Last Updated on August 20, 2026 by Team TBH
Charging a percentage of transaction value is a strange way to price a service. The work involved in selling a two bedroom flat and a five bedroom house is broadly the same. Same listing, same photographs, same phone calls, same nervous vendor ringing on a Tuesday afternoon. Yet the fee can triple.
The numbers make the oddity plain. Look at what estate agents actually charge in the UK and you find fees running from roughly 1% to 3.5% of the sale price including VAT, averaging somewhere near 1.42%. On a £275,000 home that is about £3,900. On a £500,000 home the same 1.5% is £7,500, for a job involving the same photographs, the same portal listing and, quite possibly, fewer viewings. Any pricing director would call that indefensible. It has survived for over a century.
Why it holds, when logic says it should not
Because the seller is not really buying marketing. They are buying risk transfer.
Under a no sale, no fee arrangement, the agent absorbs the cost of failure. Photography, listings, staff time, all of it is spent before anyone knows whether a penny will come back. The percentage is not a price for the labour. It is the premium on a bet the agent has agreed to take on the client’s behalf.
There is a second, quieter mechanism at work. The fee is deducted from the proceeds by a solicitor at completion, weeks after the emotional decision was made and at the precise moment a large sum is arriving. Money that never passes through your current account does not feel like money leaving.
What the disruptors got right, and where they stalled
Online agents attacked exactly the right target. Fixed fees, typically £500 to £1,500, against a percentage that could easily be five times that. On paper it is a rout.
But they broke the mechanism that made the incumbent model tolerable. Pay upfront and the risk moves back to the seller, who now carries the cost whether or not the house sells. The saving is real, the anxiety is new, and the anxiety arrives first. Plenty of sellers looked at a four thousand pound commission, looked at a nine hundred pound fixed fee, and chose the four thousand.
That is not irrationality. It is a rational preference for certainty at the largest financial moment of most people’s lives.
Six things this teaches about pricing
Strip out the property specifics and the pattern applies widely.
- Contingent pricing is a product in itself. If you only get paid on success, you are selling insurance alongside the service. Price accordingly, and say so out loud.
- Percentages feel smaller than pounds. 5% and £7,500 are the same number. They do not land the same way. Whichever framing serves you, your competitor will use the other one.
- When payment falls due matters as much as how much. Deducted at completion beats invoiced upfront, even at several times the price.
- Unbundling only works if buyers can judge the parts. Most sellers have no idea what professional photography is worth. Offer it separately and they will decline it, then blame you for the slow sale.
- A low headline rate erodes the moment extras appear. Premium listings, floor plans, brochures, a new EPC. Charge for enough of them and the cheaper agent is no longer cheaper, and the customer now feels handled.
- Incumbents rarely defend on price. High street agents kept the high street, the local reputation and the sign outside number 42. Distribution and familiarity beat a better spreadsheet more often than founders expect.
The trust discount nobody puts on the invoice
Here is the part that gets missed in the disruption story. In categories where the transaction is rare, high value and frightening, people pay a premium for the feeling of being looked after. Estate agency, funerals, weddings, legal work. Buyers in these markets are not experts and never will be, because they only do it once or twice.
Fee comparison assumes a confident buyer. These are not confident buyers. They are people who want somebody to tell them it will be alright, and they will pay several thousand pounds for that assurance without ever describing it in those terms.
Which is why the winning challengers in property have not been the cheapest. They have been the ones offering a different kind of certainty. Fixed offers, guaranteed timescales, no chain. Different product, not a discount.
The takeaway
If you are attacking an incumbent’s pricing, work out what the price is actually buying before you undercut it. Sometimes the answer is fat margin and you should go straight at it. Sometimes the answer is risk, reassurance or timing, and undercutting simply hands the customer a cheaper version of something they were not buying in the first place.
To read more content like this, explore The Brand Hopper
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About the author
Paul Gibbens – Property Expert at Housebuyers4u
He is a property expert at Housebuyers4u, advising UK homeowners on quick house sales, realistic valuations and how to avoid common pitfalls such as unclear fees, hidden option agreements and last-minute price changes.
