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Option Homes Ltd - News- The Lure Of Fixed Fee Sales… And Why Vendors Should Avoid Them

The Lure Of Fixed Fee Sales… And Why Vendors Should Avoid Them

Date Added 17/09/2015

An interesting article appeared on the excellent Estate Agent Today website this week (https://www.estateagenttoday.co.uk/breaking-news/2015/9/high-street-agent-cautions-against-offering-fixed-fee-sales) on why High Street agents should be wary of offering to sell homes on a fixed fee basis.

Their argument was that a fixed fee would deter vendors of lower value homes, while attracting a disproportionately high number of what they describe as `greedy` and `unsophisticated` sellers of higher value homes keen to get the maximum return for their property and often unwilling to sell at a sensible price.

Bad news all round for the agent, they insisted.

The main point missing from the article, however, was what fixed fees do – or don`t – offer the vendor. In a word: value. And of course that`s a very different thing from price.

Let me explain.

One can readily appreciate why a vendor should look to restrict the agent`s fee – 1.5% on a £500,000 sale is £7,500. Once you add in the dreaded VAT, it comes to a tidy £9,000. And that`s a fairly typical set of figures in London these days.

Set against a fixed fee guarantee of £1,599, say, it looks like one expense you might want to cut back on when you`re moving home. Especially when stamp duty will set you back a further big lump if you are buying as well a selling (£15,000 if you move to another £500,000 residence), plus legals, moving costs and so on.

No, moving home is not cheap!

But we don`t operate a fixed fee – and here`s why. Because they are an incentive for agents to persuade clients to take the first offer made to them, or at the very least sell below the achievable price. And our ethos is to do the very best we can for our clients.

It`s all down to turnover. Fixed fees only make economic sense to an agency if you can pile ‘em high while you`re selling ‘em cheap. Put in more than a couple of days` work on a sale and you`re in deficit.

With an agreed percentage on the sale as a fee, every pound on the selling price is more profit for the agent. What`s more, with a half decent budget behind you, you can really go to town on the marketing and give it maximum voltage: there`s a big incentive to pull in a £7,500 fee.

And remember this, the difference between an asking price and eventual selling price can easily be £10,000 or even £20,000 on a £500,000 sale. Even more if the purchaser has cash and the vendor is in a hurry.

A good agent will have enough nous to not only put a house on the market at a price he/she thinks is achievable, and so avoid the nonsense of having to reduce the price a month or two down the line. They will also know which levers to pull when they negotiate with a prospective purchaser and get the best possible offer from them – and really earn their corn.

Mind you, dealing with what the article describes as `greedy vendors` is not always easy, but sometimes you do get to make your point. Someone came to us recently having rejected our terms first time around, and then had their sale at £2.4 million through a fixed fee agency fall through.

Could we do any better they asked? Yes, we achieved £2.8 million for it.

As I said at the beginning `price` doesn`t always equate to `value`, and `cheap` rarely equates with `best value`.

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