There is a great video by the Freakonomics Stephens, Levitt and Dubner, that explains how commission structured estate agent fees are actually disincentivised to seek the very best price for a property. They showed that estate agents themselves keep their property on the market for an average 10 days longer than the general public and also sell at a higher price:
The full description of why is here:
Personally, I agree with their analysis of the system of incentives but I also think there is another problem with the commission structure. Why should somebody who owns a house that is worth £500,000 pay twice as much in commission as somebody who owns a house that is worth £250,000.
This then leads to more problems: as house prices increase, estate agents earn more money for doing the same job. Research has just shown that over the last twenty years house prices in Dulwich have increased by 863% which means that estate agent fees in that area (if they have kept their fees the same) have also gone up by 863%. A good time to be a Dulwich Estate Agent!
A report by the now defunct Office of Fair Trading highlighted that despite increasing competition there had been no pressure on the % fee charged and they recommended the support of new business models.
That’s where we come in and we think that if you are selling your home you deserve the very best service no matter how much your property is worth. Which is why we have flat pricing and even include a no sale, no fee option.
Have you ever heard an estate agent say to a client, well we will provide you with “a” service but as your neighbour’s place is worth twice as much we’re going to work a bit harder for them? I’d be surprised.
So if they are providing exactly the same service why are they charging a different fee for each property?
According to estate agents though, you are receiving the same great service even though you are paying a different fee. This means that if we take two people, one who is selling their home for £250,000 and one who is selling for £500,000 then we should believe the estate agent will work as hard on the £250,000 property as on the £500,000 property. If so, why are they charging a different fee for each?
The traditional fee structure is so antiquated that even the OFT, notorious for being slow off the mark, have passed comment on its inadequacy. Percentage based commission has had its time, the high street estate agent have their had their time and thankfully for homeowners and buyers alike, the new broom is here to sweep it all away.
The online estate agents are here and we’re outperforming the high street:
- We average 99% of asking price
- The high street average 95% of asking price