independent

Wednesday 16 April 2014

Rural estate agents cut fees but rates in capital being hiked

For Sale Sign
For Sale Sign

Estate agents have had to change their percentage fees or move to flat charges as they cope with Ireland's vastly changed property market.

Rural homeowners selling their properties are spending almost two-thirds less on auctioneers fees than they did in the boom years and are experiencing some of the lowest charges in Europe.

Meanwhile, Ireland's two-tier property market means that in Dublin -- where houses are selling well and prices are increasing by more than 1pc per month -- estate agents have actually hiked their percentage fees.

Non-city based auctioneers traditionally charged 2.5pc to 3pc for selling a house -- justified by the slower pace of the rural market and the longer travel distances required for viewings.

But they suffered from slashed property values and increased competition for reduced levels of stock in non-city areas.

This means that many strapped operators were forced in 2013 to cut their rates to as low as 1pc for larger properties while reducing their charges for more typical properties to 2pc.

And in an unprecedented move, in the case of smaller and cheaper properties, many have abandoned the traditional percentage fee system entirely in favour of a flat fee charge -- usually in the order of €1,000.

A rural vendor who had to shell out €8,250 to sell a €300,000 home in 2007 is now spending just €3,000 for the same home currently worth around €150,000.

This is despite the greatly increased amount of work involved in selling it in a still static market.

And a country-based seller of a home worth€500,000 today (down from €1m in 2007) will pay just €5,000 to sell it at a 1pc fee as opposed to €27,500 in 2007 at a rate of 2.75pc.

It means that Irish rural home vendors are now availing of some of the lowest estate agency charges by European and global standards.

UK vendors are charged an average home disposal fee of 1.8pc, German vendors and US vendors are charged more than twice this -- 5pc -- for selling their home.

French vendors pay a daunting 7pc to 10pc while Spanish vendors are often charged between 10pc and 20pc.

Pat Davitt, CEO of the Irish Professional Auctioneers and Valuers (IPAV), says: "Prices have fallen hard and stock and turnover are low in country areas. A country-based estate agent who might have had to make one to three property visits over a journey of 20 miles to sell a property is now making six to 10 trips and still won't be guaranteed of getting a sale. After the crash rural agents have had to cut back on staff and they are becoming stretched."

However, in the cities, especially Dublin, a different picture emerges. Fees had actually been hiked from 1pc during the boom years to between 1.5pc and 1.8pc by the end of 2013.

But because prices are back to only half what they were in the boom years, the agents are still earning considerably less for their efforts.

A €700,000 Dublin home which sold in 2007 would have cost the vendors €7,000 to sell at 1pc.

The same home today might be worth €350,000, which would cost around €5,775 to sell at 1.65pc -- the agent still earns significantly less.

Nationwide turnover for Irish estate agents is down by about two-thirds since the boom ended.

Irish Independent

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