Controversial online estate agent and industry commentator Russell Quirk has hit out at the fee structure of traditional agents, claiming it deters them from achieving the highest sale price for their customers.
In a blog on his eMoov agency’s website Quirk reiterates a long-held view that sellers who use traditional agents pay more than they should because they effectively subsidise the costs of agents working with ‘no fee’ vendors whose homes do not sell, as well as paying for the work to achieve their own property sale.
However, he then goes on to explain why the traditional fee structure for High Street agents deters - in his view - efforts to achieve the maximum sale price.
“The establishment flag wavers defend themselves on the question of percentage fees like this: 'We are incentivised to get a higher price and to work hard for you and that's why percentage fees are best’” writes Quirk.
But he then uses data from Foxtons’ annual report to shareholders to go further.
“The average Foxtons fee according to their own accounts is £13,000. Each Foxtons negotiator earns a typical 10 per cent take in commission but there are lots of Foxtons employees and they don't do that many deals, in fact they achieve just eight completions per branch per month (their own numbers, not mine) and therefore four negotiators per office are scrambling to do just two sales per month each.
“Imagine that you're earning a £10,000 basic and desperately need your two commissions to make ends meet every pay-day. Faced with a buyer making an offer of, say, £650,000 on an asking price of £675,000, is your reaction to potentially lose the sale by playing fast and loose with the buyer, staring them out to see if you can squeeze the last drop of cash from them on the deal, risking them walking away and you being left with nothing?
“Or is to to know full well that your commission on £650,000 is £1,300 and your commission on £675,000 is just £1,350 and therefore you focus on a 'deal at any price'? (For the pedantic amongst you, Foxton's standard fee is two per cent and so my calculation is based on 10 per cent of the two per cent).”
Quirk concludes by saying that with employee deductions a traditional agent “couldn’t give a toss” about the £25,000 difference in the example he gives.