Negotiating Agent Fees & Cutting Sales Costs
The maxim 'you get what you pay for' is true for most things in life and estate agency is no exception. If you are quoted an unexpectedly low fee the first thing to do is to check that you are being quoted for a full estate agency service. You will very often find that the lower fee is in fact being quoted by a property shop or by an agent who operates on an exclusive agency basis.
Property shops versus conventional estate agents
Property shops charge much lower fees than estate agents. They are able to do this because they charge their fee at the point of instruction and keep it regardless of whether a sale is achieved or not. The inherent disadvantage of paying an up front fee is that the property shop has no financial incentive to sell your house. It is probably because of this that the success rate of most property shops is lower than that of most estate agents. Taking everything into account a conventional estate agent is usually likely to offer better value for money.
Responding to a lower than expected fee
If you are quoted a low fee by a conventional estate agent, you must establish how he is able to undercut his competitors. You might say something like 'The fee that you have quoted is half a percent less than your main competitors. Could I ask how you are able to offer the same service at a lower price?'
On closer examination you will often find that the lower fee is financed by less advertising, fewer staff, cheaper premises or some other such economy. If this is the case you should weigh up very carefully how these economies might affect the agent's ability to achieve the best price for your property.
Responding to a higher than expected fee
If you are quoted a fee that is higher than expected, you should challenge it firmly but politely. You might say something like 'I am impressed by your service but your fee is half a percent more than I've been quoted elsewhere. How can you justify this differential?' Faced with such a challenge the effective agent might try one of two approaches:
(a) He might try to justify the differential by pointing out further features of his service which are not offered by his competitors, e.g. colour advertising or longer opening hours.
(b) He might argue that the same negotiation techniques which enable him to obtain premium fee levels from his clients will also enable him to achieve a premium price for your property!
Both arguments have some merit. It is for you to decide whether you believe that superior marketing or superior negotiation techniques will indeed lead to a higher sale price but my experience is that they often do.
The less effective agent will respond to his fee level being challenged in one of two other ways:
(a) He will immediately match the lower fee. If he does this you must ask whether he would give in so easily when negotiating an offer for your property with a potential purchaser.
(b) He will suggest that the extra commission is added on to your asking price. This is quite indefensible. If the property is really worth more why did the agent not say so sooner? If it is not then you will end up paying his whole fee anyway.
