The elephant in the room?

One subject that has fallen off the radar of late is the question of agency fees. The elephant in the room, this was the industry’s main talking point before it was ousted by credit crunch.

Before the crunch set in, many agents I talked to were of the opinion that the standard no-sale, no-fee of around 1.5-2% was in need of re-evaluation. Then the hard times set in and we had other things to worry about.

However, it’s at times of change that the question of fees – agents’ bread and butter – is particularly relevant.

This year there are going to be fewer instructions and more competition for business. In this consumer-driven market, any agency that can lead the way with a new fee model in line with the needs of our customers will win.

But what are consumers after? There are a few options to consider, all of which have choice and control, or the illusion of choice and control, at their core.

In today’s market, consumers are used to a far greater degree of control and choice than they have ever been. Think about television: gone are the days when we had four channels to choose from and were forced to sit through adverts every 15 minutes. The advent of Skyplus means we can record the shows we want and fast-forward through tiresome adverts in seconds.

In the travel industry, package holidays used to be the norm, but these days most people will save money by building their own holidays – booking their flights, accommodation, car hire and insurance separately. The internet has made this possible for everyone and the travel industry has had to react in kind, offering separate services in addition to their traditional packages.

Why can’t estate agency offer this kind of choice for their fees? Agents could offer separate but complementary services. The customer has the illusion of choice: thinking they’re in control of their transaction when in reality, all of the separate services within the traditional package will need to be purchased separately to complete their move.

What about ‘tiered’ fees based on service levels? Some companies are already taking this approach – offering gold, diamond and platinum services, where the ‘lowest’ offering is the usual package and the higher services offer ‘added extras’ that would otherwise be difficult to sell. ‘Added services’ could be the addition of a seller’s property to additional portals, search engine optimisation, newspaper advertising or a feature in advertising space in the area.

What about performance-related fees, based on time taken to sell and the proximity of the valuation price to sale price? This is a risky strategy but one that would be extremely attractive to customers and would eliminate the erroneous but widely held belief that agents do nothing for their money. There could be a ‘collar’ fee – a minimum fee, for the agent’s insurance.

How about fees determined by the saleability or risk associated with a property? You’d charge less for a three bedroom semi-detached property than for a seven-bedroom converted church, for example.

There are many options available. Does anyone have an opinion?

These days, the main asset that an estate agent has is their market knowledge. This should be the foundation of any USP that an agent uses in any advertising. The reality is that everyone can offer everything and consumers are after value and knowledge from their agent above all else. In this time of turbulence, what fee model will win out?

My belief is that – like travel, banking and television – choice and control must be the foundation of any changes.

* Robin King is a director of movewithus