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When do you pay estate agent fees?

by | Dec 14, 2022

Home $ Property Management $ Is a Letting Agent good for landlords? $ When do you pay estate agent fees?

When it comes to buying or selling a home, paying an estate agent can be vital in the sale of your property so it makes sense to want to know when you should pay an estate agent fee.

This is not to be confused with letting agents and letting agent fees as these professionals focus on the renting of a property rather than the sale of a house. Although, a landlord will likely deal with both if they are buying a property for let In this article, when you should pay this fee will be discussed alongside if the fee is even necessary.

Also, advice will be given on when to clarify and negotiate on estate agent fees and what industry terms like an “exchange of contract” mean when negotiating with an estate agent. Whether you are a first-time homebuyer or a seasoned property investor, understanding when and why to pay estate agent fees is an essential part of the home-buying process.

An estate agent explains when you should pay fees

When do you have to pay an estate agent’s fee?

The estate agent’s commission is typically not paid upfront by the buyer. The estate agent’s fee is often covered by the seller as part of the total price of selling the house. The actual amount will depend on the specific terms agreed upon between the seller and the estate agent, but the fee is typically set as a percentage of the sale price of the property.

What type of estate agent fees are there?

When buying or selling a property, one of the most significant expenses to consider is the estate agent’s fee. But with so many different types of estate agents and fee structures to choose from, it can be challenging to understand exactly what you are paying for and whether it is worth the cost.

The main reason behind having fixed fees and commission fees is the estate agent wants to make sure they get some level of income from the seller even if the property doesn’t sell or they decide to go with a different estate agent.

Fixed fees are usually charged straight away in exchange for the estate agent’s time and commission fees are charged later on when the property is sold.

What are commission fees?

Commission fees are charged on the sale of a property. Before an estate agent works with a buyer, they will agree on what this percentage is. Typically, they are between 0.5% and 3% of the purchase price.

For example, if a seller has hired an estate agent to help them sell their property. The property has an asking price of £300,000, and the estate agent has agreed to charge a commission of 1.5% of the sale price. If the property sells for the asking price, the estate agent’s fee would be calculated as follows:

£300,000 x 1.5% = £4,500

So, in this example, the estate agent would charge a fee of £4,500 for their services. This fee would typically be paid by the seller, either out of the proceeds of the sale or as an additional cost of selling the property.

It is important to note that the commission rate and the exact terms of payment can vary depending on the specific agreement between the seller and the estate agent. Read our article on the best estate agents to compare some properties.

What are fixed fees?

Typically a fixed fee that an estate agent charges will be taken if the estate agent is working with the cellar before the property is sold. This fee includes evaluating a property and marketing the property as well as making sure that people view the property for purchase. A more detailed list of what these fees cover include:

  •  Drawing floor plans
  •  Taking professional photos for the website
  •  Evaluating the property based on previous purchase data of the area
  •  Making a description of the property for viewers
  •  Installing a for sale sign at the property
  •  Reaching out to buyers who they know are interested in the deal
  •  Organising viewings
  •  Negotiating on offers with the buyers

Fixed fees will be charged upfront and then if the property is sold, a further commission fee may be charged on the sale of the property.

A postit representing estate agent fees

What are withdrawal fees?

Some estate agents also charge withdrawal fees too. These are charged to the seller in case they decide to take their property off the estate agent’s platform and decide not to sell or sell elsewhere. Therefore, the seller may pay a commission fee if the property is sold and a withdrawal fee if it doesn’t sell. This way an estate agent makes money either way.

What questions should you ask an estate agent when it comes to fees?

When you speak to an estate agent, the first thing you should speak about is what proportion of their fees come from the commission of sale and what proportion will come from fixed fees.

If it is the case that you have done most of the marketing for a property anyway such as creating floor plans for the property, taking professional photos and you may already have some interested buyers, then you may be able to negotiate down the commission fee and just charge a fixed fee for services from the estate agents such as marketing.

Do not be afraid to speak to a range of estate agents before you make a decision as there can be a big variation in how they charge fees and you may find that certain estate agents are more suited to the way you want to sell your property.

Finally, make sure that any withdrawal fees in the agreement are made clear. If you know as a buyer you are a bit indecisive and you may not actually end up selling your property, then this may be a good reason to make sure there are no withdrawal fees in your agreement with an estate agent.

How to decide on when estate agent fees should be paid

 

This should be agreed upon in the tenancy agreement before you sign any contracts with an estate agent. It could be that fixed fees are due straight away and commission fees are paid later. There may also be the option that an estate agent charges fixed fees after they have done the initial work of listing your property for sale on a platform.

The specifics of how this works will depend on the agreement you have with an estate agent and how the estate agent conducts their business 

Do solicitors pay estate agents fees?

Sometimes, a landlord who does not want to deal with the exchange of contracts and selling the property in general may delegate this task to a solicitor. However, the money will still come from the landlord’s portfolio.

There could be a commission structure set up for the solicitor as well where they are incentivised to sell a property for the highest price. In a set up like this, a solicitor will take home a higher commission for the sale of a property and so will an estate agent.

If making commissions like this seem interesting it could be a great career choice to become a solicitor or an estate agent. First, you would have to figure out how to become an estate agent and then find an estate agency firm to work for.

A solicitor working out when to charge estate agent fees

Who pays estate agent fees, the buyer or the seller?

Sellers always pay estate agent fees as they are the ones who own the property and the commission will be taken from the sale of the property.

Are estate agent fees payable on exchange or on completion of a property?

Most of the time, this will just depend on their estate agent company you have decided to sell a property with. Nonetheless, generally online estate agents take their fees on the completion of a property and physical estate agents will require a fee when contracts are exchanged.

Some people prefer to go with online estate agents for this reason as you don’t have to transfer any funds to the estate agents, they just take a commission as and when the property is sold. Also, with online estate agents who charge on the completion of a property, the estate agent has to show that they were involved in the sale and they introduced the buyer to the deal.

To conclude

When wrapping things up and to answer the question of when do you pay estate agent fees? A seller will pay estate agent fees whenever the agreement they have with the estate agent says they should. Some fees are paid on the sale of the property, some upfront and some fees are paid if the property doesn’t sell at all. Being aware of what estate agent fees are in your agreement will prevent any surprises in cost.

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