This article is taken from Merryn Somerset Webb's free weekly personal finance email, MoneySense. Click here to sign up now: MoneySense
If you bought a house six months ago now probably isn't the time to sell it: do so and the odds are you are going to lose quite a lot of money on the deal.
Say the house cost £500,000 back in January. Add in your stamp duty, legal fees and so on and the total cost to you would have been about £525,000. So you need to get at least that to break even. But in most places house prices have barely budged in the last few months.
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Worse, selling comes with costs too: there are your legal fees of course (say £1000 for those) and estate agency fees which will probably come in at around 2% of your sale price or, for a £500,000 home, £10,000.
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The upshot is that if you want to even break even on the deal you will have to sell your house for £536,000 (£25,000 + £10,000 + £1000). That's a rise of 7.2%. Yet in much of Britain house prices are not just not rising; they are actually falling (see: House prices are on a knife-edge).
During the great property bubble of the last decade the cost of buying and selling houses was little noted people making 20-30% every time they made a property trade can't be bothered with worrying about the odd twenty grand here or there. But now the bubble's glory days are over these costs suddenly seem quite shocking.
There isn't much to be done about most of them: Gordon Brown has been told a million times that stamp duty is both unfair and market distorting but he clearly doesn't intend to deal with it, while solicitors' fees are something we all just have to live with.
But this is not the case with estate agency fees, which I think we can do something about. We are always told that estate agents earn their fees (which can be as high as 3% of the sale price of a house) by marketing our houses to the widest possible group of buyers and then working tirelessly to get us the best price.
This is all nonsense. All houses now get to the same group of buyers regardless of who we actually commission to sell them (they all end up on the same internet property websites to which everyone trying to buy a house is permanently glued).
And protest as they might it simply isn't true that agents work to get you the best price. The difference to them between selling your house for £300,000 and £310,000 (assuming they are paid 2%) is 600 quid. It's not worth them jeopardising a deal for that! No way. The truth is that within a £50,000 range they don't care what they get for your house. They just want to stop having to show people round your property, pocket their cash and move on to selling the next house sharpish.
They make money out of making lots of average deals for lots of people, not out of making one good deal for you. The result? They are far more likely to bully you into taking the £300,000 than suggest you hang on for a better price or waste their time negotiating the £300,000 offer up. When I sold my flat through last year it usually felt much more like the agency were working for the buyers than that they were working for me (despite being paid 2.75%). This is why.
The other point to note is that as house prices have risen the fees being paid to agents have risen too to levels that are completely ridiculous. A house that cost £500,000 in London 3 years ago will now cost £1m. So the fee for selling it has gone from £10,000 to £20,000. That's just too much to pay for someone to do a job that is, in general, no harder than working behind the till in Waitrose. It seems to me that, just like getting financial advice, selling houses is something that could perhaps be paid for with a flat fee that genuinely reflects the effort it involves.
Given all this I was absolutely thrilled to see that Tesco has made an entry into the estate agency business. You have to do much of the leg work measuring your rooms, writing particulars and choosing your price. But then Tesco puts up a for sale sign for you, lists your property on its website (www.tescopropertymarket.com) and vets your buyers for you. The cost? £199. A saving for our £500,000 house owner of around £9800. I'd measure my own rooms for that.
This article is taken from Merryn Somerset Webb's free weekly personal finance email, MoneySense. Click here to sign up now: MoneySense
Britain's 80,000 estate agents are not pleased. They've scuppered a deal Tesco had with fish4homes.co.uk to display the houses for sale on its own website on the Tesco site (Tesco needs this so that in the early days of the site people have something to look at when they visit) and are making sniffy noises in all the trade publications about how selling a house is a complicated busienss and people "do not feel confident" about doing it without a proper agent giving them a proper service. All the other online estate agency portals have rushed to make it clear they wouldn't touch the Tesco site with a barge pole. Why? An email from www.propertyfinder.co.uk doing the rounds of the internet sums it up nicely. It reads as follows:
"Our business is based on supporting estate agents so we won't be promoting a service that tries to undermine them. Portals providing properties to Tesco will simply add value to the website which will attract more users and therefore make more people aware of this cut-price no-service offering. We don't think this is in the best interest of the industry"
You bet it isn't. But I'll tell you what, its is certainly in the best interests of the consumer. Right now I have no property to sell and I also have no intention of buying one but when I do I can assure you have every intention of working with a service that tries to undermine the estate agency industry. It is going to take Tesco a while to get its new style estate agency off the ground but the more people that abandon their existing agents for it and the other DIY sales sites out there - the sooner we will have seen the back of the overpaid and inattentive agents we have already put up with for far too long.
