Have you noticed how many Estate Agents, who did not previously offer residential letting services, that have suddenly opened a lettings department to try and supplement their monthly income, and stop their businesses from going to the wall, as the house sales market continues to stagnate?
The Estate Agent will usually select junior, inexperienced, staff members to create their new letting facility and a “Letting Department” banner will be proudly erected above their desk.
An estate agency sales flyer will be printed and delivered to all houses within the vicinity announcing that “we now do LETTINGS – so LET US impress you”. As many of the letting tasks as possible will be outsourced to third parties. For example, security deposits will be sent to the custodial scheme and inventories and check-ins / check-outs will be created and performed by third party inventory clerks (with the associated additional charges passed back to the landlord – of course!).
That’s it – job done – letting agency created. No letting qualifications, no letting experienced staff, no knowledge of tenancy law, no idea what they are really doing and no shame that they are providing, at best, a third rate service to an unsuspecting, often accidental, landlord! But then we are talking about Estate Agents I suppose!
The problem is that the General Public don’t understand the difference between a Letting Agent and an Estate Agent. They think they are the same thing (as they both deal in property). Nothing could be further from the truth!
To explain – when I have toothache I go to a tooth specialist – the Dentist. I don’t visit the Doctor who deals with general matters relating to the human body to get my teeth fixed. I guess I could go to the Doctor but the advice and service I would receive would not be as specialised or experienced as the Dentist.
Using the same analogy – if I have a house to let then I visit the specialist Letting Agent (rather than the generalist Estate Agent). I don’t understand why the General Public don’t understand this!
Landlords need to be very wary of these “hard up” Estate Agents that have moved into residential lettings as a side-line as they do not have a thorough understanding of the complex legislation surrounding the renting of property; a detailed knowledge of the local lettings market; trusted relationships with local handymen and property maintenance companies; and the interpersonal and negotiation skills to handle all of the issues that the landlord and the tenant will raise throughout the lifecycle of the tenancy.
Pointedly, Estate Agents usually earn their sales fee when the property is sold (and this is automatically paid to them by the solicitor during sales process). The Letting Agent is paid a management fee that is deducted from the tenants rent for every day that the tenancy continues. If the tenant doesn’t pay the rent – the Letting Agent works “for free”.
So, the Letting Agent has to collect the rent and mediate between the landlord (who wants to maximise the investment income by not spending any money unless he has to) and the tenant (who always has a list of jobs that they would like the landlord to pay for).
So, letting a property (and generating a fee) requires a very different skill set to selling a property to a purchaser and being paid by a solicitor. The Letting Agent will need to have strong, but tactful, negotiation skills to ensure that the rent does not fall into arrears and that the landlord maintains the property to an acceptable and safe standard.
Additionally, a high level of customer service towards the tenant will sustain the tenancy and please the landlord (as void periods are minimized and initial tenant setup charges reduced).
Letting is not a business you can easily dip in and out of when it suits. There is a lot at stake, not least the safety and well-being of the tenants as well as the success or failure of the landlord’s investment. Getting it wrong and making elementary schoolboy errors can have dire consequences for landlords, including huge legal expenses, loss of rent, extended void periods, loss of tenant’s deposit money and penalties for not complying with legislation.
Use an Estate Agent to rent out your investment property AT YOUR PERIL.
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Antony Richards
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Sign Up8:32 AM, 17th July 2012, About 12 years ago
Agree great article Mark. As a chartered surveyor specialising in management I cringe at the way some estate agents try their hand at lettings. Their lack of knowledge is astounding. As for getting the money back from custodial scheme, I know of one tenant still waiting to get her deposit back from a tenancy ended in December 2011. Give me insurance backed any time. Possession gives a far better negotiating position. In 5 years of deposit protection the only time I have been to adjudication is on behalf of my daughter at university where the agents were so bad they did not even bother to provide any evidence for their case
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Sign Up11:55 AM, 17th July 2012, About 12 years ago
I totally agree - it is outrageous that 3rd party inventory companies are charging landlords hundreds of pounds and using the adjudication process relating to tenancy deposits to try and justify these charges. Imfuna is a great application that every landlord should take a look at!
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Sign Up11:26 AM, 17th July 2012, About 12 years ago
Mark, I am not a letting specialist or an estate agent. But it strikes me as absolutely common sense for an estate agent to venture into lettings when the sales market is poor. After all, very few people will allow their business to fail without trying to generate new income streams. Whilst I agree it doesn't make sense to place junior staff in this role, lets not pretend that letting or managing a property is rocket science. There are plenty of organisations that will support a lettings business even with the legislative aspect such as RLA. So in summary,I applaud estate agents for just having a go and NOT allowing their business to go to the wall.
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Sign Up14:22 PM, 17th July 2012, About 12 years ago
Hi Robert, I guess we will have to agree to disagree!
It is like suggesting that a failing dental surgery should venture into giving General Medical advice to create more cash ... or a failing Doctor should become a part time Denist!
They might generate a little more income .... they might still go bust anyway ..... and they might KILL THE PATIENT (ie: the tenant) along the way!
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Sign Up14:25 PM, 17th July 2012, About 12 years ago
Hi Antony, Thanks for your feedback. The reason I immediately opted for the more costly insurance based deposit schemes (over the free custodial) was to maintain control of the money. If it was in my (ring fenced) client bank account - I didn't have to write to anyone requesting it back etc etc - which means I could refund it to a fantastic tenant as I picked up the keys to the rental property.
Estate agents should continue to specialize in SELLING houses and they should leave the Letting agents to specialize in letting ....... but, of course, they won't!
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Sign Up10:20 AM, 18th July 2012, About 12 years ago
Hi Mark, I guess we will!
It's nothing like suggesting a failing dental surgery giving general medical advice. Both dentists and doctors are highly trained and study for a minimum of 6 years before they are able to practice. Do you think a letting specialist would need as much training to get to the required standard? Besides, the basic skills of the customer facing side of lettings and sales is exactly the same you need good sales people that can execute the trade. Whilst the support and management function you need people with a good eye for detail to manage the paperwork. Simples!
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Sign Up12:06 PM, 18th July 2012, About 12 years ago
Mary Latham who has been in the LL game for as long as a lot of us have been alive has posted about a scheme she runs for LA only who can communicate with her in confidence without fear of retribution in not knowing things.
This she does on the basis that it is better to educate rather than leave industry professionals in blissful ignorance.
In her advices without naming any names of course she has stated that many LA, some of whom have been in business for many years have and are getting things wrong.
Now this is not because of refusal or inability to learn, it is because it doesn't matter how long you may have been doing things, it could still be wrong.
She gives tutorials to LL and LA and is always surprised, or rather not by now of how much LL and LA are getting wrong.
It therefore stands that a EA cannot easily become a LA from hitting the ground running.Yes you can have all the relevant custmer service skills, which if you are an EA is ntaken as a given; but a LA is a whole different ball game.
There are many, many hazards to trip up the unwary.
So I personally would NOT use an EA who has only recently commenced acting as a LL, no matter how swish the office is!!
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Sign Up13:06 PM, 18th July 2012, About 12 years ago
Hi Robert - thanks for the continued debate!
The point is that a letting specialist is a _specialist_ in letting whereas an Estate Agent is a specialist in Sales. The Estate Agent sells a property - then moves onto the next deal.
The Letting Agent rents out a property, does all the LEGAL work, makes sure all the safety checks are done, maintains the property, collects the rent, keeps landlord and tenant happy to sustain the tenancy etc etc
Yes - the Estate Agent could learn the legal and safety skills and information required to become a letting agent (the same as a Doctor could cross train to be a Dentist) but, without cross TRAINING, the Estate Agent is not going to deliver the same level of specialism, or the same duty of care towards the landlord or tenant.
What does all this mean in practice - landlords probably getting large rent arrears because the EA is not equipped to track or chase them - the tenant put at risk because the required safety checks are carried out (because the EA didn't know about them all) - landlord and tenant both compromised (because the correct legal paperwork not put into place).