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Home owners are handing over hundreds of millions of pounds a month in commission to estate agents because of rising property prices.
Land Registry figures show that the price of the average property sold in England and Wales in January 2016 was £190,658. High street estate agents typically charge sellers a 1.8 per cent commission fee, meaning they made an average £3,431 in fees for every sale.
A total of 77,170 properties sold that month, for a combined value of £20.7 billion, which equates to more than £250 million paid out to high street agencies, which control around 95 million of the residential market.
That is almost five times the amount they were paying 20 years ago when the average property sold for £59,278, netting estate agencies an estimated average commission of £1,067. Property sales totaled £3.1 billion in January 1996, according to Land Registry figures, which equates to £56.9 million in fees to estate agents.
The trend is most pronounced in London and the South East where property prices have risen most in the last two decades. In London, the average property now sells for more than £500,000, handing estate agents almost £10,000 in commission per transaction. Detached properties in the capital sell at an average £929,680, equating to an average commission of more than £16,000.
In the South East, where detached houses sell for an average £462,418, estate agents can expect to earn fees of almost £8,500.
High street agents still command around 95 per cent of the residential market despite the recent emergence of fixed fee agencies operating exclusively online and hybrid agencies, which operate online but have a network of property agents to help sellers with every aspect of the sale.
The fixed fee agencies are charging significantly less than their high street counterparts. YOPA, a hybrid agency which launched nationally in January, charges a flat fee of £780 compared to the 2.5 per cent commission charged by Foxtons. Selling a £500,000 property through YOPA, rather than Foxtons, would save the seller nearly £12,000 in fees.
According to official projections, the price of the average property will be around £230,000 by January 2020, meaning the gap between fixed fee agencies and commission-based agencies will continue to grow.
Daniel Attia, chief executive of YOPA, which commissioned the research, says, 'High street estate agency is in need of reform.
'Our model takes the best elements of traditional estate agency - the local, knowledgeable estate agent to provide a great service - but, as an online service which doesn’t have to worry about bricks and mortar costs, we’re able to pass huge savings onto the customer.
'Our transparent fixed fee cuts costs dramatically for the seller, potentially saving them thousands of pounds in estate agent costs.'