House buyers and sellers have been urged to negotiate estate agent fees - and even consider using alternatives to sell their homes - amid concerns that there is little price competition among firms.
The Office of Fair Trading (OFT) has made these recommendations in its investigation into the estate agent market. It found that failing to shop around and negotiate on estate agents' fees could be costing house sellers up to £570 million a year.
The consumer watchdog has now ruled out regulating estate agents but has instead proposed a shake-up of the market that it says will lead to a better deal for house buyers and sellers.
Despite finding that consumer satisfaction with estate agents has improved, the OFT warns the property market remains “dominated” by traditional estate agents with weak competition between them on price.
Plus, as property prices rise during housing booms, homeowners are hit by rising estate agent fees.
The study does, however, conclude that new rules are needed to prevent estate agents ‘favouring’ buyers who use ancillary services such as mortgage advice, surveys, and conveyancing.
John Fingleton, chief executive of the OFT, says it wants to shake-up how homes are sold - including updating legislation to allow new entrants into the market.
Current legislation, dating from 1979, may be hindering the development of new business models such as property facilitators that only introduce buyers and sellers to each other.
“Encouraging new business models, online estate agents and private seller platforms could put useful competitive pressure on traditional models and lead to better value for buyers and sellers,” he explains.
“We also encourage home sellers to negotiate hard on commission fees and consider using alternatives to traditional estate agents.”
The OFT’s study found more than a quarter of sellers who used a traditional estate agent have considered using an alternative selling method.
A third of buyers using a traditional estate agent believed that the fees they had paid to their estate agent represented slightly or very poor value for money; however, 64% failed to negotiate a lower fee.
HOW TO CUT ESTATE AGENT FEES
• There are alternative ways of selling a house. For example, using an online estate agent, selling at auction, or selling privately.
• If you think the price quoted is too high then contact other agents to find out how it compares. Don’t be shy to negotiate on fees and service levels.
• Asking potential buyers to provide evidence of finance before accepting any offer.
• Speed up the conveyancing process by getting all the information together early.
• The estate agent acts for the seller and not for you – remember this during any negotiations.
• Get your finances in order before making offers – this will strengthen your hand in negotiations as you’ll be able to provide evidence of your ability to finance the purchase.
• Remember, the mortgage valuation is for the lender’s benefit and is not a full survey of property condition so consider paying for your own survey.
General tips for both sellers and buyers
• Shop around to find advice and services that meet your needs. This applies to mortgage advice, home information packs, estate agents and solicitors.
• Keep yourself informed through the process. If you wish, you can ask the agent for direct contact with the individual on the other side of the transaction.
• Know your rights there are redress schemes, covering some of the professionals you will deal with, and you can complain if you have a problem.