What is an estate agent?
The term estate agent is used in the UK to refer to somebody employed to sell, rent or manage a property. Historically three different terms were used – estate agent for the person responsible for managing a landed estate, house agent for the person involved in letting or selling homes, and land agent for the person involved in land management. During the course of the 20th century, these duties were amalgamated into the umbrella term estate agent.
Modern estate agents bear little resemblance to the duties of those once employed to manage a large country estate. Nowadays, they usually work in companies, ranging from the small to the very big, selling and/or letting a range of properties in a particular area. After being approached by the owner of a property who wishes to sell or let, estate agents do the marketing of the property and negotiate with prospective buyers or tenants.
Do they charge for their services? How do they make money?
Residential sales estate agents make their money by charging the seller of a property a percentage of the selling price as their fee. The buyer of a property does not have to pay the estate agent. The exact percentage varies between agencies, but will generally be between 1.5 – 3% of the value, plus VAT, with Londoners paying more for estate agency services than the North of the country.
As they claim their fee from a completed transaction, it is an agent’s own best interests to sell a property and to sell it at the highest possible price. This is also a reason to be suspicious of an agency which quotes you an exceptionally low commission rate – with less financial incentive to sell your house, they might not do such a good job.
Estate agents who work in residential lettings may charge a property owner in different ways, quoting flat fees for providing various services such as drawing up a lease in addition to a charge which is paid once they have provided a landlord with a tenant.
If they are also responsible for managing a property and collecting rent then they may charge a commission on the rent for providing this service. They will also generally charge the tenants for finding them a rental property. This is usually a flat fee, ranging up to about £250, which is described as an application or administration fee.
So what does an estate agent actually do all day?
A wide range of duties. Residential estate agencies usually handle either sales or lettings, although some do deal with both. An agent who works on sales will meet people who wish to sell a property and work with them to agree on a timescale and asking price.
They handle marketing for the property which involves things like choosing where it should be advertised in order to target the most desirable potential buyers, according to the type of property, price and area. They meet potential buyers, discuss what they’re looking for and take them to view houses that they think are suitable. When they succeed in finding a buyer for one of their properties they will generally hand over to the lawyers who handle the legal side of things.
(Although estate agents initiate and manage the selling process, the legal side of the transaction is undertaken by solicitors or licensed conveyancers).
What training do you need to become an estate agent?
No formal training is required to register and operate as an estate agent; most people start by working their way up in an existing firm before taking on more responsibility or setting up on their own. The ease with which you can set yourself up as an estate agent (one year the BBC registered a fake agency, “Cheatem & Ripoff” in order to demonstrate how quick and easy it is to do) means it is possible for unscrupulous or incompetent individuals to give the profession a bad name.
How are they regulated?
At the present time, estate agents in the UK are not closely regulated, although they do have to comply with the Estate Agent Act 1979, amended for undesirable practices in 1992. The Department of Trade and Industry publishes a fact sheet detailing what they are doing to protect consumers when dealing with estate agents.
One of the main problems with the current system is that there is no requirement to belong to a regulatory body in order to set up and practice as an agent. Estate agents may choose to become members of the Royal Institute of Chartered Surveyors or the National Association of Estate Agents, and it’s a good idea to check for their membership of these bodies when choosing one to work on your behalf. However, as a trade association rather than a professional regulatory body, the NAEA has limited powers, whilst the RICS deals mainly with those involved with commercial property transactions.
The Government is aware that the current system can lead to people being cheated by unscrupulous estate agents and is working to bring in a better system of regulation. The Consumers, Estate Agents and Redress Bill, announced in Parliament on November 16 2006, will introduce a more consistent system and safeguard consumer rights more closely, although it does not express the intention to establish a professional regulatory body.
However, it WILL compel them to register with a redress scheme so that consumer complaints are dealt with seriously with the possibility of financial restitution.
What kind of problems do people experience with estate agents?
Readers may find it comforting to hear that by far the most common complaints about estate agents relate to errors in administration, often to incorrect payments, rather than to malicious or dishonest behaviour! Other common complaints involve agents who claim a fee higher than the one initially agreed, and agents failing to let a buyer know about particular attributes of a property.
Sellers frequently complain that agents have not given them information on all offers made for their property, although legally they are required to pass on details of all offers, or that agencies have been inefficient in arranging viewings for potential buyers.
What can I do when things go wrong?
The Ombudsman for Estate Agents scheme provides an independent service for settling problems between buyers and sellers of property and registered agencies. In joining, agencies agree to follow a code of practice which commits them to handling clients fairly.
If a customer is unhappy with an aspect of the service, they can approach the Ombudsman for assistance, and may receive financial compensation. However, it is important to note that this is a voluntary scheme, and in March 2006 the BBC reported that only 4 out of 10 agents were members (this is contradicted by the Ombudsman scheme itself, which claims the figure is 60%). You might want to consider checking an estate agent’s membership status before committing to allow them to handle your property.
How are my rights as a buyer or a seller protected?
The Property Misdescriptions Act of 1991 makes it an offence to make false or misleading statements about property offered for sale. As registered businesses, estate agents are required to deal fairly with their customers, but of course seeking legal redress once things have gone wrong can be difficult and time consuming. Therefore, it is very important to check the agency thoroughly before you commit to buying or selling a property through them.
As a seller you can set a time limit for making the sale, after which, if the property remains unsold, you can choose whether to stick with the same agency or to look elsewhere.
Do I have to use an estate agent?
No. It is possible to sell (or buy) a house without using an agent, especially with the increasing use of the internet. At the present time, roughly 5% of homes are bought and sold independently. However, if you decide to cut out the middleman you should proceed with caution: buying a property is a big commitment, and with such large sums of money involved it is important that the transaction is carried out correctly. There are a variety of websites designed to help you to advertise and sell your house, and it’s worth doing some research to ensure that you are confident about every stage of the process.
Although estate agents are not licensed to carry out an official assessment of the property value, they are able to give educated estimates. They also know what an acceptable asking price would be, which non-professionals may not be able to do. A surveyor can give an accurate assessment of the value of a property, so it might be worth consulting one, and conducting a survey of similar properties, before settling on an asking price for your house or making an offer.
How can I choose an estate agent?
The National Association of Estate Agents has a referral service. Contact them on 01926 417 792. You can also visit the agents in the area you live in or wish to move and ask for information on their fees and the kind of properties they handle. Most agencies will be more than happy to help you and to convince you to use their services. You might want to ask them about their complaints process and their membership of bodies like the NAEA and the Ombudsman scheme.