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Special Report
Part 1:
1. Why do estate agents sell homes for an average of 3.7% less than they are worth?
2. Just how expensive are estate agents, really?
3. Why do estate agents deliberately overvalue homes (before they undersell them)?
4. Why do estate agents take 50% longer to make a sale than private sellers do?
5. How much poorer will using estate agents make you in retirement?
6. What are the other hidden costs of selling through an estate agent?
Part II: The 7 Things to Look For When You Sell
Methodology
1. Why do estate agents sell homes for an average of 3.7% less than they are worth?
2. Just how expensive are estate agents, really?
3. Why do estate agents deliberately overvalue homes (before they undersell them)?
4. Why do estate agents take 50% longer to make a sale than private sellers do?
5. How much poorer will using estate agents make you in retirement?
6. What are the other hidden costs of selling through an estate agent?
Part II: The 7 Things to Look For When You Sell
Methodology
2. Just how expensive are estate agents, really?
The average estate agent's commission is 1.5% of the value of your home. Taking our £200,000 property as an example that's £3,000 not including "disbursements" (expenses).
Next, even though you've just lost 1.5% of your home's value to the estate agent, the tax man will demand his share too. With VAT currently at 15% that's an additional £450.
So what do you get for this for this £3450 bill? Essentially you get a brokerage service — the estate agent puts you in touch with a series of prospective buyers until you sell. The actual sale of your home has nothing to do with the estate agent since preparing the sale contract and all of the legal work will be carried out by your solicitor and paid for separately.
By way of comparison, the legal work for the sale of a house can now be done for as little as £300 — that's a tenth of what an estate agent charges you just to find a buyer!
By way of comparison, the legal work for the sale of a house can now be done for as little as £300 — that's a tenth of what an estate agent charges you just to find a buyer!
To put this in perspective, let's imagine we have £10,000 of equity in our example house. Suddenly, that estate agent's bill isn't just 1.5% plus VAT: it's more than a third of your entire equity.
(HMRC, Countrywide plc)
How much does this add up to for a £200,000 property?
If we include the amount lost because your home is sold for less than it's worth we get:
estate agent's commission
VAT on commission
lower sale price
Total:
VAT on commission
lower sale price
Total:
£3,000
£450
£7,400
£10,850
£450
£7,400
£10,850
That's a total loss of £10,850 when you compare what you're left with when selling through an estate agent to what you could achieve selling privately and at the best price.
According to The Independent, the average salary in December 2008 was £25,000 dropping to £19,000 after deductions or £1,583 per month. Dividing £10,850 by £1,583 gives 6.85. That's nearly seven months that it would take the average person to make up the costs of selling a £200,000 property through an estate agent!
