Recent research by online estate agents HouseSimple has revealed that London estate agents earned £1.1 billion in fees in 2014, a 23% increase on the amount they earned in 2013. This means that home sellers paid an average £9,384 in estate agent fees on each property sale in 2014, an amount that many would consider exorbitant.
An estate agent earns an average 1.6% of the home sale as commission, but according to Russell Quirk of eMoov, it can be as high as 2.5%. Marc Shoffman points out that if you divide the average commission an agent receives by the average number of hours it requires for them to complete a property sale (usually about 5 to 15), you end up with an hourly rate that exceeds that charged by doctors and lawyers.
A good year for estate agents
Estate agents can provide invaluable assistance to home sellers, giving professional advice and helping to promote the property and close the deal with buyers. However, the ease with which homes in high-demand areas, such as Kensington and Chelsea (the two districts that generated the highest earnings for estate agents in 2014), have been sold has prompted many home sellers to ponder whether such expensive fees are justified.
In 2014, estate agents operating in Chelsea and Kensington garnered an impressive £73 million in earnings, which amounts to a 16% increase on the previous year. Westminster wasn't far behind with a total of £70 million in agents fees; a 14% increase.
Properties in such areas have generally been bought by the first person to view them, leading devotees of online estate agent services to suggest that home sellers might have saved significant expense by using online channels to promote and sell their homes instead.
Other areas, such as Newham, Waltham Forest, Greenwich, Tower Hamlets, Barking & Dagenham, also saw a significant increase in the fees earned by agents. Newham, as home to the stadium that hosted the 2012 Olympics, generated 55% more income for estate agents in 2014 than it had in the previous year.
In response to the figures, Alex Gosling, chief executive of HouseSimple, claimed that you'd be hard pressed to find a high-street agent without a “Cheshire cat-sized grin on their face”.
How can home sellers save money?
Many home sellers don't realise that there are other options available to them. The internet has enabled a whole new industry to emerge: Online estate agents. Currently, only 2% of home sales are assisted by online estate agents, but Alex Gosling claims that if 20% of home sellers had used online services in 2014, they would have saved £210 million in fees.
Prospective home sellers will be wondering whether employing the services of an online estate agent can truly save them money. Patrick Collinson of the Guardian said, “On a straightforward comparison of costs, there is no case to answer.” Many online estate agencies charge a fixed fee, versus the high commissions and hidden costs employed by traditional estate agents.
At the very least, online estate or clicks and mortar agencies such as Tepilo provide an alternative that may force traditional estate agents to change their game, as they realise they no longer have a stranglehold on the property market.