8th September 2018
The property industry in the UK has no barriers to entry, and therefore, you can be an agent simply by owning a mobile phone. And many do. This is in contrast to the US, where the buyer and the seller both have brokers; and the industry is highly regulated. The commissions payable are typically 3% on either side, both from the buyer and seller.
Here, the most you typically pay is 2.5% if you’re a seller. Having an agent for a buyer is lesser known in the UK. Usually, they charge according to the rarity of the deal, the discount, and their ability to secure it.
Because there are no barriers to entry, sometimes you end up having the most ludicrous conversation with agents. There are those who try to load up the commission, with no underlying reason. They try to justify it by saying, for example, that there are many in the chain to get the deal done. One agent told me he has ten mouths to feed in the office! These are the kind of justification given for the enhanced commission request.
Recently, I had one agent who claimed he had a buyer for a deal we have. He wanted a commission of £200K. I mentioned to him that the top agents in central London don’t charge this amount, and asked him what the reasoning was for this level of fee? Apart from him claiming he has a buyer, he didn’t have a reason to give me.
Often, they do not even have the knowledge or expertise to execute a transaction. In many cases, it is not as simple as agreeing the deal. There will be issues which come out of the woodwork, whilst the deal is being transacted, which will need to be resolved.
It takes experience, which is born of having successes, and a few failures, to be able to identify deals, and know which ones are to be avoided.
By appointing someone to act for you in regards to purchasing a property, you inherit their experience, knowledge and flaws. From identifying what is a deal today, in comparison to market values; and which areas are going to grow strongly in the years to come; to being able to see through deals with issues.
It’s rare you get deals handed to you on a plate. Focusing on these, may well eclipse buying a deal just because it’s discounted on day one; especially if it’s a buy and hold deal. You may get a discount. But if it doesn’t grow much over the next five years, you may have been better off buying something at market rate, in an area which is set to rise strongly.