A guide to estate agency fees and contracts

A guide to estate agency fees and contracts

When you sell a property through an estate agent, you enter into a contract with them, and pay the estate agent a fee. This commission fee covers the costs of the estate agent’s services and is charged on a ‘no-sale, no-fee’ basis. Estate agent commission is due when contracts are exchanged.

At a glance - estate agent fees and contracts

How much are estate agent fees in the UK?

What is the average estate agent fee in the UK?

Estate agents' fees will obviously vary based on the value of the property, but for the average house price in the UK of £272,000, the average estate agent fee will be around £3,860. This is based on the national average estate agent commission rate of 1.4% of the sale price.

How are estate agent fees calculated?

Estate agent fees in the UK for sole agency agreements are usually in the region of 1% to 1.8% of the selling price (including VAT). The fees are quoted to the seller as either as a percentage or as a flat fee, plus VAT.

Is VAT included in estate agent fees?

Yes, estate agents' fees are subject to VAT, but estate agents will sometimes quote the fee exclusive of VAT. If you are unsure, always check with the estate agent.

What do estate agent fees cover?

Estate agents' fees cover the costs of marketing the property, including photography, floor plans, physical ‘For Sale’ boards and listing the property on websites. Estate agents commission will also include the cost of viewings and any administration costs an estate agent incurs when negotiating and liaising with buyers, solicitors and surveyors.

Can you negotiate estate agent fees?

Yes, it is possible to get a better price with an estate agent.

When is the best time to negotiate estate agent fees?

An estate agent will usually tell you what their fee is when they conduct a valuation of the property. It is good practice to get two or three valuations from different estate agents. You will then be able to compare the commission fees you have been quoted. If you have a preferred estate agent, but their fee is higher than the others that have valued your property, you can ask them to match the lowest quote.

What should you consider alongside the fee?

The main things to take into consideration are:

• How long is the tie-in period?

By signing an agreement with an estate agent, you are committing yourself to them for a fixed period. This is usually for at least 10 weeks, but can be longer.

• How long is the notice period?

You will need to give the estate agent notice that you are terminating your contract with them after the expiration of the tie-in period. This is usually 28 days, but check the terms of your contract to make sure. Check also if you can give notice before the end of the tie-in period.

What should you check in an estate agent contract?

It is very important to check the contract thoroughly before you sign it.

Sole agency agreements

In sole agency agreements, which are the most common type, you sign up with one estate agent. They get paid the commission fee if the property is purchased by a buyer the estate agent has introduced. If you find a buyer privately, the estate agent does not get paid the fee. Make sure this is clearly stipulated in the terms of the contract.

You should be aware that an estate agent will often include a clause to the effect that even after the end of the tie-in period, they can claim the commission fee for any buyer they have found that goes on to buy the property.

Sole selling rights agreements

This type of agreement gives the estate agent the right to claim the commission fee even if the seller finds a buyer privately. If the estate agent insists on sole selling rights, try to negotiate a lower fee.

Multiple agency agreements

In multiple agency agreements, the seller signs with more than one estate agent. This increases the chances of a successful sale, but means agents can charge a higher commission fee, usually 2.5% to 3.5%. Check the contract for clauses that might give the estate agent the right to claim a fee even if the sale does not proceed.

Tie-in and termination periods

Perhaps the biggest issues with small print are the exact details of tie-in periods. In contracts this is often called the ‘initial term’. After this term elapses you will be able to give notice to the estate agent to terminate the contract.

What happens if you sell your property privately?

A situation may arise in which you have signed a contract with an estate agent, but sell your property to a buyer independently of the agent (like a family member or a friend). Under a sole agency agreement you won’t have to pay the estate agent a commission fee. If you have signed a sole selling rights agreement, you will still be liable to pay the fee.

What happens if you want to change estate agents?

You are within your rights to change your estate agent, but you need to wait until your tie-in period with them has expired. You can then give notice, usually 28 days, until signing a contract with another estate agent. There is also a statutory 14-day cooling-off period after signing an agreement, during which time you can terminate the agreement without penalty.

How do I compare estate agents?

If fees are similar, how do you choose an agent to sign a contract with? Even if there is a range in the fees quoted, price alone shouldn’t solely guide your decision.

Look at local market expertise

It can be difficult to measure how well an individual estate agent knows the local property market, but by asking them questions you may be able to get a better impression of their expertise. How many properties have they sold in the local area? What properties are selling well? When did they last sell a property similar to yours?

Check marketing and buyer reach

To see how well an estate agent markets properties, look on property portals like Rightmove to find their listings. Browse the agent’s own website. Are the photographs of high quality and impactful? How well written are the property descriptions? What other visual media do they use? Do they have a significant number of listed properties? How large are the audiences on the estate agent’s social media channels? This will give a good idea of the number of buyers they are able to reach.

It’s possible to pose as a potential buyer. See how quickly you receive a response to your enquiry, and are put on a database of contacts.

Consider reviews and track record

One of the most readily available resources are online customer reviews. Google and Trustpilot are two of the largest review platforms. Google allows you to see reviews for individual branches, if you are considering a regional or national estate agent.

Frequently asked questions

Can I negotiate an estate agent's fee?

Yes, you can compare the quote you receive against those of other estate agents, and ask if the fee can be reduced. If you change estate agents, you may also be able to ask for a lower quote, especially if circumstances have changed - if your property hasn’t sold, for example, or you have lowered the asking price.

Do I have to pay an estate agent if I change agents?

No, as long as the tie-in period has ended, you are free to enter into a contract with other agents. You will have to give notice, however – usually 28 days.

How long does an estate agent contract last?

Estate agent contracts usually last at least 8-10 weeks, but can be as long as 16-20 weeks. The average contract in the UK lasts 12 weeks.

Is it cheaper to use an online estate agent?

Yes, online estate agents are cheaper – they charge a fixed fee, between £1000-£1500, sometimes payable upfront, and regardless of whether the property sells or not.

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