Choosing an estate agent: valuations, fees and the contract you sign

Choosing an estate agent is one of the biggest financial decisions in a sale, and most sellers make it in an afternoon. Two or three agents visit, each gives a figure and a fee, and the choice usually comes down to who you liked and who said the highest number.

Liking the agent matters. You will be dealing with them for months, often at stressful moments, and a good working relationship is worth having. But liking the person is one decision. Agreeing the price, the fee and the contract is another, and it is the second one that decides what you walk away with.

What an agent’s valuation really is

An estate agent’s valuation is not a formal valuation. It is a recommendation about the price to market your home at, made by someone who wants your business. Most agents give an honest view. But every agent knows the seller is likely to choose the highest credible figure, and in a competitive market that creates pressure to pitch high.

A figure that wins the instruction is not necessarily a figure that sells the house. Take a home where the sold-price evidence points to around £550,000. One agent suggests £600,000, another £560,000. The higher number is flattering, and the agent quoting it may be sincere. But if buyers will not pay it, the home sits, the price is reduced in stages, and by the time it sells it may have lost the early interest that the right price would have attracted.

There is a second risk. Even if a buyer agrees a high price, their lender’s valuer still has to agree with it. A down-valuation at that stage can leave the buyer short of money weeks into the sale, with your onward move depending on it.

You can see what homes like yours have actually sold for, by type and area, with our house price check. It is a useful reference point when the figures you are given are far apart.

Estate agent fees

Traditional estate agents usually charge a percentage of the sale price, anywhere between about 1% and 2% plus VAT, depending on the area, the agent, the property and the type of agreement. Joint and multi-agency usually cost more than sole agency. Some agents also charge upfront fees, marketing charges or withdrawal fees on top. Online and fixed-fee agents charge a set sum instead, which is often payable whether or not the home sells.

On a £550,000 sale, 1.2% plus VAT is £7,920, and 1.5% plus VAT is £9,900. That difference of about £2,000 is real money, and fees are negotiable. But it is small next to the cost of getting the price wrong, which can run to tens of thousands. The cheapest agent and the most expensive agent are rarely the real choice. The real choice is the agent most likely to achieve the best price, with terms you are comfortable with. Our cost of buying calculator shows the agent’s fee alongside the other costs of selling and moving, so you can see the whole picture.

The contract you sign

The agency agreement is where much of the risk sits, and it is often signed on the day of the valuation, at the kitchen table. Estate agents must set out their terms in writing before you are bound, and some terms must be explained in a particular way. The ones that matter most:

• Sole, joint or multi-agency. Sole agency gives one agent the home for an agreed period. Joint agency shares one, usually higher, fee between two agents. Multi-agency lets several agents compete, with only the one who sells being paid, usually at a higher rate. Watch too for the much rarer “sole selling rights”, under which a fee can be due even if you find the buyer yourself.
• Tie-in and notice periods. Many agreements commit you for a minimum period, then require notice. Switching agents during that time can be expensive.
• “Ready, willing and able purchaser.” Wording like this can make a fee payable when the agent finds a buyer prepared to proceed, even if you then decide not to sell.
• Introduction clauses. A fee may be due if a buyer the agent introduced later buys, even through a different agent, which is how some sellers end up paying two fees.
• Upfront and extra charges. Upfront fees, marketing charges for photography, floor plans or premium listings, and withdrawal fees, and whether any of them are payable if the home does not sell.

None of these is unusual, and none is a reason not to sign. They are reasons to know what you are signing. Agents must also belong to an approved redress scheme, so there is somewhere to go if something goes wrong.

Why the first few weeks matter

A home is never more interesting to buyers than in its first few weeks on the market. Buyers who have been waiting for something like it will look straight away. The price and presentation at launch, and how the agent handles that early interest, have more effect on the outcome than almost anything that happens later. That is why the choice of agent, and the price you agree with them, is worth getting right before the photographs are taken, not after the first reduction.

Where an independent view helps

Jon has more than 35 years in estate agency and has sat through a great many valuation appointments from the agent’s side. A consultation is a chance to talk through the valuations and fees you have been given, and what the agreement in front of you actually commits you to, with someone who is not competing for your instruction and takes no referral fee from any agent.