I've sold several hundred properties during my career, and in that time I’ve paid out over £300,000 of my own money in estate agent fees alone...
It's given me a really unique insight into the UK property market, and has helped me figure a few things out. I’m excited to share some of that with you here. In this article we’re going to cover:
- The cheapest way to sell your house… and
- Why the “cheapest house sale” is probably the most expensive one you can get.
So let’s get straight to it. What is the cheapest way to sell a house?
Selling your house with a free or low-cost online estate agent is the cheapest way to sell your house in the UK. However, this can work out more expensive in the long run if you achieve a lower selling price for your home. We recommend choosing the best estate agent you can find, rather than the cheapest.
Let’s get into more detail and I’ll explain why I’d almost never use a free or low-cost estate agent, and why I think you should avoid them too.
To get free advice on how you should sell (based on your property and your priorities), take the free quiz I've designed for you:
1. Why the cheapest house sale is actually the most costly
When you buy something it's easy to get hung up on price. We all do it. But price isn't the only consideration... quality is important too.
We know this when it comes to products.
For example, you don't always want to eat at the cheapest restaurant you can find. And would you strap your child into the cheapest car seat on the market? Probably not.
So when we buy products, we're used to thinking about the trade off between price and quality because we can see it for ourselves. We know if something looks, feels, or tastes cheap.
But with services, it's sometimes harder to spot the difference. Especially with professional services like estate agents and solicitors. But the difference is there, whether you can see it or not.
You get what you pay for. And sometimes, using the cheapest estate agent you can find is a really bad idea.
Why? Read on.
1.1. Don't think about fees... think about profit.
When you sell your house you're making a huge financial decision. So let's put our business hats on for a moment.
When you run a business, your main aim isn't to reduce your costs... it's to increase your profits. Reducing costs can help, but that's only part of the equation.
Profit equals Revenue minus Costs. So your profit is how much you take in, minus how much you pay out.
The same is true for you as a house seller.
When you sell your house, the price you walk away with at the end isn't just about how much you paid in fees... It's how much you actually sold your house for too.
So when you're thinking about selling your house, I want you to stop thinking just about fees, and start thinking about profit instead.
When you start to think about profit, you focus on two things instead of one:
- You don't just want the cheapest fees you can find...
- You want the highest sale price you can get too.
And this is where your choice of estate agent comes in.
1.2. Estate agents are meant to make you money
Estate agents aren't a tax you pay when you sell your house. They're meant to be a professional service. And as with any professional service, the idea is that they're actually meant to make you more money than they cost you.
I'm not saying that all estate agents do this, or that most agents are even any good... unfortunately, many aren't.
But a good estate agent should find you more buyers, and negotiate more effectively for you. This results in a higher overall selling price - one that more than covers their fee.
This example illustrates the whole point: You get what you pay for, and using a free (or cheap) online estate agent can be one of the most expensive decisions you can make.
So why do I think cheaper estate agents translate to a lower selling price?
2. Why I don't believe in low-cost or free online estate agents
The last 5-10 years in property have been a story of the online estate agents. They were going to disrupt everything, turn the market upside down, and "fix" the property market.
But they haven’t taken over. Their market share’s still less than 10% - even after benefitting substantially from COVID. Most people are still selling with their local agent.
Why is this?
Simply put, low-cost (or free) online estate agents can charge less because they compromise on service.
But compromising on service costs you in other ways:
- It can mean fewer interested buyers,
- And less effective negotiations,
Both of these lead to a lower selling price.
Compromising on service also means your sale's more likely to fall through. This is because there's not really anyone "at the helm" steering the sale toward completion when you use a free or low-cost online estate agent.
2.1. The problems with free/low-cost online estate agents
There are two main problems I have with online estate agents.
1. Low-cost online estate agents charge an up-front fee (which removes their incentive to sell your house)
The thing I find completely hilarious about online estate agents is that they launched into national consciousness with the Purple Bricks "commisery" adverts.
The premise was that you shouldn't have to pay these estate agent commissions. Instead, you should pay Purple Bricks an up-front fee that was cheaper.
What was always left out of the argument was that commissions aren't actually that bad. Commissions are actually pretty consumer-friendly for two reasons:
- You only pay when the estate agent's actually sold their house. If they don't sell it, you don't pay.
- This actually incentivises them to sell your house, because they won't earn a penny if they don't.
The crazy thing with Purple Bricks, and with the rest of the low-cost online estate agents, is that they want you to pay them up front! Obviously this creates two huge problems that get forgotten about:
- When you pay an up-front fee, you have to pay regardless of whether or not your house gets sold.
- Because the company's already been paid, you've removed the incentive for them to actually sell your house. They've already got what they wanted.
No wonder Purple Bricks only sell around 51% of the properties they take on... (That 51% stat is the reason Purple Bricks was referred to as a £1,000 coin toss by financial research firm Jefferies in 2018).
Pulling the wool over everyone's eyes with those "commisery" ads might be one of the greatest advertising ploys of the last 50 years. Paying for a service before the company has delivered, and removing any incentive for them to actually sell your house, is not a benefit.
This is probably why their market share is still under 5%.
Charging up-front isn't the only problem though. The low-fee business model is actually a more serious problem.
2. Replacing people with software doesn't work in a business about relationships and problem solving
What people don’t get about property and about estate agency is that it’s a business about people, and about relationships, and about problem solving.
The low-cost estate agents have tried to compete and take their place in the market by:
- Reducing their costs.
- By reducing their costs, they can reduce the fees they charge…
- And that’s how they compete. (You'll notice the free/low-cost online agents don't brag about their performance in their marketing. Instead, it's all about cost).
But the way they’ve reduced costs is by getting rid of the people, and replacing them with software.
Software and technology are GREAT. But it just doesn’t work for estate agency the way these companies are trying. Here are just a few examples:
- Software can’t mediate a deal.
- It can’t negotiate a higher offer,
- It can’t calm you down if you’re frustrated and about to make a rash decision,
- It can’t get to the bottom of hold ups and get things moving again.
People do all of that.
If you take people out of the process and you start removing the person-to-person communication… it doesn’t work.
And look, I don't have a horse in this race. I'm not an estate agent, nor have I ever been one. In fact, I’m a nerd. I’d love it if we could replace all the people and all the communication with software and with code. But it doesn’t work.
It lets these agents charge less... but it results in a poorer service, and I believe that's far worse for home sellers in the long run.
GetAgent.co.uk, the estate agent comparison website, agree.
In an interview with Property Industry Eye, their founder Colby Short said “the low cost, DIY approach of the online sector is no substitute for the value of a traditional, full-service agent”.
So, in short, low-cost estate agents can charge less because they've cut out some of the typical estate agent offering. BUT, I'm convinced that you'll lose more than you save when you use a free or low-cost estate agent...
Are there any exception? Well, yes, I think there is. Let's cover it here.
2.2. When is it a good idea to use a free or online estate agent?
As I've outlined above, I think the savings you make by using a free/low-cost online estate agent are usually going to be outweighed by the lower selling price they achieve for your house. Overall, this will result in a loss for you.
I actually think an online estate agent might be a good idea if both of the following 2 things are true for you.
1. Estate agent fees will be unbelievably expensive for your sale.
Let's say you're selling a £2m property, and estate agent fees near you are all 1.5%+vat or more. That's a hefty £36,000 in fees, including VAT. I think if you stand to save that much, it can potentially make sense to go with a low-cost estate agent... But only if you know what you're doing.
2. If you're a property professional already
If you're also in the property business, then you might be able to do a better job than some estate agents already. Estate agents are spread thin over dozens of properties at once. If you know about property and can focus all your efforts into your sale, there's a good chance you'll be able to do better for yourself than the agent would do for you.
This is where free/low-cost agents can work for you.
They let you get coverage for your property by listing it on the biggest property portals. You can then coordinate directly with buyers to schedule viewings, negotiate offers, and progress their sale through the conveyancing stage.
In this situation, online estate agents can be a powerful tool for you. But for most home sellers - especially those who aren't experienced in sales, marketing, and negotiation of house sales/purchases, or working with solicitors - it's not a good idea, and could cost you thousands of pounds.
3. Are house buying companies the cheapest way to sell your house? (Hint: No)
In the last section I've basically explained that free/low-cost estate agents will cost you less in fees, but can result in selling your house for far less money. So although your fees are lower, you're worse off overall.
The same is true for cash house buying companies.
Genuine house buying companies are, without doubt, the fastest way to sell your house.
On paper, they're also the cheapest way to sell your house. This is because they don't charge any fees whatsoever, and even cover your legal fees.
It literally won't cost you a penny to sell to a cash house buyer. But that should be ringing some alarm bells. How can it be possible?
It's possible because house buying companies buy from you at a significant discount. It's usually around 80-85% of the market value. Saving 1-2% in costs is meaningless if you sell your house for 20% less than its value. This is how the "cheapest" option really becomes the most expensive.
Why do people use cash house buyers then? They offer a faster, more certain and more convenient sale than going through the estate agents. It just comes with a significant compromise on price. (And I'd know; I've owned my own house buying company since 2014, buying almost 150 properties in the process).
I've designed a short quiz to help you decide if a house buying company's right for you. It takes a couple of minutes, and the results & recommendations are totally free. Take a look if you're interested in a very fast sale. (Just remember that it comes with a significant compromise on price).
4. My Advice on "the cheapest way to sell your house"
The thing I've hopefully convinced you of in this article is that fees shouldn't be your main consideration when you sell your house. You could save a thousand pounds on fees, and lose ten thousand on your sale price.
So instead of focussing on the cheapest way to sell your house, focus on the best way to sell your house.
- If you want the highest price, it's going to mean selling with the best local estate agent you can find. This will result in a higher selling price, and that's the real way to "reduce the cost" of selling your house.
- If you want the quickest house sale, it's going to mean selling to a reputable house buying company.
- And if you want a balance of the two, it's going to mean selling by auction. This is especially a good idea if your property has some kind of issue (like subsidence or Japanese knotweed, for example). See my write-up on the benefits of selling by auction here.
Thanks for reading. Here's the key takeaway: Don't pick the cheapest estate agent you can find!
By Matthew Cooper, Co-Founder of Home Selling Expert