Should you use a “no-fee” estate agent?

One side effect of soaring house prices is that the size of the commission payable to a traditional estate agent has become a rather more glaringly obvious cost of moving than it once was. That's contributed to the rise of online estate agents, who offer low fixed up-front fees. Now we're seeing the next logical step the fee-free agent. But are they any good?

Online estate agent House Tree claims to be the first UK agent to give customers the option not to pay a fee when they sell their house. Naturally, there's a catch: in order to qualify, customers have to use House Tree's recommended solicitor for conveyancing on both the sale and purchase of a new home, as well as the agent's preferred mortgage broker. Rather than charge customers, the agent will recoup its costs via referral fees from these other companies. The fees charged by its recommended solicitor, Convey Law, are "very competitive", claims the estate agent (£695 each for the sale and purchase, excluding costs such as local search fees or Land Registry fees), while its broker, Meridian Mortgages, offers products from all UK lenders.

However, House Tree's offer is more complicated than it sounds. For the "pay no fees" deal, the basic estate-agent fee is £996. If you are looking to take advantage of this option, you'll still have to pay this fee up front via credit or debit card, or by taking out an interest-free deferred loan agreement with a third-party finance provider (Divido). If you go with the latter option, the loan is due to be repaid within ten months of the start date of the agreement. House Tree then agrees to repay up to 100% of the £996 fee from commission received from its solicitor and mortgage broker. This commission will usually be paid between one and three months after the sale has been completed.

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Although this route may sound tempting to those who've had bad experiences with agents in the past (or are simply looking at the size of their commissions), there are several potential downsides. There is always the risk that once fees have already been agreed and paid, the agent may lack the incentive to get the best price, or offer the best level of service. This argument can, of course, be levelled at any online agent where the fees are paid up front whether you think traditional agents are any more likely to put in the necessary legwork probably depends on your past experiences and the complexity of your sale.

Moreover, with this "fee-free" deal specifically, you are also tied to the specific solicitor and mortgage broker being recommended by House Tree. This in itself is nothing unusual plenty of estate agents are paid commission to try to persuade you to use a specific broker or solicitor. The difference is that well-informed buyers and sellers rarely use these services. Instead, they usually shop around for their own providers (or in the case of a mortgage broker, do the legwork themselves).

Looking at House Tree's terms and conditions, it does offer alternative packages, including a service whereby you pay £795 up front with no need to use their broker or solicitor. In all, if you are willing to use an online estate agent in the first place, we'd suggest it's better to shop around for the one that you believe will offer the best service (there are plenty to choose from these days), and to shop around for solicitors and brokers separately.