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Sunday, 6 July 2008

Let’s hear it for the Estate Agent

I was surprised to learn that in surveys Estate Agents don’t top people's list of most hated professions.

I say I’m surprised because whenever I talk to friends or neighbours and we get on to housing, no matter how tangential it might be, estate agents and their perceived parasitic existence almost always crops up.

The comments run something like this: they charge an arm and a leg for doing little or nothing; they’re rude, unprofessional, and their fees increase without them having to do anything.

It’s that last comment that interests me.

It’s the one you used to hear repeatedly during the boom time. As house prices rocketed, estate agents fees just rose and rose – and they didn’t have to do anything more to earn the higher fee. In fact, selling got easier as purchasers fell over themselves to get through the office door.

It’s factually correct. If you charge 1 ½% on a sale valued at £100k you get £1,500. If the same property is sold a few years later for £200k the fee doubles to £3,000. And you don’t have to do much more to sell the same property at a higher price. And sellers resented that. (They also resented the tax paid on the transaction, and buyers weren’t keen on the fees charged by the banks and building society for arranging the mortgage. But that’s another story).

The estate agent is the agent for the seller. It is his job to get the best price for your property. He/she is the transmission mechanism translating demand into higher prices.

I don’t know many house owners who have complained they got top dollar when selling their home. At dinner parties very few people grumbled that their home was now worth three times more than they paid for it. And how was that new car, holiday, extension, colour LCD etc made possible? Because of rising house prices and equity withdrawal. And what exactly did we, as house owners, have to do to reap those benefits? Precisely nothing.

So why begrudge estate agents their share of the housing market’s bounty over the past few years.

That’s not to say they shouldn’t up their game, and the current downturn is likely to help achieve that. With transactions down over 60% on this time last year many agencies are going to the wall. Only the lucky ones or those who work really hard to make that sale are likely to survive.

Did you mention city bankers? Well, now you're talking.

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