Landlords negotiation of fees with letting agents

Whats the best approach to take when landlords negotiate fees

Many say the letting industry is currently in a race to the bottom, with letting agencies competing with each other in order to win new business. Some agencies think that by simply reducing their fee structures and marketing this that business will pour in. I would argue the point that whilst it may work well to have a few listings on their books now, it will do greater damage in the long run.

Negotiation of letting fees

Image Credit Matt Biddulph

A typical example of this is a company reducing its fees to what would appear to be a level where the ability to turn a profit is significantly reduced.

We should all know that in order to provide a professional service, their needs to be some profit in the margin. I mean, if not why go into business? I have no reservations about a company offering a limited time only promotion in order to stand out. For Example – Reducing the fees for the first 3 months of management is an incentive to do business whilst placing a restriction on the discount.

However when I see a letting company offering a letting or management package at a set cost or on a percentage base well below that of the competition, I see this as a race to the bottom. It affects the market, as it becomes a bargaining point for landlords. This normally happens with a landlord with whom you already do business, who will say something like “company X is offering the same package for half of your fee”. It is clear that your landlord is looking for negotiation on fees.

So what can you do here?

Well the obvious first step is to compare service with service. This should allow you to point out that the difference in this fee is that company X are not providing the extras which make the landlord’s life easier.

What if the company offer the same service?

This is typical as company X will market the fact that they offer the complete package with the only difference being the cost. The reality of this is that as industry professionals we understand that it is next to impossible to offer this at the rate advertised and still make a profit. So in reality what the landlord will get is a below-par service at a below market value fee.  The only problem is that the landlord will sometimes find it hard to understand this.

So what is the solution in fee negotiation?

I am a big believer in offering more services rather than reducing fees in order to win business. A great way to achieve this is to offer the landlord a service which will cost you less after costs than a reduction in fees. By doing so, you will secure the business whilst increasing the value of your services to the landlord. Give the landlord a free digital inventory reports instead of reducing your fees.This is the best way to handle negotiation of fees.

Negotiation of fees


Image Credit Victor1558

Building Value

A simple way to maintain your fee structure and deal with competitors’ lower pricing is to offer more services for the same value. The skill here is to build value in your additional services. So for example, if I were offering a landlord a free inventory service with my letting service I would ask what type of inventory they currently use.  If it does not have detailed photos, I would highlight the important of this.

If the master inventory is not up-to-date, once again I would highlight the importance of this.

Lastly, I would inform the landlord that you can offer a solution to all of these areas, inform them of the value of this, and then remind them that you are going to include it with your letting service for FREE.


Same fees, more value

By doing this, you are creating value for your landlords rather than just dropping price. I must highlight the importance of building value in your additional services, as without these, all the landlord will consider is the lower fee.  If you bear this in mind the next  negotiation of fees that you will have you will come out the better.
by Andreas Riha

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