Estate agent

Front windows of a little estate agency Mons (Belgium).
A house for sale in London

An estate agent is a person or business that arranges the selling, renting or management of properties, and other buildings, in the United Kingdom and Ireland. An agent that specialises in renting is often called a letting or management agent. Estate agents are mainly engaged in the marketing of property available for sale and a solicitor or licensed conveyancer is used to prepare the legal documents. In Scotland, however, many solicitors also act as estate agents, a practice that is rare in England and Wales.

It is customary in the United Kingdom and in Ireland to refer to real estate or real property simply as property.

The estate agent remains the current title for the person responsible for the management of one group of privately owned, all or mostly tenanted, properties under one ownership. Alternative titles are Factor, Steward or Bailiff depending on the era, the region and the extent of the property concerned.

Origin

The term originally referred to a person responsible for managing a landed estate, while those engaged in the buying and selling of homes were "House Agents", and those selling land were "Land Agents". However, in the 20th century, "Estate Agent" started to be used as a generic term. Estate agent is roughly synonymous with the United States term real estate broker.

Estate agents need to be familiar with their local area, including factors that could increase or decrease property prices. e.g. if a new road or airport is to be built this can blight houses nearby. Equally, the closing of a quarry or improvement of an area can enhance prices. In advising clients on an asking price, the agent must be aware of recent sale prices (or rental values) for comparable properties.

Regulation

The full legal term and definition of an estate agent within the UK can be found on the Office of Fair Trading (OFT) website. Enforcement of these regulations is also the responsibility of the OFT.

In the United Kingdom, residential estate agents are regulated by the Estate Agents Act 1979 and the Property Misdescriptions Act 1991 which is due to go in October 2013, as well as, the more recently enacted Consumers, Estate Agents and Redress Act 2007.

In September 2012 CPRs (consumer protection regulation) was introduced which now regulates the residential sales process.[1]

For residential property, there are also a few trade associations for estate agents, INEA The Independent Network of Estate Agents and National Association of Estate Agents (NAEA). NAEA members can be disciplined for breaches of their code of conduct.[2] Their disciplinary process includes everything from cautions and warnings right through to more severe penalties of up to £5,000 for each rule breached.[3]

Some estate agents are members of the Royal Institution of Chartered Surveyors (RICS), the principal body for UK property professionals, dealing with both residential, commercial and agricultural property. Members, known as "Chartered Surveyors", are elected based on examination and are required to adhere to a code of conduct, which includes regulations about looking after their clients' money and professional indemnity insurance in case of error or negligence.

The Ombudsman for Estate Agents Scheme,[4] which obtained OFT approval for the Code of Practice for Residential Sales in and, as of November 2006 claims to have 2,532 member agencies.

There is a legal requirement to belong to either organisation to trade as an estate agent. Agents can be fined if they are not a member of a redress scheme. The redress scheme was brought in alongside and to govern agents in reference to the HIP (Home Information Pack).

Industry structure in the UK

A handful of national residential estate agents chains exist, with the majority being locally or regionally specialised companies.

Several multi-national commercial agencies exist, typically Anglo-American, pan-European or global. These firms all seek to provide the full range of property advisory services, not just agency.

Only a handful of large firms trade in both commercial and residential property.

Fees

Lettings

Estate agents who handle lettings of commercial property normally charge a fee of 7 to 15% of the first year's rent, plus the whole of the first month's rent. If two agents are charging 10%, they will split the fee between them. Estate agents selling commercial property (known as investment agents) typically charge 1% of the sale price.

The fees charged by residential letting agents vary, depending on whether the agent manages the property or simply procures new tenants. Charges to prospective tenants can vary from zero to £300 in non-refundable fees usually described as "Application", "Administration" or "Processing" fees (or all three). There are no guidelines for letting agents on charges, except that they are forbidden by law to charge a fee for a list of properties. Otherwise, they are free to charge as they please.

The first month's rent in advance plus a refundable bond (usually equal to one month's rent) is also generally required. Most residential lettings in the UK are governed by "Assured Shorthold Tenancy" contracts. Assured shorthold tenancies (generally referred to simply as "Shorthold") give less statutory protection than earlier, mostly obsolete, types of residential lettings. Shorthold tenancy agreements are standard contracts; the wording is generally available from legal stationers and on the internet for around £1.00, although most lettings agents will charge £30 to provide one.

It is important that tenant referencing checks are in place prior to a tenant moving into a property. The credit check can be run using credit history data from Equifax, Experian or Call Credit (the three main UK providers) using an in-house website system or a managed referencing service. A reputable agent will also ask for an employment reference and a previous landlord reference to attempt to verify that the tenant can afford the rental on the property and that there were no serious problems with the previous agent. It is also essential that proof of identity and proof of residency are also collected and filed.

Selling

Estate agents selling residential property generally charge between 0.5% (sole agency) and 3% (multiple agency) of the achieved sale price plus VAT (Value Added Tax). Some agents may charge for additional marketing such as newspapers and websites, however generally the advertising is included in the fee. All fees must be clearly agreed and noted in the agency agreement before market so there is no confusion of additional charges.

In 2011, Which? magazine found the national average estate agents fees to be 1.8%,[5] although fees vary widely.

Other than for the cheapest properties, estate agent fees are generally the second most expensive component of the Cost of moving house in the United Kingdom after stamp duty.

High Street Agents rarely charge up front costs for selling nor costs for aborting a sale and withdrawing a home from the market. So whilst other options are available to sell property with Online Agents they do often charge upfront fees with no guarantee of selling or perhaps the motivation a No Sale No Fee High Street Agency will offer.

Other approaches

Since around 2000, online estate agents have provided an alternative to the traditional fee structure, claiming cheaper, fixed fee selling packages. These online estate agents claim to give private property sellers the ability to market their property via the major property portals (the preferred medium used by traditional high street estate agents) for a fraction of the cost of the traditional estate agency. New models have been introduced, which uses digital media screens in place of the agents traditional high street window. These screens allow agents to take their listings into remote locations where an office may otherwise not be available.

In February 2010 the Office of Fair Trading (OFT) announced that a change in the legislation for estate agents has led to a shake up in the way homes are sold, allowing cheaper online agents to become more established than they could before.[6]

Intermediary estate agents and or property portals that are based in the United Kingdom have started to encourage UK and worldwide estate agents to collaborate by showing all their properties, thus allowing site visitors to see a vast array of UK and overseas properties all on one website.

Research undertaken in 2007 said that the most effective way of selling property is via 'For Sale' signs, 28% of customers had seen the estate agent's For Sale signs before researching more in depth into the properties. Searching for houses via the internet came in a close second (21%), with newspapers third at (17%). The fourth most effective way, and the most traditional, was customers visiting an estate agent's office (15%). In 2010 80% to 90% of properties were found via the internet and agents see fewer people walking into their offices. Boards are still very effective, but many agents are now cutting out paper advertising and moving just to digital such as eMags and just the web.

Other methods included auctions (11%), word of mouth (3%) and leaflets (2%).

Technology

Estate agents use estate agency software to manage their buying applicants, property viewings, marketing and property sales. Estate agents can use the software to prepare property particulars which are used to advertise the property either online or in print. They can also record the requirements of a buying applicant and automatically match them against their database of properties. Once a sale is agreed, they can manage the chain of linked property sales using the software.

Estate agency software will also help with property marketing by automatically distributing the property details to property portals.

The latest technology enables home buyers to receive property details while outside a property, visit estate agents' websites for the latest listings and display properties for sale in the local vicinity using location based applications on mobile phones.

In recent years agents have started working together again through systems similar to the USA called MLS (multi listing service). This is where a main agent will take on a property and send details via the most to other local (sub) agents. The sub agents will market and introduce applicants to the main agent. MLS can achieve more offers, sell a property quicker and is offered by agents as a premium service.

In the US property data is passed from the agents software by the RETS data feed schema. In the UK the INEA idx (information data exchange) data feed is being adopted by many software to receive sub (mls) property listings back.

In both cases technology via MLS and idx means that sub agents collaborating can populate many more properties into their websites by working together.

'Estate agent speak'

Estate agents are known for their unique way of putting a positive spin on their description of properties. For example, 'in need of modernisation' may actually mean a great deal of repair work is required to a house, this is necessary as they do not wish to offend any clients that may like the way their home is currently finished. Equally with buyers alike may give feedback that "too much work is required" on a house, yet the next person finds the property perfectly fine, so there is a degree of opinion when it comes to describing the opinion of a property. [7]

See also

References

  1. ↑ "Department for Business Enterprise & Regulatory Reform". Berr.gov.uk. 2011-10-08. Retrieved 2011-11-15. Archived website.
  2. ↑ http://web.archive.org/web/20111003232757/http://www.naea.co.uk/media/29514/residentialrulesofconduct.pdf
  3. ↑ "Why use an NAEA Member?". NAEA. Retrieved 2011-11-15.
  4. ↑ "Ombudsman for Estate Agents Scheme explained". www.tpos.co.uk. Retrieved 14 May 2015.
  5. ↑ "Estate agents' fees exposed - March - 2011 - Which? News". Which.co.uk. 2011-03-31. Retrieved 2012-09-23.
  6. ↑ Office of Fair Trading Website, http://www.oft.gov.uk/news/press/2010/18-10 Archived website. Archived February 21, 2010 at the Wayback Machine
  7. ↑ BBC News website Estate Agent speak: A dictionary 11 October 2002 (viewed 2011-10-07)

External links

Look up estate agent in Wiktionary, the free dictionary.
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