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One of the most consequential decisions you'll make when starting an estate agency isn't your brand name or your office location. It's how you're going to generate revenue, and more specifically, how you're going to generate enough of it, consistently, to build a sustainable business.
Most new agents spend a lot of time thinking about their sales fee, but fewer spend enough time thinking about everything else. Let's look at both.
The traditional percentage-based fee remains the dominant model across the UK, typically running anywhere from 0.75% to 2% of the sale price plus VAT, depending on the area and the type of property. There's a reason it has persisted: clients understand it intuitively, it scales naturally with the value of the transaction, and it aligns your incentive with theirs. You both want the highest possible price.
The drawback for a new agency is that percentage fees require you to justify your worth before you've built a local reputation. You're asking someone to commit to a fee of potentially several thousand pounds with an agent they've never heard of. That's a harder sell than many new agents anticipate.
Most agents operate on a completion-only basis, and for a new agency it's an understandable default, as it removes a barrier for clients wary of committing upfront. The trade-off is cash flow: you're absorbing the cost of marketing and time for any property that doesn't complete. Some agents mitigate this by charging a modest instructed fee, with the larger element payable on completion.. Whatever you decide, be explicit from the outset: any ambiguity in fee terms is one of the more common sources of dispute in this industry.
Fixed fees came to prominence largely because of Purplebricks. Founded in 2014 and floated on the London Stock Exchange within a year, Purplebricks charged a flat fee, initially £599, and grew rapidly by tapping into genuine frustration among homeowners at high percentage commissions. At its peak, the business was valued at over £1 billion. The model had real appeal: it was simple, transparent, and felt fair to sellers watching property prices rise.
What the Purplebricks story also illustrates, though, is the structural weakness of a fixed-fee model when it removes the incentive to complete. Without commission, there was limited financial motivation for their agents to progress transactions - only to win listings. Service quality suffered, and the company reported losses of over £20 million before being sold to competitor Strike for £1 in 2023. It's a cautionary tale not because fixed fees are inherently wrong, but because a fee model that decouples agent income from client outcome tends to create problems over time.
For a new, independent agency, the more important question isn't fixed versus percentage, it's whether your fee model reflects the value you're delivering and creates the right incentives. A hybrid approach, where a modest fixed element has a success-based component on top, can reduce the perceived risk for a new client while preserving the alignment that makes percentage models work. Many well-run independents operate this way effectively. Before settling on anything, research what established agents in your area are charging; competing primarily on price is rarely a strong foundation for an agency with a reputation to build.
Your sales or lettings fee is the obvious revenue line, but it shouldn't be the only one you're planning for. Most established agencies derive meaningful income from referral arrangements with third-party partners, and for a new agency these relationships are worth setting up from the very beginning.
Conveyancing referrals are typically the most valuable. Conveyancers pay referring agents a fee when a client they've introduced proceeds, and the amounts are material. Published figures from agents across the UK suggest average referral fees in the range of £100 to £450 per completion, depending on the firm and the arrangement. Given that every property transaction involves conveyancing, this is a recurring, scalable income stream that costs you nothing beyond maintaining a good referral relationship.
Mortgage referrals work on the same principle. Mortgage brokers pay referring agents when a client proceeds, with average fees typically in the range of £200 to £500 per referral, depending on the mortgage value and the broker's terms.
Out of area referrals are when you have an enquiry from a client who is selling their house, but their house is out of your patch. You can refer them to a trusted agent elsewhere and receive a commission fee in return, turning a lead you couldn't otherwise act on into a revenue opportunity. Homeflow's Lead Manager includes one-click or even automated out-of-patch referrals to make this an easy additional revenue stream as you grow.
Surveying and removals operate similarly, though the fees involved are generally more modest. Some agents include these partners as a client service rather than a material revenue line; others negotiate meaningful per-referral fees. Either approach is reasonable, and having a network of trusted partners to recommend adds genuine value to the client experience even when the financial return is secondary.
Referral fee income is legal and common practice across the industry, but it comes with clear disclosure obligations. Under the Estate Agents Act 1979 and the Consumer Protection from Unfair Trading Regulations 2008, you are required to disclose to clients in writing, clearly and prominently, that a referral arrangement exists, who it is with, and the amount or estimated value of the fee you receive. National Trading Standards published detailed guidance on this, and non-compliance risks criminal prosecution.
In practice, most agents include referral fee disclosures in their standard terms and conditions. The key is that the disclosure is genuine and legible, not buried in small print. Transparency about referral arrangements rarely puts clients off, as most understand it's standard practice. What damages trust is finding out after the fact that it wasn't disclosed.
Whatever model you settle on, believe in it and be able to explain why. Agents who hesitate, apologise for their fees, or reduce them at the first sign of resistance undermine their credibility before the conversation has properly started.
Fee negotiation is a normal part of winning instructions, and some flexibility is reasonable. But there's a significant difference between having a considered position on fees and simply capitulating to whoever pushes back hardest. The latter trains clients to push back harder next time, and builds an agency on margins that won't sustain the service level you're trying to deliver.
