A crackdown on the estate-agent cartel

published 20 October 2017

867_MW_P31_Inv-Prop — Fees vary so read the small print

Last month saw a group of estate agents in Somerset fined more than £370,000 by the Competition and Markets Authority for running an illegal cartel. Six agents had grouped together to fix their minimum commission rates at 1.5%, effectively denying homeowners the chance of getting a better deal when selling their property. Although estate agents don't immediately spring to mind when most people think of illegal cartels, it is nevertheless worth doing your research to make sure you're not overcharged for selling your home.

Most high-street estate agents charge a fee set as a percentage of the selling (not asking) price of your home. Fees can range from about 0.75% to 3% plus VAT, depending on the type of contract you opt for and the area of the country in which your property is. The most common type of contract is a "sole agency agreement". If you appoint a sole agent, the fee will be lower than if you choose a multi-agency agreement, as you are giving that company exclusive rights to market and sell your property for a set contractual period. Note that if you find a buyer yourself, you don't have to pay a fee. But look out for a "sole selling clause" in this type of arrangement this would usually mean that if you find a buyer yourself, you would still have to pay the agent. Sole agent fees normally range from 1% to 2.5%, though you should aim to get a fee that is 1% plus VAT, recommends the HomeOwners Alliance (HOA), a campaign group.

Multi-agent agreements where you instruct three or more agents to act for you at the same time typically come with fees of between 2.5% and 3%, plus VAT. The agencies compete with each other to sell the property (as only the agent that achieves the sale will get the commission), so this can help to sell your property quickly, but can be quite "frenetic", notes the HOA.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

It's usually a good idea to invite three estate agents to value your home and quote a fee. You can then negotiate until you reach an agreeable fee with an agent you're happy to instruct. Make sure they are including VAT in the figure they quote this is now a Property Ombudsman requirement. Some estate agents offer a scaled-down service for a fixed fee that is payable upfront, whether your property sells or not; just keep in mind that a fixed fee on a cheaper property can end up being a high percentage of the sale price. Others might also accept a lower fee for higher value properties, such as those selling for over £500,000.

You might also want to look into online estate agents. They tend to be cheaper than high street agents, but check what's included in the fee. Although online agents typically charge set fees of between £300 and £1,500 (according to consumer group Which), you often have to pay extra for services such as photos or a for-sale sign. Purplebricks, for instance, charges a flat fee of £1,199 to sell in London, but you would have to pay an extra £300 for them to conduct viewings. Whether or not this works out cheaper than a high street agent will depend on the value of your property.

If you're going down this road, be aware that some online agents offer low fees on the condition you use their recommended mortgage brokers and solicitors (the agent will receive a commission for this), so you would have to be comfortable using those providers. Finally, some agents require you to pay their fee upfront, so keep in mind you may lose the money if your property fails to sell.

The world's most expensive house

Villa Les Cdres was built in 1830, and operated as an olive tree farm from 1850, before being sold in 1904 to the Belgian King Leopold II, who expanded the house's gardens. Today there are olive trees on the grounds that are more than 300 years old. Inside, the vibe is "decadent and slightly weathered, consistent with the estate's Belle Epoque heyday", featuring grand sitting rooms, chandeliers and French doors. A wood-panelled library holds 3,000 books on flora and naturalism, including a 1640 edition of a botanical "codex" a handwritten collection of sheets of papyrus or parchment - that is worth "several hundred thousand euros". (It is possible to buy the furnishings along with the home.)

Since 1924, Les Cdres has been owned by the Marnier-Lapostolle family, industrialists best known for producing Grand Marnier liqueur. When Campari acquired Grand Marnier's parent company last year and realised that the property could be worth 20% of its gross 2016 sales, it almost immediately put the mansion on the market.

Emma Lunn is a multi-award-winning journalist who specialises in personal finance and consumer issues. With more than 18 years’ experience in personal finance, Emma has covered topics including mortgages, first-time buyers, leasehold, banking, debt, budgeting, broadband, energy, pensions and investments. Emma’s one of the most prolific freelance personal finance journalists with a back catalogue of work in newspapers such as The Guardian, The Independent, The Daily Telegraph, the Mail on Sunday and the Mirror. As a freelancer she has also completed various in-house contracts at The Guardian, The Independent, Mortgage Solutions, Orange and Moneywise.

She also writes regularly for specialist magazines and websites such as Property Hub, Mortgage Strategy and YourMoney.com. She’s particularly proud of her work writing about the leasehold sector and a Guardian front-page story about a dodgy landlord. She has a real passion for helping people learn about money – especially when many people are struggling to get by in today’s challenging economic climate – and prides herself on simplifying complex subjects.