Fee's and Commission - Is There A Difference ? Should I use an Online Agent ?
24 Feb 2017
Recently on a market appraisal a vendor asked me the question, are Purple Bricks selling houses for free, how are they making any money ?
The vendor cannot really be criticised for asking this question after watching their latest round of ‘commisery’ adverts, where they push the point, over and over that you do not pay them a penny commission.
So I thought I would write a short article on the rise of this new way of paying. I liken it to when the cheap airlines started offering seats for a penny, advertising it everywhere, hyping it up. Then somehow you ended up paying quite a lot more ……..
Instead you pay an onliner an upfront fee, for listing your house onto websites such as Rightmove and Zoopla. Then I understand that you pay them more if you wish for them to carry out viewings on your property, wish for a for sale board, etc etc
Its a different way of selling and there is definitely an audience for their product, although looking at the number of properties listed, the number of ‘local property experts’ and the amount they are spending on marketing then nobody actually knows if they are making any money in real terms, with investors ploughing money into the company at the back end to keep things going, and to move into other markets, namely Australia, and America which was announced last week. It will be very interesting to see how Purple Bricks get on in America, after Foxtons failed due to the perception that the fee’s charged were too low in order to offer a good service. This ties in with most surveys whose findings say that people are prepared to pay more, for better service.
So I explained to the vendor who had asked me the initial question that they make money by charging an upfront fee rather than charging commission.
He asked what the difference was between a fee and a commission, surely they are both a fee, with one being charged before the job was started, and the other being charged after the job is completed, but dependent on the sale price.
Onliners, mostly charge upfront, whereas traditional agents charge at the end.
I think most people would prefer to pay for a job on completion, that gives the company you are using the drive to do the job to the best of their ability, much in the same way when you employ a builder for instance, you like to see the job done before the final payment, and you don’t pay them if they don’t finish the job.
Imagine how great it would be to be able to pay a builder commission at the end of the job, with nothing upfront, with the amount reliant on how good a job they did.
The perception of a low fee is also worth exploring as when selling a property for a reasonably low figure, as a low percentage fee charged by a high street agent can actually work out less than the upfront fee’s charged by the onliners.
I do agree that the claim that they ‘do not charge a penny commission’ is misleading and treads a fine line between the definition of fee and commission.
So in reply to their ‘commisery’ claims, it looks like they are simply making many people ‘fee blind’ ……. Unfortunately we don’t have investors pumping millions into TV advertising campaigns to raise awareness of going ‘fee blind’. So we are also unable to make those same investors very rich on the stock market.
Luckily we are a family run estate agency who do not have any investors to satisfy, just vendors, landlords, buyers and renters, who we love looking after, by charging them a fair fee, commission, cost, payment, charge, bill, or whatever you wish to call it.
If you would like to talk fees or commissions or would just like a chat about your property then do give our friendly team a call on 0161 832 9922
Sales and Lettings Manager
Suttons City Living