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High Street agent cautions against offering 'fixed fee' sales

A High Street estate agent has cautioned others within the industry against being tempted to go down the route of charging vendors a fixed fee. 

Jonathan Newall, director of SaleBoards Estate Agents in Exeter, says his company started life offering fixed fees but says this led him to lose money.

“We set up an office in 2007 just as the downturn kicked in. None of us had estate agency experience but we generally thought it was a good marketing tactic to have a fixed fee of £1,599 to differentiate us from established local agencies” he had told Estate Agent Today.

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“At first it worked. We soon became the third largest agency in Exeter in terms of the size of our portfolio, behind only [local leading agencies] Wilkinson Grant and Fulfords, and the public appreciated we were trying something new’ says Newall.

But problems started when it became clear that the flat fee appeared to deter sellers of small and relatively low cost properties - for which the £1,599 was not particularly low - while on the other hand it attracted a disproportionate number of unsophisticated sellers of large houses.

“We found ourselves with cheapskate and sometimes greedy sellers of big houses who would have made a very big saving, but were highly reluctant to reduce their asking prices even though this was a difficult market in a downturn” he says.

In addition the overheads associated with larger properties - in terms of quality of property details and demands from vendors - proved unreasonable for the fixed fee.

Newall was prompted to explain his experience to Estate Agent Today readers in the light of the recent decision by Dybles estate agency in Winchester to go down the fixed-fee route - as we reported exclusively last month.

SaleBoards Estate Agents, by contrast, abandoned the experiment - although gave it a very thorough test, for three years.

“We were losing money so it had to stop. Now we have a standard 1.25 per cent fee and we’re breaking even or making money” explains Newall.

  • Chris Arnold

    Fixed fee requires that you set a limit to the number of hours it takes to sell. If your fee is £1000 & it takes 25 hours, you're working for peanuts! If it takes 10 hours longer than you expected, you then start to lose money. Some sales will achieve a higher hourly rate but it is a risky strategy and one which will be the undoing of online agencies.

  • Jon  Tarrey

    Interesting viewpoint, although we have to remember that this is anecdotal rather than empirical.

    I agree with your general point, Chris Arnold, but I think you have to accept that there will be a place in the market for a low-cost alternative. We're seeing it all over the country. And, in many cases, cheaper prices don't necessarily mean lower quality.

  • Sceptical As Always

    the winner of the "stating the obvious" award. Bigger houses are harder work in general, you have more clutter, older people that work slower, never happy with the achieved price (imagine getting the asking price within 4 weeks, you must have undervalued it) and always find something to complain about. Best sellers are under 40, selling a flat and keep a tidy house. They listen to advice because they don't "know it all" - invariably they've gotten to where they are by hard work and learning, something that aged sellers do not have in common with them - they are in that big house often because they bought it cheap 20 years ago!

  • Andrew Stanton CEO Proptech-PR    Proptech Real Estate Influencer

    Having a fixed minimum fee is always a good idea, which should be £250 more than the 'cost' of selling a property, otherwise you are giving money away. In any marketplace you are always going to get agents who will do a 1% or less fee, and that is their business model, agents who want to make profit should only take instructions that make profit.

    Bearing in mind also that only 50% of property listed by an agent gets to completion, so any fee needs to cover the cost of selling the property, the cost of marketing another property that fails to complete, and the need for profit.

    As to fixed fees, trading standards actually likes the concept of fixed fees as it adds transparency in their eyes, after all 1.65% of an unknown sale price is not exactly a known fee, but a fixed fee of £4,950 + VAT for selling a property at £300,000 is.

    As to losing market share and losing instructions as 'fixed fees' are too high - is that such a bad thing? Do you want to sell a flat for 1% at £140,000, £1,400 + VAT, when it costs £2,200 to sell it, the 14 hours pre-SSTC and the 40 hours of sales control chasing up the leasehold pack, holding the hand of the first time buyer, communicating with all stakeholders etc.

    In fact I actually tell my client agents who are starting up to choose a segment of the market and just be a specialist in that market. Typically, looking to earn a £4,000 fee per sale on completion. And if that means a 1% fee on a £400,000 property, then do that, or if the local market allows 1.25% then sell property at £320,000 and above. If your website and portal prescence is only these type of properties, vendors with these type of properties will seek you out.

    Who wants to dominate all of the market (unless you are a corporate) - make the financials work for you. It is basic mathematics, as a start up one/two person concern, if you list 10 properties a month, that is 11 sales month a year (you lose two weeks in Dec and Jan) or 110 properties annually, of which half go to exchange equals 55. If your average fee is £4,000 that is £220,000.

    If you do not have a minimum fee, and just take any property, and take three properties a month at say 1% of £140,000, then you have 11 x 3 x £1,400 fee divided by two = £23,100 of exchanges Vs 11 x 3 x £4,000 divided by two = £66,000 of exchanges, one agent gets a turkey for Christmas, the other is the Turkey.

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