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Why fees can be good for you. . .
Bill Tyson

 


THE word fee isn't very appealing. It sounds a bit sneaky . . . and in many cases it is. Banks filch fees from your account and lots of companies load on annoying little charges.

But in some cases fees can be good for you.

The case in point is when they are used instead of the even sneakier, and much more financially painful, way to extract cash from consumers . . . commission.

Estate agents made a killing on the property market by linking their charges to property. When agreeing a price for their services with a client, they can brusquely mention that their fee is 1.5%.

That sounds negligible.

Hardly worth haggling over.

And it wasn't . . . in the days when you could snap up a semi-d for less than a half a lifetime's earnings.

But now it is very different. One and a half percent represents a hefty wad of cash when applied to something as humungous as the price of property. At that rate, an estate agent would trouser over 11,000 for flogging a fairly standard 500,000 home. When VAT is added on, the householder will have parted with close to 14,000.

That's a lot of money to pay someone for giving a bit of palaver and showing someone around your home. In fact, you could say it's downright outrageous.

Vendors didn't kick up much of a fuss before because they were making so much money anyway in a soaring market.

But now that prices are falling, they're not quite so blase about handing over half a year's income to someone for what probably amounts to a good day's work.

Why don't we challenge the ludicrously expensive commission system and pay a fee instead? Well, we couldn't before because, not surprisingly, few estate agents were willing to abandon the extremely lucrative commission-based system. But now a new breed is breaking ranks and doing business for a fraction of what their pricey peers are charging.

One of these is Movehome. ie, based in the Omni centre in Dublin's Santry, which charges fees instead of commission. The result . . .vendors pay as little as 999.

Founder Ronan Crinion got the idea when he sold his own home . . . and got fleeced. He describes the commission system as "outrageous" and says the new fee-based agents can have the same impact on the property market that Ryanair had on air travel.

He describes as "outrageous" the fact that some agencies are now putting up their commission even more because the property market is slowing down.

"The fat cats have had it too good. Now that they have to do a bit of work, they want even more."

He bristles at the standard jibe flung at his company by other estate agencies in the area (he covers much of north Dublin) that if you pay peanuts, you get monkeys.

"We provide the same service. We put up signs, show the property and advertise it on myhome. ie (and other options). Three grand (his maximum charge) certainly isn't peanuts and we can easily provide a great service for that."

Maybe the monkeys are the ones forking out 14 grand instead? So how does Movehome. ie get on with other estate agencies?

"Well they're not sending us any Christmas cards, " says Crinion. Corkonians are famously cute so it's no surprise that there are two feebased estate agents in the Rebel county.

One of these is Property 4U. ie, which has been up and running since October and claims to be the only agent in the country to charge a flatfee . . . of 999 . . . no matter what your home is worth. It also throws in advertising in a couple of local newspapers but the valuation is an optional extra for 100.

Founder Tony Johnstone pledges to maintain his prices despite the fact that other local agencies, which charge many times more, are upping theirs.

"We can still earn a decent living, " he maintains.

A spokesman for the Irish Auctioneers and Valuers Institute says it "doesn't comment on fees" as it is precluded from doing so under competition law. He says members can operate whatever charging structure they like.

However, he stresses:

"IAVI has always maintained that people shouldn't always go for the cheapest deal."

HOW PROFESSIONALS FLEECE THE LAYMAN

"All professions are conspiracies against the layman" . . . George Bernard Shaw

ESTATE agents have had great success in fleecing consumers by charging percentage-based commission. But they are not alone.

Other professions, quick to note the system's profit-boosting potential, have also got in on the act.

Architects charge an even bigger whack at up to 6%. (Admittedly this is for a lot more work and responsibility than estate agents).

A Dublin family building a new house were still reeling at being charged that much on a millioneuro project (/60,000 in total) when they were hit by a double whammy when the architect brought in an engineer.

The engineer, clearly jealous of how the other professions were making a killing, demanded 1% . . .and our friend had to part with another ten grand.

Ka-ching!

For years, investment advisers have used commission to disguise how much their clients are actually paying.

Many now offer a fee-based service instead. But most investors baulk at paying fees to advisers.

Why pay hundreds of euro when you don't have to, they scoff? Yet they end up paying thousands instead by going down the commission route.

And how good can the quality of advice be when the person giving it stands to make more from the institutions that pay the most commission?




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