I don't really agree with you here – you make some good points about some good estate agents being good – which is great, but surely a bit of competition in this sector is a good thing.

The point Beeny makes very well is that the price point of agents is stupidly high and not proportionate to the amount of work required to sell a property. There are good recruitment agents out there, but they don't charge £10,000 to place you in a job?

Tepilo make the point on their site that the site takes the emotion out of the process – by making users interact on the site – it's more like social networking in that respect it seems – so you type in an offer, or ask any questions directly to the owner on the site itself – what's emotional about that?

The other point you make is about valuation – well how “trained” do you need to be to value your property? Surely you know what you paid for it, what your neighbour sold for last year, and roughly how much demand there is for property in your area?

Every estate agent I have had selling my house has been an 18-20 year old, fresh from school where i'm fairly sure they didn't study estate agency for their A-Levels.

People made the same point about online travel agents never taking off and they were wrong, and I think you are here too. Bring on the changes – nice work Sarah.

Thanks for the comment – all are always welcome especially those that don't agree as they open up dialogue.

Let me run through those points if I may.

Stupidly High / Disproportionate Fees: If one takes the average house sale and works out the effort put in by an agent, so say;

Value property: 1hr
Listing & Marketing Pitch: 1hr
Field queries: 4hrs
Open homes / auctions / viewings: 5hrs
Misc admin etc: 2hrs

So what 13hrs all told then sure £770 an hour (based on £10k fee) is a lot.

But factor in the cost of doing business; rent, insurance, marketing costs and such it comes down quickly.

Then factor in you only get paid on those you sell. I've no idea what the batting average for agents in the UK is but if it's 1/5 I'd be suprised. So now it's more like 5 x 13 hours work (65 hours) for £10k or £153 an hour before costs.

Not a huge amount.

Ok so that one owner that pays feels the burn but it's a little like why mechanics charge so much – the cost of doing business still has to be met.

Doing things online reduces emotion: not a chance. ok so questions and offers can be handled online but viewings? would you buy a house just on seeing it online? I wouldn't and experience tells me that pretty well nobody would. The emotion invested in a home, as I said, reaches beyond the obvious into that whole “feel of a property” thing.

Training for valuation: Yeah I realised when I clicked submit I hadn't clarified this enough. In the UK the indisutry is subtly different to other countries I know about. Comparible sales is a valuable tool for a starting point in valuation but just ask a registered surveyor how accurate that is in reality. There is a hidden art to correct valuation – that's why surveyors are registed and banks won't lend on the buyer/vendor's pricing. I've done the training and there are a great deal of checks and balances that need to be applied for correct pricing.

Unfortunately most agents from what I hear in the UK are not trained formally in valuation (let alone marketing or negotiation) and all too often get drawn into either buying a listing by offering up a high price or caving to the desires of the owner rather than the reality of the market.

18-20yr agents: That old chesnut ) I have met a few “youngsters” who are fabulous agents. They just seem to have the natural gift of selling. But certainly in the UK the industry has far too lower barriers to entry, it's an easy game to get into. My advice with agencies is always the same – ask for proof of their ability, everytime.

As for the comparison to travel agencies, sorry but there I have to disagree. In a price driven market differentiation between travel agencies online or offline is little. So people will head to the cheaper hence the success of online business. However just go for a walk down any busy high street, especially in affluent areas. There you will find bespoke travel agencies doing very well thanks as they bring skill and knowledge to those more discerning and not as price driven.

All that said, don't mis-understand me. Will FSBO sites work, yes for some people. In a fast paced vendor's market with buyers a plenty selling a home yourself is very doable. In a tough buyer's market FSBO is oft held out as a saviour to high fees but the reality is that a good agent should always add more value (read £) to the sale than they cost through their ability to price, market and negotiate better than the average punter.

[...] Probably Not – In Reply to Tepilo Ending Need for Estate Agents (exponere.com) [...]

I find the defence of estate agents and their “value” incredible.

I've bought and sold houses in both London and Scotland and have to say that whilst the Scottish agents aren't great, the London agents are deplorable.

In Scotland the agent (normally a qualified solicitor) always does a floorplan and provides marketing material in the form of a schedule (brochure) that you can provide to viewers. This brochure is usually 2 to 4 pages long, has a description of each room, pictures of a selection of rooms, an area map and contact details for the agent. In London they rarely (if ever) even provide a floorplan on the online marketing let alone a paper brochure. As such the agents costs must be incredibly low.

The photographs produced for the online marketing have been ridiculous as well. I'd have thought the agent should be advising the seller about how to make their property look as good as possible. Instead I've seen living room photographs with a clothes horse full of drying clothes right in the middle of it. Would it have killed the agent to move it out the way prior to taking the picture? Incidents like this aren't uncommon either.

I find it equally laughable that Barney says agents “haggle” for a living. They do not. They are nothing better than a messenger service relaying an offer. You cannot pressure someone into buying a home, it is a long drawn out process and not an impulse buy. An agent cannot convince someone to buy a property the way a salesman in a jewellers can convince the man looking to buy his wife a birthday present can.

Next I'd point to commission. In my experience this varies from 0.75% to 2.5%. I'm at an absolute loss as to what added value someone receives when they sell a house for £500,000 at 1.5% commission (£7,500) versus someone selling at £200,000 (£3,000 commission). What more has the estate agent done for that extra £4,500? The answer is nothing and it is insulting to imply otherwise.

In the past agents were good at providing you advice of the going market rate but now with the land registry freely available online then you can easily check what houses in the area are going for and pitch your property around there. It isn't difficult and you don't need a school leaver with little or no qualifications to do this for you.

Just to be clear, I am not advocating the abolition of estate agents but I'd like to see higher standards of professionalism and flat monetary fees. If they incur additional costs then they should be declaring these to the client and negotiating their fee accordingly.

Hey Russell

Happy to admit never had any property dealings in Scotland but from what I
little know of the Scottish system all round it is a fairer one.

I should perhaps declare a hand here. I worked for a few years in Real
Estate in New Zealand (although have nothing to do with it now) and have
what is widely recognised as one of the highest professional real estate
qualifications anywhere, an AREINZ. Basically you have to spend a few years
studying for a proper academic qualification with exams and such. The end
result meaning you not only understand the business inside out but also have
a very sound knowledge of property, consumer, company and contract law along
with an understanding of property valuation that is only just shy of the
standard required to become a registered valuer (akin to a UK surveyor).
Basically I have some previous.

With that out of the way I'll run through your thoughts briefly.

There are good and bad agents. A good one WILL definitely get more for a
property (i.e. add value to the process) than a bad one or indeed an
untrained person. At least all things being equal and across a range of
markets (buyer vs seller, bull vs bear).

Why? Well they do it all day everyday for their living. I can change the
oil on my car or change a disc pad if I wanted to, but honestly a car
mechanic is going to do a better, quicker and probably cheaper job than I.
They add value through their training, skill and setup.

For estate agents it is no different. They are on a day to day basis in
contact with buyers and sellers, viewing properties, gauging reactions – in
other words they have a far better idea what is actually going on than Joe
Bloggs on the street.

That expertise adds value to the transaction (be it in a higher price, lower
costs, lower stress, whatever).

Another example would be with UK tax returns. MOST people who need to file
them could easily complete the forms yet a vast majority pay a few hundred
quid for peace of mind and get an accountant to retype their numbers into
their own spreadsheet / accounts package and do the filing.

As for “haggling for a living” – hardly laughable unless one is a very
uptight Brit with a “Cringe Gland” (love that advert). An agent is by very
definition acting on behalf of one party in dealing with another. Part of
that agency is negotiation, and the first rule of negotiation is “everything
is negotiable.”

Now I'm just fine with asking about the price and can we haggle. Agents are
the same. Honestly. They know it's a competitive market out there and that
there are any number of agents willing to take on the business. Most I have
talked to will negotiate on some part of their professional services; be it
the fees, the marketing, etc…

Similarly the agents role is one where they provide the intermediary when it
comes to offers being made. That process is normally one of negotiation or
haggling.

So laughable? Not really but I can well understand the arrogance of many
agents when it comes to what they offer and charge being laughable.

I won't bother with the commission rates vs sale price argument. It's been
done to death by both sides. Just suffice to say as with ANY agency (think
sports agents for example) a commission is a percentage. Fixed fees have
been tried but for some reason the majority of customers seem to prefer the
commission basis – I suspect as it seems more negotiable when in reality a
fixed price is anything but fixed.

Valuations. Absolutely everyone can go and get the same registered
information and make an educated guess. There is a fairly big caveat to
that mind. Those registries have a time lag. So in a moving market (up or
down) the registry is an historical record not necessarily reflecting the
current market. Most people are smart enough to realise this and use it as
a base figure (rather than gospel) but where many go wrong is to then look
at what has sold or worse what is selling and then make a very human
decision that their home is worth a bit more “because…”

The reality is unless you actually are going in and out of a great number of
properties AND spending a lot of time talking to buyers and sellers you will
never have a really good grasp on the market. Given that the home is one
of, if not the, biggest purchases one ever makes it's a gamble very few
people are willing to make.

BUT if one is educated in the techniques, spends time doing the research and
has a flair for marketing there is not a reason in the world why given the
tools at one's disposal they can't pull off a blinding sale.

I too would think a more professional standing for the industry in the UK
would be nothing but good, probably in lettings even more so. As for fee
structures, if the majority of consumers want flat rate fees then that is
what any agent will provide, just right now it appears they don't.

Barney,

I appreciate the response and have to say if most agents were as professional as you then there would be no problem. The sad part is my experiences of agents (and that of my friends) is such that we have little or no faith in them. There was a TV show on not so long ago about houses that weren't selling and a professional agent showed how best to market your property. The best part of the show was him taking the existing agent to task and asking what they were actually doing. To a man (or woman) all the existing agents were mumbling messes providing a shoddy service. They weren't even providing basic advice to vendors on how to make their property look at its best for limited or no cost to the vendor.

On the fee versus commission basis I don't believe that most consumers want the commission structure. I do however think most are naive to the costs involved. You neatly side stepped my point about what more the agent does for someone selling a house at £500K versus one at £200K. If you can tell me what additional work and/or services the agent provides for that extra £4500 I'd love to know. It is afterall not an inconsiderable amount of money.

Agents have costs that need to be covered. I do not for one minute disagree with this and think it is only fair and right that they make money from their profession. Why else do it? But… the amount of work done and costs incurred should be representative of what the agent is actually doing.

My house is worth circa £500,000 and it'd cost me about 1.5% with an agent to sell. A good corporate lawyer in the city charges about £250 per hour. Am I honestly being told my estate agent is putting in 30 hours in selling my house and is worth as much as a professionally qualified, highly educated lawyer?

I do not for one minute accept good agents achieve higher prices than bad agents or private sellers. Neither of us have statistics to support our points of view so we can never come to a definitive conclusion. What I will say is that most agents don't even bother attending viewings unless the vendor is away on holiday or it is the property of a deceased relative. When the agent is there they are usually as much use as a chocolate teapot! I have asked agents questions like “What is the council tax ban?”, “Is it a cable area?”, “How long is the walk to the tube?”, “What is the commute to the city?” and invariably you get met with an “I don't know”.

From 2000 – 2007 the estate agent game was easy, houses sold quickly and for good prices. This caused a boom for estate agents but the past two years has seen many of them found out and there has been a justified holocaust throughout their ranks. Agents had it too easy and for far too long. Obviously this is a great opportunity for the good ones but going by neighbours who have their houses up for sale and their views then the agents don't seem to have upped their games any.

I think there is an apparent void between the very regulated industry in NZ
and that which is serving the UK population. There everyone has to take
some education, if basic, before becoming an agent. Then there are all
sorts of very strict and legislated rules.

Not knowing something like a council tax band would be akin to
misrepresentation under consumer law, just not knowing is no legal defence
in NZ. So consequently the better agents (and there are crap ones there
too) have to be armed with an array of information not only about the
property but also local and regional stuff including planning, environmental
and resource type issues.

Basically a fair more professional industry.

I don't know for sure but I'd suspect that supply and demand in the UK over
the last 20 years or so has a lot to answer for. With much low hanging
fruit it is understandable so many poorly trained, poorly equipped people
have gone into the industry looking for an easy living. As you say, the
current slower market will happily weed some out.

I wan't dodging the fee structure issue at all. Again my experience is
primarily based on NZ real estate.

In an average market (neither dead slow or super fast), in NZ an agent may
well put in the best part of 30 hours effort into a single property.
Granted they probably work harder than in the UK, in part due to the
regulation requiring them to undertake more information gathering, any
number of open homes, viewings, marketing activity etc…

In the higher price brackets buyers are assuredly more discerning. Not the
megabucks markets as those buyers are cashed up and able to buy anything.
But the price brackets where mortgages still matter, debt tends to be high.
So for example where we lived, houses under $350k were if priced right and
presented well generally easy to shift taking say 20 hours over say 9 weeks.
In the $1m plus bracket again they might only take 20 hours over say 5
weeks. But the majority of property would sit in the middle.

Here it was not uncommon in an average market to take upwards of 12 weeks
(sometimes a lot longer) and 35+ hours.

In other words for the majority of sales the cost of effort
was disproportionately high.

Now Kiwi's will haggle on houses like pro's. They aren't scared of asking.
There certainly commission based structures were tested time and again with
fixed price offers but for some reason they never lasted as no one like the
idea of being “fixed” – everyone wanted to haggle.

As for a cost versus lawyer. Honestly don't think it's a fair comparison.
The rates are set by market forces just as are the sale prices. If the
commission rates, fixed fees or number of goats for a service are more than
the market will bare then those services simply won't get bought.

My advice is always do the homework and haggle. A decent agent really does
get it.

Here and now I don't have the figures for good agents achieving higher sale
prices as I have no need of them, but they are out there certainly for NZ,
Australia and to some extent the US – all of which have similarly run
markets. Certainly experience bore this out for those agents I worked with,
trained and managed.

Barney – I must agree with an earlier poster “Russell” on this debate.

I struggle sometimes to see the value which estate agents bring to the table in property sales. To go further I also think that the relationship a estate agent holds with both a buyer and a seller is one which places a large onus on ethicacy on the part of the agent.

It is in the estate agents interest to sell property as quickly as possible whilst securing a good price. Ultimately however the commission earned on a house selling at 350k rather than 390k is minimal. Therefore it is in an estate agents interest to push a quick sale.

Out of interest is their a minimum standard of qualification an estate agent must undertake in order to work in the market?

I work in insurance and was required to complete both Internal Underwriting licence exams and professional qualifications in order to be able to price any business. Sometimes I worry that some other professions are not as serious.

Afternoon David

There is a duty of care placed on any agent. Firstly and fore mostly to
their principle – their paying client the seller. That said that duty also
bounds them to the buyer in my opinion. Certainly ethics play a part,
however for me regulation has a larger role to play.

I think it's important to remember that an agent (in the sense of real
estate) doesn't sell a property, it's not theirs. They market and negotiate
a sale for, and with the seller. That is an important distinction as their
financial interest is therefore, as you, directly proportional to their
efforts and input – their risk.

So whilst a quick sale would facilitate a speedier payout, this has to be
balanced with the fact that pushing for a lower price when fees are
commission based will result in a lower fee. It's a balancing act. But
one that in my opinion should not enter into the equation at the outset.

The agents role is to achieve the best possible sale for their principle.
So for some clients a speedy sale at a lower price will be of more value
than a longer wait for more money, for example.

The agents actions therefore should reflect the work required to achieve
that goal, not their own ends.

Saying that, there is financial risk for the agent. If they don't make a
sale (commission based) then they don't get paid. So every hour they spend
on the job is an hours risk. At some point any business must make a value
based decision about cutting losses.

There is another factor wrt: quick sales. I'm not at all sure how relevant
it is in the UK, but in NZ it is pertinent. Where the principle is paying
for marketing costs on a monthly, account basis the longer the sale takes
the more the agency stands to make. Personally this process doesn't sit
well with me, whilst I have no issue with the vendor paying for direct
marketing costs to keep things square I do think markup on marketing costs
should be outlawed.

As for qualifications. When I last looked it was essentially…

Step 1) Before one can be a real estate salesperson (an agent in NZ is
actually the business license holder see later steps) you must take a basic
course in consumer and property law, contract writing (essentially how to
fill out a pre-described form) and marketing. From memory it takes about a
week full time, requires moderation and then is followed up by character and
criminal checks.

Step 2) Optional but there was talk about it being made compulsory (I fought
for this). The salesperson can achieve an advanced status by taking a BTec
(I think) in Real Estate. This takes several months part time, again is
moderated and covers more law, valuation methodologies and marketing.

Step 3) To run a real estate business (even as a branch manager) you have
to fulfil both of the above, have worked in the industry for 3 out of last 5
years (?) AND then completed the National Diploma in Real Estate. This is
where it gets a whole lot harder nowadays. The NDip takes about a year part
time and covers a lot of marketing and business practice (think accounting,
payroll etc…) but spends most of it's time on law and advanced valuation
(with the option to specialise in business, rural or residential valuation).
There is also a very substantial project based around something called the
Resource Management Act which results in a dissertation sized report packed
full of a detailed understanding of what is an overriding part of NZ
legislation.

At the end of this you have the NDip and a solid understanding of just how
big a liability a real estate agency manager has in NZ. It's a full
personal risk akin to accountants, lawyers etc.

Step 4) And this is the crucial bit for me, once you have all that lot you
still have to jump a number of other hoops to be recognised as an Associate
by the powers that be – another 3 – 4 months of checks.

All up you would be looking at normally about 2.5 years of part time study,
about $15k in fees, who knows how much in lost earnings whilst studying.

Then you can call yourself an agent. To that point you are just a
salesperson and technically supposed to be under the very watchful eye of a
qualified and recognised agent.

In other words, a totally different ball game to the UK.