First-time buyers, trader-uppers, downsizers, getting a mortgage, saving a deposit; so much of our our property market talk is focused on purchasing a property. But unless a house is a first-time purchase, for each of these purchases there will be an opposite transaction – the sale of a house.
It seems that not enough of us are selling our properties, which means that supply is shrinking. Listings on MyHome.ie, for example, slipped close to a historic low of 23,500 in June 2016, while agents across the State bemoan a lack of new properties coming on to the market.
While negative equity is an obvious deterrent for many, who simply can’t afford to pay down their mortgage and have enough left for a deposit of up to 20 per cent of a new home in Dublin, is it possible that the cost of selling is also holding people back from moving?
While data abounds on the cost of buying and owning a home, the figures on selling your property are somewhat more vague. Global Property Guide puts the costs for selling a house in Ireland at between 1.2 - 4.3 per cent of the value of the property, so between €3,600-€12,900 for a house worth €300,000. This compares favourably with costs of between 2.4-4.1 per cent in the UK, but less so with Denmark, where costs average about 0.5-2 per cent.
But what do these costs include?
Estate agent fees
In Ireland, it remains the norm to appoint a estate agent to sell your home, and this can be the biggest expense you’ll face.
Some agents will charge a flat, fixed rate fee, and this may work out to be the best value – although agents will argue that their higher fees may correlate with higher sale prices.
Typically, you can expect to pay between 1 and 2.5 per cent for their services, and you’ll have to discuss whether or not this includes additional costs such as brochures, professional photography, online/print advertising, etc.
Sherry FitzGerald, for example, says it charges a rate of between 1.5 and 2.5 per cent, but precisely how much depends on a variety of factors, including the value of the property, the likely selling period, the work involved in the sale and even the location of the property and its accessibility, which can be relevant in more rural locations.
It’s a hefty sum. A house that sells for €250,000, for example, will generate up to €6,250 in fees for an estate agent, and double that for a house worth €500,000. And, of course, this all eats away at whatever gains the property owner might make.
Not only that but VAT, at 23 per cent, is also due on this sum, so the vendor might have to write a cheque for more than €7,600 if they sell a property for €250,000.
Unfortunately it's not a very transparent market, which makes it more difficult to shop around. You won't, for example, find fees clearly listed on agents' websites, and the Property Services Regulatory Authority, which regulates estate agents, says there is no legislative provision requiring estate agents to publish their fees.
Outside the capital and other urban areas, many auctioneers no longer charge a percentage of the sale price, given the slump in property prices. In Longford, for example, where the average property price is about €80,000, local auctioneer Padraic Davis now charges a minimum fee of about €1,000.
“We haven’t done percentages since 2010,” Davis says, noting that a sale price of €40,000 would generate a 1 per cent fee of just €400 and this wouldn’t pay enough to keep the office open.
On a percentage basis, the fee works out at 1.25 per cent of an €80,000 sale and this, along with lower sale prices, may act as a disincentive to people considering selling.
More commission = bigger sale price?
Don’t be fooled into thinking that the bigger the commission the agent will earn, the bigger their incentive to get a better price on your house. If your house sells for €300,000, for example, the agent will earn €3,000 if the commission rate is 1 per cent. If the house sells for €320,000 – which is a big increase for you – their commission will only rise by €200, so it may not be enough to incentivise them. To get around this, some estate agents will offer a performance-related percentage of the sale price. Castle estate agents, for example, says it can offer a performance-related percentage of the sale price or a flat-rate fee.
Another point to be aware of is that when you sign an agreement to sell your home with an agent, they will request that you indicate the “duration” of the agreement, in line with standards set out by the Property Services Regulatory Authority. This means that, during this period, you won’t be able to drop your agent and hire another to sell your home, even if you’re unhappy with their services. You will, however, be able to sell it privately.
Lock-in periods typically range from about six to 12 months, and can work against you if you’re selling your home and want to swap your agent.
What if your house doesn’t sell?
If your house doesn’t sell, or if you change your mind about selling it, you may still incur estate agent charges. Some agencies, such as Churches, operate under a “no sale, no charge” structure, and it promises that you won’t be charged anything, even marketing costs.
Others however will impose an “administrative” charge, of upwards of €500 for the effort incurred.
What about upfront costs?
Some agents will request you pay a fee upfront to pay for the cost of sign boards, online advertising, photographs and the printing of brochures.
Sherry FitzGerald, for example, imposes marketing costs of a minimum of €500 to €700, but clients are sometimes advised to pay in addition for print advertising “which can significantly increase the spend, particularly if the property is being marketed internationally”, the agency says.
Estate agent fees are not the only costs you can expect to incur when selling your home. You may feel it’s worthwhile to invest in sprucing up your home or garden, or getting those niggling DIY jobs completed.
You will also have to get a BER certificate, to demonstrate the energy rating of your property. You can expect to pay between around €100 and €200 for this.
Another significant cost is legal fees. You should be able to shop around for legal fees on handling the sale of your property, given that it’s typically a straightforward transaction. You can expect to pay fees of between €1,000 and €1,500. Try to avoid a solicitor looking to charge you a percentage of the sale price, as this will likely be significantly higher, unless there are extenuating circumstances.
O’Kelly Solicitors in Killiney, Co Dublin, for example, charges a professional conveyancing fee of €900 when selling your home (plus VAT at 23 per cent, of course). Additional charges include bank fees (€24.50); law clerk fees (€15) and commissioner for oaths (€60). So you can expect to pay about €1,300 for a typical sales transaction with the law firm.
Is there a cheaper option?
Distintermediation in the form of the internet has changed the nature of many services. However, one market that the arrival of the internet has not really changed is estate agents. We still rely on the traditional model – and pay traditional fees – for the service of selling our properties. But could there be another option?
William Kelly certainly thinks so. He came up with the idea of an online estate agent when selling his old family home.
“I was faced with poor valuations and extortionate fees (€5,500 plus VAT). I searched online for alternatives, asked my friends for advice and it seemed there were only a couple of options,” he recalls.
With a background in property, he opted to sell the property himself, achieving a quick sale – and for €20,000 more than what the estate agent had suggested as the listing price.
But the process itself was complicated, and Kelly recalls that he made “countless errors”, including ending up paying €1,000 in late fees.
It did, however, sow the seeds of an idea for a business, and his venture, Property Cloud, has just received its first round of funding, and is currently in the process of acquiring an estate agent licence.
“The aim is to be an affordable professional service that is available to help people sell their properties,” he says, helping them avoid the pitfalls he encountered.
Propertycloud.ie hopes to reduce estate agent fees by between 75 and 91 per cent by using an online, rather than an office-based, model. It offers home sellers three options:
- wait until the property is sold and pay a flat fee of €999;
- pay the whole fee up front (€699), or;
- pay €299 up front plus €499 on completion.
The fees include an initial home visit, property valuation, professional photographs, listing on MyHome/Daft.ie, a for-sale sign plus taking control of the negotiation process.
Rather than an estate agent managing viewings, however, customers do it themselves, although Property Cloud will take on this service for an additional fee “which is still cost effective when compared to traditional estate agents”, Kelly says.
Kelly believes that, in seven years’ time, some 70 per cent of properties sold will be through online estate agents, with the work of traditional estate agents limited to the higher-end properties of €750,000 or more. He plans to launch in the greater Dublin area in January 2017, before branching out into Cork and Galway and going nationwide by early 2018. The company is currently recruiting for a number of positions.
Another option is to sell your property yourself. Donedeal.ie, for example, often lists properties for sale, and allows people a little bit of imagination when it comes to listing a property.
“Buy one cow get luxury six-bed house for free!” goes one ad for a six-bedroom house on seven acres in Co Meath which is on the market for €359,000. The website charges a fee of €10 to list your ad for 60 days, or €30 for a “spotlight” on it for three days.
Another option is a website like sellityourself.ie. It charges €150 to list your property on the site, and this includes delivery of a “for sale” sign and pointer board delivered to you. Ads on Daft.ie, meanwhile, start at €299 per property.