What exactly do we pay letting agents for?

Hannah Ricci's picture

I’ve had the unfortunate experience of coming into contact with letting agents again recently, and I had forgotten how much they make my blood boil. 

The current economic climate has seen a surge of estate agents, with a shortage of sales on their books, turning their hand to letting property instead. This coupled with an increase in ‘reluctant landlords’ – homeowners who are opting to rent out their property rather than sell – mean letting agents are one category likely to be benefiting from the recession.
As a tenant for many years, I resented the pressure they put on - particularly in central London where finding affordable housing is hard enough – to make a quick decision on a property, by warning that it would be snapped up by other, probably fictional, people who had also viewed it.
With the worry of ending up homeless, this lead me on more than one occasion to end up in a place with either a serious damp problem, mouse infestation or a generally nightmarish landlord.
Add to the fact that you have to pay for this service and then face a struggle to get your deposit back when you’ve had enough of the place you were hoodwinked into taking, it makes the whole process incredibly expensive and stressful.
So I found it interesting, since becoming a landlord last year, that it’s not much better from the other side.
When the current tenants gave their notice to move out last month my heart sank, knowing how difficult it can be to find reliable tenants. On a tight budget, we were determined to do it without an agent however, and put an advert in the local paper.
After no calls for several days, I started to panic. Then, as if sensing my weakness, I received a call from a local letting agent telling me they had a number of people interested in the property and they could fill it by the end of the week.
Deciding to hear him out, I asked him what fees were involved.
First, a £450 finders fee. Since he didn’t need to do any finding as people were already interested, I asked if this would be waivered. It turned out not.
Apparently it also covered credit and reference checks on prospective tenants. Still, quite a hefty sum, particularly when they would expect it again in six or 12 months time, even if the same tenants remained in the property.
On top of this was a monthly fee of 12% of the monthly rental income; or 17% to include insurance for rental income if the tenants don’t pay up. This was described as a management fee, but as we’re on hand to deal with problems directly, this also seemed excessive.
On declining his services, he forcefully suggested he meet us at the property the following day to discuss. After declining again and hanging up, I received a barrage of calls over the next few days from him and several other agents.
Luckily we’ve now found a tenant ourselves. So while letting agents offer some degree of protection, for me it’s just not worth the money.

Your Comments

In any boom and bust situation there are the usual grabbers, letting agents are no exception.Name of the game is to shop around and do your homework before you commit to any one agent.My experience go's back 20 plus years with the same agent who I have recommended to dozens of people .He charges 12.5% for a full management service with the addition of contracts etc on change over,I have never had a void in all my dealings which cant be bad.This is in the outer London area

I have appointed two estate agents to look for SUITABLE tenants for my 2 bed flat. I have given a check list of conditions to the estate agents who have consistently failed to ensure that the prospective tenants have met with all the conditions before a viewing is arranged.

So the viewing is arranged and when I ask the tenants questions from the check list, the tenant's response is that the estate agents have told us nothing.

Therefore, my time is totally wasted as I have to inform the tenants that they do not meet with all the conditions.

Therefore, the estate agents are a total waste of time and they just do not want to work for their commission.

Like other profession, it is time that the estate agents should be regulated.

I entirely agree with Hannah's sentiments. We used a letting agent for several years when we started letting the home that I had once lived in and were unable to sell. Initially we thought it was fine, but we then found that the advice they had given us was flawed, and whenever we phoned their office we always seems to speak to a junior who didn't seem to know what they were talking about.

When some tenants moved out and we disputed the state that they left the property in the agent gave us no helpful advice on how we should prepare our case for the arbitration service. What they should have said was that the photographs we took should have been dated (they were actually - electronically - but this was ignored), and witnessed by someone independent (e.g. neighbour), which they weren't.

Trying to get an accurate inventory done (for which we paid handsomely) was again a challenge, and inaccuracies in what was provided took months - and much hassle - to resolve.

For all of this 'service' we paid 15% of the rental value - payable upfront no less, and not just in the first year, though it did reduce a little after 3 years - plus extras. These extras included paying for an 'agreement fee' (which was simply their proforma, some of which didn't apply as it was for flats or leashold properties and they refused to customise it, even though we were paying for a personalised service!), inventory, check in and check out fees, quarterly inspections. We later found out that our tenants were also asked to pay £50 for the tenancy agreement too! The final straw was when I realised that the tenancy agreement for which we had both paid may have left us liable to problems under the Housing Act if we needed to evict the tenants, as the procedure for what to do in case of a dispute at the end of the tenancy was incorrect. So much for advice from the experts!

The only thing the agents did manage to do for us was to find us tenants promptly, but after all the hassle of dealing with them (it was far easier to phone the tenants directly and ask them to phone us directly too, which we now do) we finally got rid of the agents to our great relief as well as being considerably better off financially without them.

One thing I should say is since we put the deposit with the Letting Protection Service I keep getting emails about reference services, insurance etc which are useful as I wouldn't have known where to look for these services. I am filing these away for when we do need to get new tenants which hopefully will be a long time in the future as our present tenants are lovely!

Within all industries there are good and bad companies. In future you might want to try and online letting agent, the terms are very clear and you only pay for what you want not random commission or administration fees.

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