What separates the UK from the US? Geographically, the answer is the Atlantic Ocean. Geography aside, the two are bonded as countries in many ways – historically, politically, and culturally. However, they are vastly different in many other ways. Despite the fact that English is commonly spoken in both, accents differ. Terminology and the way we spell words is different too. In the UK, you would sit on a colourful couch . An American would sit on a colorful sofa. The American would buy a condo, whereas the Brit would buy a flat. Buying a house across the pond illustrates how different the real estate market is, as George Clooney, Madonna, and Kate Winslet have discovered. So, how does the property market differ in the US and UK? Keep reading to find out.
Realtor vs Real Estate Agent
The US and UK real estate markets operate very differently from one another. For starters, the titles are different. In Britain, the individual selling houses is the “sales negotiator” or “lettings negotiator” while in the US, a ”realtor” is the correct term. Americans refer to the company as a brokerage. In the UK, real estate agents are often how the British refer to the actual company. However, real estate agent may also refer to the person, therefore we’ll use that term in this article.
Mindset and Culture
It’s vital to understand the cultural distinctions between the two nations before we discuss differences in property. The ultimate dream in America is to become an entrepreneur. It is common knowledge that Americans take great delight in expanding their own businesses. In reality, this idea is the foundation of the American dream. The UK does not embrace entrepreneurship in the same way. The typical perception of British culture is that it is more conservative and risk-averse. While British people prefer a salaried job working for someone else, realtors in the US are often congratulated after leaving their employer.
Education and Licensing
A realtor must hold a valid license in order to sell any type of property in the US. All agents must show proof confirming they have completed high school. Despite the fact that each state has its own set of legal requirements, most states have agreements with one another that streamline the license transfer procedure. There is no equivalent license in the UK. A real estate position is open to everyone so you can print your business cards and sell some homes if you have a bit of sales expertise. The US and UK real estate markets differ significantly in terms of education and licensing.
Employee or Self-Employed?
Americans are more inclined to launch their own company than Britons, who want a stable position with decent perks. The majority of realtors in the US have previously worked for themselves. If they join another firm, they will bring their previous database and list of clients with them and are eager to exclusively accept commission-based employment. If you don’t own the business, you would apply for a real estate job in the UK that pays a wage. A variety of non-compete clauses would bind you, barring you from taking your old clients with you to your future position.
Salary vs Commission
In Britain, you would receive a salary and only a small commission or bonus on any sale made. Salaries tend to be low, as are bonuses. A junior real estate agent usually makes a basic salary of £15,000 to £20,000 with a 10% bonus on completed sales. With incentives, a seasoned worker might anticipate earning between £30,000 and £40,000. Your earning potential is limited because the commission bonuses are always capped. The business keeps the majority of the profits in return for a salary, access to a database, and use of some marketing tools.
Realtors in the US receive commissions on their sales. When you look at data from the last few decades, commission rates have traditionally averaged between 5% and 6% of the sales price, making this an extremely lucrative career. Commission rates are always adjustable in the US. Since there is no salary offered, if January sales are low, you may find yourself in a difficult financial situation. The sky is the limit, though, when months are good and homes are selling since your earning potential is unrestricted.
Company vs Individual
In the UK, a real estate agency would get a customer who would then be allocated to an employee in the company. This ‘agent’ or ‘sales negotiator’ would be the middleman between the buyer and seller and would represent the real estate agency. The UK realty profession is all about the company and not the individual agent. The company controls every aspect of communication between their customers and employees, including the sale. Visit any estate agency website in the UK and you probably won’t learn much about the agents who work there. It is difficult to find contact information for an individual because the company is the main attraction. The agency controls all communication between the employees and their clients. Even emails are generic, using words like ‘info’ and ‘sales’ instead of agent names. Websites will include contact details of the company and not the employees.
US agents work for the buyer and handle all the negotiations, paperwork, and closing costs for a commission. American realtors are considered self-employed and use brokerage offices as a place to complete daily tasks and hang their license on the wall. US realtors run their operations with themselves front and center. The philosophy is that people buy from people. It is not uncommon to see a billboard featuring a massive image of the realtor being promoted. The realtor becomes the focal point of the business and the star of the show with their name and contact details advertised predominantly.
Multiple Listing Services Don’t Exist in the UK
There are about 900 Multiple Listing Services (MLSs) in the US. These are databases where competing agents share property information so they can cooperate with each other to sell houses. If one realtor has the property and another has the client, they can complete their part of the sale and split the commission, making everyone a winner.
MLS does not exist in the UK. In Britain, each real estate agency has their own database of property listings and clients. Data is never shared. In the United States, a buyer can cooperate with one agent for the whole market using the MLS, whereas in the UK, agents tend to only show the listings in their own property portfolio. Even if they know that a competitor’s property would be ideal for their client, they will have no access to it.
RESPA is an American Thing
The Real Estate Settlement Procedures Act (RESPA) was enacted by the U.S. Congress in 1975 to provide homebuyers and sellers with complete settlement cost disclosures. It was designed to outlaw bribes, restrict the usage of escrow accounts, and stop abusive activities in real estate settlement. The Consumer Financial Protection Bureau (CFPB) is now in charge of enforcing the federal law known as RESPA.
The purpose of RESPA is to regulate the sector, improve transparency, inform borrowers about their settlement costs, get rid of dishonest tactics, and prohibit referral fees that might raise the cost of obtaining a mortgage.
It is up to the real estate agent to stay professional and open when educating potential buyers on the house purchasing process because RESPA does not exist in the UK and there are no set laws for selling properties and getting loans in Britain.
What are the Similarities Between the US and UK Property Market?
There are many differences between selling homes across the pond. One thing, though, never changes. Regardless of differences in geography, culture and terminology, buyers and tenants around the world want to find property in the right location and with the right specifications to match their budget. Landlords and sellers want their properties quickly rented out or sold to responsible tenants who pay rent on time and take care of their homes.
Whether you are a realtor selling a penthouse suite in Manhattan or a real estate agent renting a cottage in Liverpool, the basic principles remain the same. Dealing with people in a professional way while offering expert advice is the thing that truly sells houses.