Our property columnist Ed Mead is shocked that literally anyone can purport to be a property advisor – and that the government doesn’t seem to care
Let’s look at two types of people who need estate agents: property sellers; and property investors, looking to spend hard earned cash on buy-to-lets.
First, the sellers. London remains one of the cheapest places in the world to sell a property. Fees will most likely be 1.5 – 2 per cent plus VAT. So with average prices in greater London at over £300,000, fees are going to be a minimum of £5,000. Towards the centre of town, fees can be very much higher – often in excess of £10,000.
Second, the buy-to-let-ers. Buying a property to let out has come to be seen as a reasonable option for those sophisticated investors out there who want at least some kind of a return on their money and a well-hedged asset.
There’s nothing to stop literally anyone setting up as an estate agent. This is rather a worry in an industry hardly peopled by rocket scientists in the first place.
Understandably, sellers and buyers have high expectations of those seeking to advise them.
So how do you tell if the property adviser you’ve picked is qualified to help you pick an investment that could determine your future wealth and happiness?
Truth is, there’s nothing to stop literally anyone setting up as an estate agent or property finder and calling themselves an expert.
Many people do just that. Having bought one or two properties, they think that is all the experience they need. This is rather a worry in an industry hardly peopled by rocket scientists in the first place.
For some reason our government sees the fact that London is one of the cheapest places to sell as the thing they want to hold up to the world – misunderstanding that you get what you pay for.
Sadly, it appears the government has no desire to change the fact that estate agents don’t need any qualifications for the foreseeable future. The government has specifically stated that it doesn’t want to bring forward any property-related legislation in this parliament.
This leaves potential investors, and sellers, somewhat adrift in a business that’s fraught with difficulty, and when they most need accurate and reliable information.
What kind of information do agents need expertise in? Let’s look at buy to let. In London you are perhaps better hedged against market fluctuations. But returns can be very low, four to five per cent gross. By the time you’ve paid agents’ fees and tax, returns like that can be somewhat unexciting.
The agent could actually abscond with your tenants’ deposit and your rent.
Most long-term investors understand that the money you make from renting a property out simply covers the cost of its upkeep, until it can used by the investor or their family. The investors look to capital uplift to give a real return.
You could look at less salubrious areas in London to get higher yields, but perhaps the long term growth won’t be as exciting.
Then there’s the quality of your tenant. Will they stay a long time, or do you risk high turnover and voids? Is the agent you’re using registered for a redress scheme?
Unbelievably in law, rental agents do not have to belong to a redress scheme, yet they handle money. The agent could actually abscond with your tenants’ deposit and your rent.
So do you try and save money by doing it all yourself and by managing your tenants yourself? This may be time-consuming. Do you instead pay an agent to manage the let? Do you buy something that’ll rent well or something you’d fancy living in?
These sorts of questions need to be answered by someone who knows what they are talking about, not someone who was selling mobile phones three weeks before but has a good line in patter.
The government seems to be looking at ways to encourage investment in the private rented sector while it is determined not to introduce more property regulation.
Let’s not forget what a disaster light-touch regulation has been on wider investments. Surely the idea of a whole new generation of buy-to-let investors in a no-touch regulation environment beggars belief?
Ed Mead has been an estate agent in Chelsea for over 30 years. He sits on the Board of the Property Ombudsman and has written about property for the Sunday Times and The Telegraph. He’s never afraid to say what he thinks and is a tireless campaigner for higher standards in estate agency.