Since I’ve been blogging here on Agent Genius I’ve been asked a few times to explain how the UK estate agency model works and so I’m going to attempt to do so and to make it easy to chew I am going to do so in three parts.
Part one will cover our structure and how we work with sellers. Then part two will explain how we work, or don’t work, with buyers. Finally in part three I will explain which are the key differences and how I can see the UK and US models becoming more similar.
There are around 14,000 estate agency offices in the UK which are split between corporate and independent ownership. The corporate companies were traditionally owned by the banks and insurance groups and have grown primarily by acquiring successful independent businesses. There are currently 4 main corporate estate agencies in the UK and between them they account for around 3,000 of the estate agency offices.
The independent estate agency offices are generally smaller chains of offices, the vast majority being single office operations ran by individuals who have learned the ropes as an employed estate agent but wanted to operate their own business and so set up on their own. There are a number of franchise or licensed groups and this sector has seen significant growth in the last decade.
The primary business model, which applies in over 99% of cases, is that of Estate Agency Owner and employed estate agents. The owner pays their estate agency staff a basic salary plus commission based on either office or individual performance.
Within each office there will normally be specific roles such as manager, listers/valuers and Negotiators. The listers will be responsible for carrying out market appraisals on potential new properties that have been booked in by the negotiators. The negotiators key objective is to close deals and this also includes the process of managing buyer enquiries and arranging property viewings.
Show Me The Money
Typical fees charged by an estate agency to a home seller can be anywhere between 1 – 2% so with an average UK property price of £246,000 you can work out the average fee levels.
The average UK estate agent currently has 78 available properties for sale and with a national rate of around 60,000 completions per month (half the number in 2007) they each average 4 completed sales per month.
Typical time on market (median) for unsold properties at the moment stands at 109 days, while the average time on market is 184 days. Once a sale price is agreed, it then takes another 10-12 weeks for the transaction to complete which compares badly to timescales in the rest of Europe. Fall through rate varies from agent to agent but average at around 20%.
Additional revenues are generated by offering services such as financial services, Conveyancing (Legal work), Energy Performance Certificates and enhanced marketing.
Most estate agents now operate both selling and rental departments, particularly since the market downturn where rental business was the lifeline in many cases. Whereas the rental department was previously considered the poor relation to the sales department, most agents now realize that having a good stock of properties under management can be more than just a valuable security blanket for their businesses and can bring in profits at a similar level or in some cases higher.
So that’ the seller, what about the buyers? Part Two will follow tomorrow…
Agent for Movoto
December 7, 2010 at 1:20 pm
very interesting post! looking forward to the next two installments.
Kelsey Teel
December 8, 2010 at 1:24 am
Interesting article, Ben!
“The average UK estate agent currently has 78 properties for sale”
This statement was particularly interesting to me because I have seen agents in different parts of Texas who have totally different opinions about listing inventory. In my hometown, the agent I worked with had over 100 listings and took the stance of “the more listings, the better. If I don’t have it listed, someone else will and I’ll lose out on the commission (of course this didn’t apply if the seller wanted to grossly overprice their home or there was no chance of it selling)” On the complete opposite end of the spectrum, the agents I worked with in Austin usually only had around 3-6 listings and preferred it that way, taking the stance of “I don’t want to waste my time or marketing dollars on listings that won’t sell”.
Which is the right stance? Who knows, I guess it really depends on the market. My hometown is definitely a much smaller city so that obviously has something to do with it. Others factors could include the agent’s preference of working with buyers or sellers and whether or not they have a sufficient support staff to handle a large number of listings. I’d be interested to know how many listings the average US agent has for sale….I think you have just inspired me to do some research!
Erica Ramus
December 8, 2010 at 4:13 pm
Ben — Is the banking industry in the UK much stricter than here in the US?
I have a client in the UK who asked her bank for a printout of her bank balance and they agreed to send it to her in the mail, but whited out her balance. She said she went into the bank to then ask for a printout and they refused to give it to her. Does this sound normal?
Rob McCance @ Atlanta Homes
December 10, 2010 at 3:27 pm
Nice post. Interesting differences between the UK and USA.
1-2% is pretty rough, especially with the small average sales price.