Mandatory regulations and qualifications could lead to higher fees for UK agents, a former industry executive claims.
Former Fine & Country global chief executive Simon Leadbetter released a report through his unchained.marketing consultancy last month showing support for minimum industry standards but questions over if it means agents can charge more.
A reader commented on the story that qualifications don’t lead to higher fees, so Leadbetter decided to investigate this.
He analysed real estate fees and regulations in 19 countries, using data from the National Association of Realtors and Property118.com.
Among the 10 countries with the lowest fees, the average fee was 2.6%, with 50% of these countries having regulated markets.
Among the ten countries with the highest fees, the average fee was 5.0%, with 90% having regulated markets. This analysis shows that mandatory regulations and qualifications are associated with a 39% increase in fees, Leadbetter said.
Delving further into the relationship between regulation and qualification requirements, the data showed that in countries without regulation or qualification requirements, the average fee was 3%. In countries with regulation and qualification requirements, the average fee was 4.1%.
Leadbetter told Estate Agent Today: “With mandatory qualifications and stricter regulations, underperforming estate agents would be eliminated, leading to a more professionalised market.
“This could result in higher fees over time, though only after some time. A 2016 study from the Mercatus Center at George Mason University found that a 10% increase in regulatory restrictions led to a 0.687% increase in consumer prices across various industries, indicating a statistically significant correlation between regulations and prices.
“While it is important to remember that correlation does not equal causation, the strong relationship between regulations, qualifications, and prices, including fees, cannot be ignored. The UK, in particular, deviates significantly from other real estate markets in this regard - in lighter regulation and lower fees.”
Leadbetter said agents deserve higher fees but homeowners deserve better-qualified and more regulated agents, adding: “My accountant, stockbroker, solicitor, doctor, and dentist must all be qualified and are strictly regulated. Why does the person who manages my most expensive assets not have to be?
“Qualifications do not lead to higher fees? Although not a perfect correlation, the data suggests that countries with more stringent regulations and qualifications tend to have higher real estate fees.”
Leadbetter highlighted that we are now nearing the four-year mark since Lord Best's Regulation of Property Agents (RoPA) working group proposed the establishment of a new industry regulator and code of practice, along with mandatory training, licensing, and significantly enhanced enforcement measures.
He said: “It's time to make RoPA happen.”
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Properly structured, policed and enforced regulation would help strengthen the relationship and trust (or lack of) between, conveyancer and estate agent. Both professions need it, as do the public.
Excellent research and well-reasoned conclusions Simon. Cutting to the chase however, and as an international estate agency trainer, may I humbly suggest that it could just be that as qualified agents are de facto well- trained, that part of their training focuses on HOW they can indeed charge the fees they deserve. Anyone who has attended my “raising fees instantly” course will tell you that they learn about the psychology of persuasion and are empowered with over 80 fee-raising dialogues. Too many agents wing it without training and then complain about low fees with a hundred excuses! Have a great day.
Excellent point, Richard. Nice to 'meet you'. You're totally right; it's a virtuous circle - training means you become better at something. That said, even our highest fees fall below global standards. I just think estate agents deserve to earn more. A more regulated market with more qualified agents would push up prices to benefit agents and homeowners alike.
Having just attended one of Richard's training courses on the Art Of Negotiation, literally within the last 4 hours, and having benefitted from his previous "raising fees instantly" course I agree with him entirely. Agents trained properly on the psychology of persuasion WILL be able to raise fees. We have done it!
That said, i believe that BOTH licencing/mandatory regulations AND effective training are much needed.
Ultimately, it will be for our clients to decide whether we are worth better fees - we can only demonstrate why we believe this should be the case.
What exactly would be covered in any qualification?
There will always be agents who cut fees.
You can look up example questions on the Propertymark website... critical stuff like What should you do with a fire extinguisher in hot weather...
Compulsory qualifications mean compulsory CPD, regular training, regular updates and the mind set needed to pass a few exams which all result in a more professional approach to business which most consumers like (excluding those few who will always want something for nothing regardless of service).
Yes but
What exactly would be covered in any qualification?
What would the exams cover exactly?
.
Slight glitsch in the system today I think!!
Easy for "Former" Fine & Country global chief executive Simon Leadbetter to comment about regulations, as he is no longer an agent, he does not have to spend time studying for exams whilst small businesses like mine must work extra hard to keep going during the worst shortage of rental & sales properties since I my business in 29 years!
Reason "To much "Regulation", EPC’s, AML, Right to Rent, Gas & Electrical Safety....HMO, Additional & Selective Licensing...Do I need to go on!
Banks, accountants, stockbrokers, solicitors, doctors, and dentists may well be qualified and are strictly regulated but there are daily cases of bad & Illegal practice.
Most Agents including the larger organisations in North & Northwest London say they don't reduce fees, but to get an instruction they "ALL" always negotiate fees...
The Property Redress schemes are there to protect the public from bad practice by any agency.
Propertymark and Estate Agency Trainers are always going to push for change to charge exorbitant training & course fees.
There is enough bulletins and updates available to keep on top of the forever over regulating changes all the time.
The public prefer the experienced independents as they are more approachable and go that extra mile to give good advice. Long Live the small Independents, despite the big boys trying to swallow them up!
Funny how so many small agencies are constantly being approached to sell their management portfolio to bigger chains, reason, they realise they cannot get these landlords any other way!
These arguments are getting very tired and if I might say a little desperate.
In real terms these stories are being placed in the trade press and in some cases in the national press because those with significant vested interests in seeing RoPA implemented are pushing for it.
Just so we're completely clear, Propertymark and RICS, who sell qualifications as a business model, sat on the RoPA working group and in essence have attempted to write into legislation the requirement for anyone who CARRIES OUT A VIEWING to have one of their qualifications.
It is not subtle!
What's more it is curious that apparently out of nowhere Rightmove have decided to jump into the qualifications bandwagon. Of course it will have nothing to do with the fact that David Cox now their head of legal, sat on the RoPA Qualifications Sub Committee when he was part of Propertymark!
Be under no illusion RoPA is a stich up, designed to pick the pockets of ordinary hard working agents 99% of whom do an excellent job. It is also in the best interests of the large corporates to push for further regulation and compliance, as they have the scale and capital to absorb its impacts whilst it hits harder on smaller firms who make up the majority of their competition.
With regards to the benefits, these are entirely made up. Fees will not go up, because our fees are dictated by market forces, in particular large corporate agents who lower their fees and prioritise market share over profitability, because they have the scale to do so. Also the same body who are responsible for enforcing the current regulation (Trading Standards) remain the enforcement body under RoPA. Through no fault of their own, they do not have the funding to effectively enforce the legislation we already have, let alone any more of it.
As a final point, fees in the US as an example are hard fought for, the regulatory bodies including the NAR actively campaign to protect their members fees. It is deeply unfortunate that our trade bodies have transformed into consumer groups more interested in protecting consumers against their members rather than their members from the worst vestiges of an interfering government. A government which has done more to damage the housing industry in the last 13 years than any other before it.
James
Agree with your comment about fees.
The people espousing exams - training are totally self interested who make money from thi8s stuff.
On my 1st day as an agent I sold a house by ringing the emailing list and arranging a view
Rocket science it is not!
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