In my Negotiator column last month, I said that nearly all of my clients have successfully recovered 100 per cent of the banned tenant fees from their landlords who have in turn recovered the cost by increasing their rents. Predictably, I have had a number of emails from business owners who have not managed to achieve this. I am sorry to say that I have limited sympathy for them.
The tenant fee ban was introduced because a small number of letting agents were selling their service to landlords on price, and price alone. They then made up for their low fees to landlords by charging exorbitant fees to tenants. Now that this practice has been made illegal, they need to be able to sell their service on quality and many are simply not able to do this.
Both prospective and existing landlords will on a regular basis ask you to justify your fee and unless you are able to justify the fees that you are charging, your business is unlikely to survive.
So how can you do this?
Until not so very long ago, most letting agents saw themselves as technicians rather than sales people. They thought that the primary purpose of a valuation appointment was to explain to landlords the technicalities of renting out their properties. In recent years, this has all changed and the best letting agents are now also very good sales people and their valuation appointments are handled in a much more structured way.
Rather than reducing your fee, you need to be able to defend the concept of ‘you get what you pay for’.
You need to start by taking time to listen to the prospective landlord’s requirements. Different landlords will have different priorities when they are letting out their property and there is no point in making a presentation about how you will achieve the highest rent when the landlord is much more concerned about finding a tenant who will look after their property. It can easily take fifteen to twenty minutes to do this properly and if you rush this part of the appointment, you will fail to build a rapport with the prospective client and you may well make a presentation which does not address their needs.
View before you evaluate
You then need to ask the prospective client to show you around their property before you give an opinion on the recommended asking rent. It is not good enough to just blurt out a figure. You need to justify your recommendation by showing the landlord comparable properties, recently let for a similar price. A common trick is for agents to overvalue to win the instruction, then try to reduce the rent. You need therefore to be ready to defend your valuation if necessary.
Next you need to answer the prospective client’s sometimes unspoken question, “Why should I instruct you rather than the other agents in the town?” You simply must have plenty of well thought out answers to this, addressing every stage of the letting process. How are you going to expose the property to the maximum number of prospective tenants? Mention things like your Google position, social media presence, office location and contacts with big local employers. Then you need to focus on how you convert the maximum percentage of these applicants into viewing appointments. You might mention things like photographs, floor plans and the proactive approach to phoning applicants to encourage viewings.
Talk about your skill in negotiating offers; the experienced team, achieved premium rents for others; thorough referencing of prospective tenants to make sure they look after the property and pay the rent; your lower than average arrears rate.
Move on to how you manage the property once the tenants move in. You might cover:
- Prompt payment of rent
- Access to legal advice from ARLA qualified property managers
- Proactive property management to prevent more expensive repairs
- The quality of your contractors
- On-site property management
Support your claims
You need to be able to support all these points with case histories and anecdotes that prove beyond doubt that the quality of your service and the financial value of it to the landlord fully justifies any additional fees that you charge over your cheaper competitors. If you are forced to sell on price and price alone, your business simply will not survive.
If your fee is challenged, you need to be ready to defend it with convincing arguments. Rather than reducing your fee, you need to be able to defend the concept of ‘you get what you pay for’. You also need to be able to show detailed case histories of properties that were let by you after another agent had failed and case histories of record rents achieved. You should also not be frightened to use horror stories of landlords who went to a cheap letting agent and ended up finding that their property was trashed.
Some of my top clients are achieving management fees of up to 18 per cent and nearly all of them are achieving a fee premium of 25-50 per cent over their cheaper competitors. You can do it too.
Adam Walker is a business transfer agent and management consultant who has specialised in the property sector for more than 25 years.