Sammie Ellard-King
I’m Sammie, a money expert and business owner passionate about helping you take control of your wallet. My mission with Up the Gains is to create a safe space to help improve your finances, cut your costs and make you feel good while doing it.
Estate agents, you either love them or hate them. Let’s face it, if you’re not one, you probably dislike them a fair bit, which is totally understandable.
Picture this, you’ve got your house up for sale, and for the pleasure of putting you in the shop window, banging you up on Rightmove and showing a few people around, they get paid an absolute fortune.
This is why there’s been a rise in a new breed of commission-free, online-only estate agencies, such as PurpleBricks and Yopa, as the old system was outdated and, at times, questionable.
Buying or selling houses expertise, which is why the estate agency business continues to be strong.
In this article, we’re going to discuss how do estate agents make money, why they have a bad rep and why they still have a lot of relevance in today’s property markets.
Boon Brokers are one of the UKs leading online mortgage brokers. They have a 5-star excellent Trustpilot rating with over 543 reviews.
- No mortgage fees
- Whole of market access
- Free online consultations
- Directly authorised by the FCA
- No in person meet ups
Table of Contents
How do estate agents make money?
Put simply, they make a commission from the final sale price of your property or through rental agreements and management contracts. They can also make money from the valuations of properties and through introductory commissions to mortgage lenders or solicitors.
Mainly estate agents make money from commissions on the sale of both residential, commercial property and also the sale of land too in some cases. Commission amounts can vary by the estate agent you choose and is negotiable for you as the seller.Â
The sale fee is often based on a no-sale no fee basis. This means if an estate agent fails to sell your house, you aren’t liable for any costs. Other agents may charge a listing fee and fees for things like photography, which can be pricey in some cases.
According to The Advisory, the average high street fee for estate agents is currently 1.18% + VAT for residential property.Â
Importantly regulation was brought in 2016 to ensure VAT was included in the percentage commission given to a customer.
For example, if you sold your property for £300,000, your estate agent fee could be £3,540 ex vat (£4,248 inc VAT).Â
If you, as the seller, decide to list your property with multiple agents, then the estate agent may raise your fee up to somewhere like 2.5-3.5%.Â
This is because they’re competing against other firms, and the amount of work it takes to sell your home isn’t worth the effort for them.
The crazy thing is when the housing market is hot, some agents could be selling five or more houses a week, which quickly adds up.Â
It’s not all glory for each agent, though, as the firm they work for will profit the most from this and pass the commission down to their team.Â
Still, not bad for walking around houses and chatting with buyers all day!
What does an estate agent do day-to-day?
An estate agent’s role will differ depending on their experience level and time with the business. As they grow with the company, they take on higher-value clients and receive a higher base pay alongside a lucrative commission structure.
Day-to-day tasks include:
- Marketing and selling properties, both residential and commercial
- Negotiating offers and preparing sales documents
- Coordinating and conducting viewings of properties
- Maintaining a database of properties
- Building relationships with clients and potential buyers or renters
- Admin tasks such as uploading data and emails
- Introducing clients to online mortgage lenders and solicitor contacts
- Handling valuations on potential new listings
- Handling property management for rental agreements and tenants
Much of the job is behind a desk appointment setting, contacting a database and managing client listings. If you’re starting out, don’t expect to show clients around million-pound houses immediately.
Boon Brokers are one of the UKs leading online mortgage brokers. They have a 5-star excellent Trustpilot rating with over 543 reviews.
- No mortgage fees
- Whole of market access
- Free online consultations
- Directly authorised by the FCA
- No in person meet ups
How much do estate agents earn?
Salaries vary wildly across the industry, and a few factors are at play, such as location, experience and market performance. On average, an estate agent’s starting salary is between £20,000 – £25,000.Â
Estate agents’ pay may decrease after the first 3-6 months, which is when they are expected to start bringing in commissions. This would take you up to anywhere between £25,000-£30,000 per year during the following 12 months with commission included.
The average wage for an estate agent is £31,489, with a high of around £38,000, but this is without commission.Â
Some agents make a lot more than this, and it depends solely on the amount of business they bring in. A top seller can move up the ranks quickly and command larger commissions and bonuses.
Another factor to think about is bonuses. If you and your team hit their targets, you will likely be in a position to receive a reward for doing so. It’s a numbers game so bring in the sales, and the extra cash rolls in.
How much commission does an estate agent make?
Each estate agent will adopt different commission structures, but generally, you will earn more as you increase your value to the firm.
If your firm earns 1.5% on a £350,000 sale, then they would collect £5,250. An agent might expect to make 5-10% of that amount, meaning they would get somewhere between £250-£525, but this all depends on the firm.
This process is different when it comes to lettings, as instead of a one-off fee, agents usually charge a percentage of the monthly rental price.
This would then be split down to the agent, similarly to a property sale, with a small portion of the fee reaching their pockets in commission each month.
If you build up a considerable portfolio of rental properties, this regular income is very profitable for estate agents.
Boon Brokers are one of the UKs leading online mortgage brokers. They have a 5-star excellent Trustpilot rating with over 543 reviews.
- No mortgage fees
- Whole of market access
- Free online consultations
- Directly authorised by the FCA
- No in person meet ups
Controversies surrounding estate agents
The estate agent industry has undergone a lot of criticism in recent years for the high fees and lack of transparency about the work that goes into selling property.
The rise of the internet has meant that over 92% of sales now come from online listings. This has somewhat killed off the days of window shopping for your next home on the high streets though many still enjoy it.
This has birthed companies where you pay for your listing and pay no commission on the sale. This has dented a lot of businesses and forced estate agents to become more competitive in their pricing and transparent about their processes.
Real estate agents often got a bad rep due to hiding costs in their final pricing. This was a feature throughout the 90s and 00s until regulators stepped in to help improve this; however, a lot still needs to improve.
FAQs
Do estate agents make a lot of money?
Estate agents earn a good living, and once you’re established, you can easily make over the national average of £33,000. Newcomers earn less, but as you move up, the commission structure can improve, and once you reach Branch Manager you can make a lot of money at a good firm.
Is it hard to be an estate agent?
Being an estate agent is not a physical job but requires exceptional sales, organisational, and administrative skills to succeed. To get into a management position, you will need to consistently close property sales and bring new business to your company.
How do I become an estate agent with no experience?
No qualifications are required to be an estate agent, although most companies will require decent A-level results and a display of confidence and charisma during an interview. You can work your way up by developing your sales skills and motivation to close business.
Conclusion
So, how do estate agents make money? Well, they sell sell sell!
They do this by selling houses and renting out property. There’s a lot more to the role itself; to work your way up, you must prove yourself right from the get-go.
It’s a specific type of individual who will be a successful estate agent, so it’s essential to understand the characteristics you will need.
If you want to earn a lot, you will need to open your own estate agency, so be prepared to pick up all you can before venturing out on your own.
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Disclaimer: Content on this page is for informational purposes and does not constitute financial advice. Always do your own research before making a financially related decision.
