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How Do Estate Agents Get Paid?

Published on July 21, 2014 by Danko Puskaric in News, Selling

When I was a lot younger and looking to buy my first property, a small one bedroom flat, I came across Estate Agents for the first time. It was only at this stage did I realise that the main function of an Estate Agent was to sell property since it is on the sale of a property that estate agents get paid.

Up until then, I was under the sad misapprehension that you could walk into an agent and say “I want to buy a property located at such and such an address” and for a fee, they would make the arrangements. I was young and naive!

However I was right in one respect: an estate agent will help you find and buy a property, provided it is a property that is on their books and they are selling on behalf of a client vendor. The main point to remember though is that an estate agent only makes money when they sell a property and not until then! So let’s look at that in detail a bit more.

Property Valuation


An estate agent is normally not a member of the Royal Chartered Institute of Surveyor, though like everything else in life, there are exceptions. I mention this because when it comes to the valuation of your house for the purpose of recommending a sales price, the estate agent is in effect giving you a guestimate of what he considers the house is worth. This figure is not accepted as a full valuation price but is based upon several factors; a) the value of similar properties in the immediate area b) the agent’s personal knowledge and experience of selling similar properties and c) an almost “gut feeling” of what the market will bear in relation to your particular property. There is no true scientific method of reaching a sales value and for that reason, it is extremely wise to approach several agents and obtain their idea of a sales price before appointing one to act on your behalf.

You should also consider these factors. When sales are slow, such as when there is a downturn in the economy, some agents will deliberately place a low valuation on the property so that it will sell more quickly and they will gain their commission more quickly as well. However, the reverse can also happen. An agent may place a high value on the property in order to win your business but as the property will be unlikely to sell at this high price, he will drop the price to a figure more in tune with the market. By that stage, it will be too late for you to change as he will have contractually obtained your instructions.

Earlier in this article, I mentioned that it was advisable to obtain approximate sales values from several agents. It is also possible, subject to the agents’ written terms and conditions, to appoint two or more agents, whereby the agents would either share the commission made from sale regardless of which agency actually made the sale, or alternatively on the basis that whichever agent makes the sale, keeps all the commission.

What do they do for their fees?

So what would you expect an estate agent to do for their commission? In the first instance, you will be asked to sign an agreement which lays out the full terms and conditions under which the agent agrees to a) sell your property, b) what commissions you must pay when a sale is completed which can be anything from 0.5% to 4% of the sales price and c) any additional fees that may become payable for additional work outside the agreement. Read the agreement careful and assure yourself that you are fully cognisant and accepting of those conditions.

It is the function of the agent to advertise and sell your property so initially they will visit and go through the house in order to create a detailed description. This will involve going carefully through the property, noting the dimensions of each room and any unique feature. They will take photographs that will show the property to its best advantage. This may well include photos of the garden and any outside buildings, such as a garage. The whole purpose of gathering this information is to prepare publicity material that can be handed to potential purchasers. This document will also mention the location of the house as well as a brief summary of any local amenities such as school, shops, hospitals and the like. Most important, it will contain the sales price. Finally, they will place a “For Sale” board outside the property and include the sales brochure in their main portfolio.

Now we come to that part of an Estate Agent’s function that makes it essential you must be careful when instructing the right one!

Selling and Viewing

Remember, it is the job of the Estate Agent to sell your property – not you! They should have a good reputation in the area, which will mean that more potential buyers will contact them when looking for a new property. They should attend every viewing that they arrange for potential buyers and not leave it to you. They are the sales people – not you and of course, they should sell it for the highest price possible. They should also have a good reputation for being able to “move” properties quickly, even in an economic downturn and they should be able to do this with the minimum amount of fuss and pressure to you. They should be chasing you to arrange viewings and potential purchase offers – not you chase them!! Once the right purchaser who is acceptable to you has been found, the estate agent withdraws from the process and hands over to the legal people to prepare and arrange completion of the sales documents!

Only at the time of contract completion and handover of the funds by the purchaser do estate agents receive their fee.

Alternative Option

This entire process can often be a long drawn out affair and can occasionally result in some estate agents reducing the sales price of the property in order to get a quicker sale and receive their fees in a shorter time. However, if you have a property in UK, we can often arrange for a cash purchaser to complete a purchase within a matter of days instead of months and depending on the circumstances, for the sellers’ asking price. There is no need for an estate agent and a string of viewings and of course there are no estate agent fees to be deducting from the selling price. Give us a call so that we can explain in more detail this alternative option to selling a house without an estate agent!

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Why Your Buyer Wants To Arrange a Survey and How to Prepare Your Property
About the author
Danko PuskaricDanko is IT professional with big passion about properties from young age. He is based in Manchester where he actively investing in properties and helping others to sell their houses.

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