Letting agents have a poor reputation. Partly this is down to some really bad examples of the craft, exemplified far too often by horror stories of con-men opening up shop with no experience, no intention of providing a good service and, more often than not, next to no moral compass.
But the truth of the matter is that most of the poor perception that plagues the letting industry – whether it be concerning agents or their clients – is based on a critical lack of understanding about the service provided, and its financial value.
Almost every other business I encounter has ‘services’ in their name. Such-and-such property services ltd seems most common (in fact I used to work for just such a company). However, there is little recognition of the service element of the business these companies undertake.
Letting agents are a significant part of the services economy. Take a stroll down any high street in the UK and you will see three major service sector enterprises capitalising on the demise of traditional retail.
- Coffee Shops
- Bookmakers; and
- Estate/Letting Agencies
And here’s the rub. People like coffee and the things that come with it. It is also very easy to see what you get for your money and determine whether it is to your liking.
Bookies are little more nuanced, not universally popular but the only people who need enter their establishments are those with a particular affinity for their services. And once again it’s pretty clear cut in terms of witnessing the service they provide – you like the odds or not, they pay out promptly, or not.
Letting agents are different. By and large, our services are accessed because of need. A landlord needs help letting their property. An applicant needs somewhere to live and hasn’t the time or inclination to search the classifieds. In many cases both parties ‘believe’ they could do without, and view the experience in much the same way as a distressed purchase.
When they do so they are (quite) promptly presented with the price of using an agent, but the value is far too often only implied, and left just a little unclear.
At best landlords and tenants probably recognise the increased ‘ease’ and reduction in ‘hassle’ meaning they begrudge the cost just a little less than they would otherwise.
Of course if we were to quantify the service a little better they may change their mind.
So here goes…..
A two-bedroom house in suburban outer London is on the market for £1,000 per calendar month (PCM) and has been empty for 2 months. So far the cost to the landlord has been:
- £2,000 in unachieved rent
- £250 in Council Tax his tenants would otherwise have been paying
- One whole morning cleaning graffiti off of the garage door, tagged when local kids realised it was empty
- £50 on utilities, thanks to having to keep the heating on to stop the pipes freezing and/or damp setting in
- £100 advertising the house ‘to let’ privately
- 4 days annual leave, taking days off to show around prospective tenants (3 of whom failed to show up for appointments) worth c. £800
- £20 credit checking a prospective tenant who turned out to have more CCJs than a tin of alphabety spaghetti
- A sinking feeling when he realised his buildings cover could be invalidated by leaving the house empty for more than 28 consecutive days
Lets call it £3,220, not including the time and effort taken getting the place ready and the additional cost he will eventually face when he finds a tenant for:
- Carrying out an inventory
- Negotiating rent and terms
- Establishing an AST (or SAT)
- Protecting any deposit taken
Compare this to his neighbour, with a near identical property, who engaged an agent as soon as his previous tenant served notice.
Typically, an agent in London can secure a new tenant in less than four weeks. So assuming they agree to allow seven days between tenancies for some routine maintenance and a good clean – what does his cost profile look like?
- Let only fee at 10 per cent £1,200
- Seven days’ Council Tax c. £29
- £6 to heat the house
- One Saturday morning to sign the T&Cs and hand over the keys (but the agent had good coffee, so it wasn’t a total loss).
From the tenants’ point of view, the costs are a little trickier to quantify but time is an incredibly valuable commodity. As is confidence.
An agent can make a home search much more convenient, efficient and safer. When you consider the advantages of two or three hours of scheduled, accompanied viewing relative to the time consumed traipsing around random houses hiding who knows what risks – it should be a no brainer and it should save a significant amount of money; even if there is an administration fee.
A net contributor?
We learned today that the UK economy grew my 0.6 per cent in the last quarter. This was driven by a larger growth of 0.8 per cent in the service sector. Letting agents contribute massively to this growth in terms of the business they do, but also the time and money they save their clients allowing them to be more productive.
Most of us even pay our taxes, unlike some of the other service sector examples discussed above.
As salespeople isn’t it strange that we fail so regularly to sell the importance, and value of what we do?