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PaperclipPerfector  1mo ago (text post)   1991 thread views

Small-Scale Question Sunday for March 31, 2024

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There has been some discussion (1 2) of how the lawsuit recently lost/settled by the US's National Association of Realtors may affect real-estate transactions in that country. But what about the rest of the world? It would be nice if some of the goshdarned furriner varmints that frequent this forum could relate their own experiences with buyer's-agent-free real-estate transactions, so that we uncultured USAians know what to expect in the coming years. For example, are these articles from Britain (1 2) and Australia (1 2) accurate?

As a Brit who has bought two houses, sold one, and walked several friends and work colleagues through the process, the attached articles about the English process (Wales is basically the same, Scotland and Northern Ireland are very different) are accurate. Some thoughts about how the system works in practice:

  • Even before you look at the 2nd commission for they buyer's agent, England has lower % commissions - admittedly based on higher average house prices. "Standard" commissions for a full service bricks-and-mortar agent are 2% outside London, 1.5% in London, and are negotiable down on large transactions so in practice the commission is a flat £7,500-£10,000 for houses in the £500k-several million price range. (In all cases add 20% VAT on top). Discount agencies like PurpleBricks or Yopa charge a flat fee of roughly £1,500, but as far as I can see they do the bare minimum work not to get kicked off the property websites (which don't accept FSBOs).
  • Given the existence of Zillow-style property websites (the main ones in the UK are Rightmove, Zoopla and OnTheMarket), I don't see what MLS or buyers' agents add to the house-hunting process. Before property websites, a thorough house hunt with no buyer's agent involved speaking in person to 5-10 estate agents in your target neighborhood to see what was on the market.
  • I can see the advantages of both parties being represented in complex negotiations - but if you are in complex negotiations you are probably in a chain, and the norm in the English system is that all of the estate agents in the chain are supposed to work together to keep things moving forward - in practice this means that the agent I hired to sell my first house acted as an informal buyer's agent on the purchase of my second house. And I wouldn't trust someone being paid by the seller to represent me in any case!
  • If you hire a cheap lawyer to do the conveyancing, it costs about £1,500 for the buyer and £1,000 for the seller. This is usually fixed-price work, not hourly. A licensed conveyencer (i.e. a paralegal who specialises in uncomplicated real estate transactions) would cost about half that. De facto this goes up sublinearly with price because people doing bigger transactions tend to use fancier lawyers. Some of this covers work that would be done by realtors in the US (negotiating the non-price parts of the contract) and some covers work that is done by the title company (like local searches and organising the closing).
  • Solicitors get paid anyway, so they feel less urgency about closing transactions than estate agents do - particularly the cheap ones. (At the price level where people have family solicitors, the solicitor will feel the amount of urgency appropriate to the quality of the client relationship).
  • A major bogosity of the English system is that it takes a long time to actually close a sale after an estate agent tells you the seller has accepted your offer. The traditional target is 6 weeks from acceptance to exchange of contracts - closing is traditionally 2 weeks after exchange but can be delayed further to fit around removal arrangements etc. The actual average from acceptance to closing is 12 weeks. Obviously delay creates the risk of the seller (in a rising market) or the buyer (in a falling market) opportunistically renegotiating the offer - something referred to by the lovely technical terms gazumping and gazundering respectively (both of which are generally understood by the housing-obsessed English public). It isn't clear why this is, and multiple attempts to fix it have failed.
  • England has a Torrens-like registered title system, so a single Land Registry fee covers deed recordation and title insurance (including for any mortgages).

So the total cost of an English residential transaction (excluding the mortgage broker and taxes) looks like:

For a £300,000 semi in the burbs outside London (full service/discount):

  • Estate agent £6,000/£1,500
  • Seller's solicitor £1,000/£500
  • Buyer's solicitor £1,500/£750
  • Local search fees £300
  • Land Registry fee £150
  • Total £9,000/£3,200 (3%/1%)

For a £1-2 million London townhouse:

  • Estate agent £7,500-10,000
  • Seller's solicitor £1,500-£3,000
  • Buyer's solicitor £2,000-£5,000
  • Local search fees £500
  • Land Registry fee £500
  • Total £12-19k (slightly over 1%)

For a US comparison, you would need to add the title company fee and any county deed-related fees to the realtor commission to compare to the UK total.

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