Sat 27 Jul 2019

Is Opting for the Lowest Commission Fee Always the Best Idea?

You’d expect a letting agent article about landlord fees to take the opinion that cheaper, is not always better.  However, there are some very valid reasons why it might not always be a good idea for landlords to focus so heavily on agency fees.

It’s important to ask yourself, how professional will a cheap service be?  There’s that old adage;
 

Good and cheap won’t be fast;

Fast and good won’t be cheap;

Cheap and fast won’t be good.

 

When it comes to finding a good tenant for your home, your investment, we think it’s important for an agent to put in the required effort to make sure you have a well-matched tenant to your criteria.  Not just the first one that comes along with an application.

Of course, it’s only natural to want to retain as much of the rental income as possible.  This will mean that you can keep the letting as a business that’s commercially viable.  Let’s look at how much difference it actually makes:
 

If a property fetches £800pcm -

The cost for an agency who charges 10% + VAT of the rent to fully manage is £1152 over the year;

The cost for an agency who charges 9% + VAT is £1036.80;

The cost for an agency who charges 8% + VAT is £921.60.

You can see that the difference between a good 10% letting agent and a cheaper 9% agent is £115.20 and £230.40 between a 10% and an 8% agent.

Using a good agent and a less rigorous one could make the difference between void periods in your property or not.  This could be down to their proactivity in marketing or tenant matching.

Using the same £800pcm property example, a two-week to one-month void period could cost you from £369.23 - £800.  You could also end up with repair fees if the tenant was not really suitable for your property.  Of course, these can be mitigated by taking out landlord insurance, and yes, we’re highlighting a worse case scenario!  There are a few, really good ways to proactively make sure that you avoid a void period in your propety.  But, it’s important to consider all scenarios when making your decision about which letting agent to use.

Therefore, perhaps an outlay of an additional percentage might not matter so much in comparison.

We would urge all landlords to make sure that you look at the bigger picture when you’re commissioning an agent.  Look at the services on offer;

• Is the agent RICS and ARLA registered?
• Where and how will they market the property?
• Are they are experienced letting specialists or do the staff have to do both sales and lettings?

All of these things are so important when it comes to picking the right letting agent for you.  If you'd like to learn more about our letting and managment services, get in touch with our dedicated lettings team, here.