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Estate agents v online estate agents?

For Sale signsRecent reports about the housing bubble say that 25 people are searching for each house which is on the market, blaming the raise in buy-to-let house hunters for the shortfall, which has in turn been fuelled by low interest rates. However, when Chancellor of the Exchequer, George Osborne, scrapped higher rate tax relief on buy-to-let mortgage interest repayments in his Budget in July, the tax crackdown could cost some amateur landlords thousands of pounds a year, persuading some to sell up and scaring new investors away.

Wealthy pensioners with twitchy feet might consider selling up and spending the lot as their investment property is not covered by the new relaxation of inheritance tax. If they do, what are their choices? Should they choose an online estate agent or a traditional one?

Last year most property sales in London involved flats which sold on average for £456,984, while terraced properties sold for an average price of £591,112. For most people, these are huge figures to get your head around, especially given that the national average income is only £26,500.  So you need a fairly impressive nest egg to consider a buy-to-let property in the first place.

If an estate agent were to sell these properties at the full asking price, they would charge, on average 1.25%. It sounds a fairly small number doesn’t it? However, in reality it is £5,712 for the flat and a whopping £7,388 for the standard Victorian terrace.

Before I researched this article, my view was; so what do the agents actually do for these colossal sums of money? It’s certainly not £7k+ worth of work.  Having recently put my house on the market and then taken it off again, it seems that all they do is send around a photographer to take some pictures then write some extremely overstated descriptions and pop it on the usual portals and wait. To be honest, we could do that ourselves. We are all tech savvy enough to upload some images and a bit of a description, however this is a closed shop. It has to go through some type of agent.

Rightmove (https://www.rightmove.co.uk/) and Zoopla (https://www.zoopla.co.uk/) have been around for a long time and spawned a new type of cyber estate agents. Rather than charging £7k for a standard terrace, they charge a flat fee of about £900 (inc. vat) which includes:

  • Someone comes around to value the house
  • Create floor plans and take photos
  • Give you an advertising board
  • Send you details or arrange a viewing slot
  • Then you can show your home to the viewer

So are you actually paying the nearly £6,000 difference for someone to show your home for you? Far from it.  PurpleBricks and the gang have taken a “match.com” approach to house selling. While many people who are house hunting do search the portals, the agents actually do a lot of vetting before showing prospects around; especially at the higher end of the market.

Having done my research and spoken to quite a number of agents; I have discovered that 75% of their work happens after the offer has been accepted. Getting it on the market and under offer is the easy part in their view.  If you use the online-dating approach to house sales, in essence, you are shunting the fees further down the sales process. There is a vast amount of paperwork which needs to be collated and verified. While this could be done by a solicitor, they charge for this service in the way that only a solicitor can, the numbers can be very large and are not fixed. With a professional agent, they do all this leg work and nurse your chain to completion.  It is a much more professional process with a lot less hassle. The net costs, when you compare the final and full cost of selling the investment property is about 10% difference between the 2, but the stress and hassle can be huge.

On the other hand, if you decide to keep your rental property (and the returns are still very good) then using an Estate Agents in Berkshire if you are located in that area is definitely the best solution. The online dating agency is only worth considering if your property is an annex in your own home. Agents really do work a lot harder than they are given credit for in this area, especially if you have an older property which could be subject to any number of problems. A good agent will give excellent advice too.

Within a month of Osbourne’s “Fairness Budget” in July, we find the global financial markets have crashed (again) making it highly unlikely that there will be a change in the base interest rate in the UK in the next 2 years. So savers wanting more than 0.8% on their nest eggs may still be on the lookout for a bricks and mortar investment.

 
Let By sign outside houseIf so, then  overall, you can save a bit of money going to online agents for your property needs but at the end of the day, it is a DIY approach and unless you have a lot of free time and don’t mind dealing with all the hassles and pitfalls then it could save you a bit.  However, if you are like the majority of us, who work full time and hardly find an hour spare to deal with the personal admin which wafts through your letter box and inbox on a daily basis – a good traditional estate agent is actually worth their weight in gold.

If so, then  overall, you can save a bit of money going to online agents for your property needs but at the end of the day, it is a DIY approach and unless you have a lot of free time and don’t mind dealing with all the hassles and pitfalls then it could save you a bit.  However, if you are like the majority of us, who work full time and hardly find an hour spare to deal with the personal admin which wafts through your letter box and inbox on a daily basis – a good traditional estate agent is actually worth their weight in gold.