Letting Agents – Because they’re worth it?By Mark Long
For private landlords, the decision whether to engage the services of a letting agent is an important and often difficult one.
Their extra considerations include the agent selection process, the bundle of services purchased and the fees involved.
On average, agency customers are handing over 7.3% of their letting income to cover the cost of agency service provision, with some variability linked to location, portfolio size and the range of services being purchased.
So, to what extent do landlords think they can do a better job than agents, and why?
BDRC’s Landlords Panel provides an interesting window into agent engagement, and has thrown up a wide range of thought-provoking insights. Half of landlords currently purchase agency services, comprising a mix of full management, letting only or a combination of the two. This highlights an untapped 50% of the landlord market which agencies are currently missing out on.
There’s a clear relationship between portfolio size and agency use. 68% of very small landlords are inclined to self-manage, far more than those further up the portfolio ladder with, for example, 5-10 properties.
BDRC asked lettings agency users and non-users their opinion of the key differences in the service offered to tenants by direct landlords and via letting agencies. The recurring themes were ‘personal service’, ‘hassle’, ‘fees’ and ‘professionalism’.
Landlords ‘in a relationship’ with an agent typically said that letting agents could show flats at required hours and invariably had a web-presence and reputation. Additionally they knew how to pitch things and were clued up on ‘closing a deal’. These landlords told BDRC that agents knew far more than them about the law, about the market level of rents and about what to do with awkward or neglectful tenants.
Those landlords who did not use a letting agent mentioned that they gave a more personal, bespoke service than those who did, developing a relationship with tenants and acting promptly whenever they might get in contact. This, they said, led to trust and a mutual sense of responsibility. They also mentioned that they did not overcharge tenants on referencing or admin fees as letting agents might. The savings they made by not using an agency could be passed on to tenants in the form of reduced rent, making these landlords more competitive than those with letting managed properties.
Of course, there’s no right or wrong way to market and manage a portfolio. Landlords will always do what works best for their own particular circumstances. However, agency managers should be aware of non-customer views and look, where possible, to change negative perceptions if they want to grow their business share beyond 50%.