Having attended two major property conferences recently I have been saddened somewhat by my industry’s approach to the perceived market share of Purplebricks, Yopa, Hatched, et al.
In particular, I am alarmed by the lack of coherent industry-wide action by full-service agents to mitigate the threat over the next 15-20 years from online competitors.
Currently the online sector of estate agency makes up 3-5% of the total market, depending on who you listen to.
There has always been an element of the public who for whatever reason want to sell their own home, so actually for me, the present day competition is nowhere near as severe as many are making out.
My fear is that as an industry we are complaining and protesting too much just because the model is different and using it as an excuse to why our firms are not achieving a fee reflective of our service.
By being obsessed with today, we are losing sight over what could be an overall very different market in 15-20 years.
To give an example, one attendee at a recent conference from the west country was very animated in explaining that one Purplebricks representative is selling property over a 50-mile radius and this seem to be having a major effect on him.
I question why he is alarmed by this competition. Frankly if this one online-only rep can make a reputation and generate sizeable revenue by servicing clients over a 50-mile radius, then good luck to them.
This short article is not to eulogise or criticise a business model. Good luck to anyone offering an honest service for honest pay, but the reality is we as full-service agents should be doing more to defend our industry and highlight the benefits of using a good full-service agency against an online-only competitor.
The need to point out the listing fee v success fee
Why is there not industry-wide communication to the general public that online-only agencies charge a listing fee – not a fee based on overall success?
This breaks the traditional link between standing by your valuation, gaining traction over the marketing period and taking the transaction through to successful completion with all the chain-related, legal and financial obstacles that generates.
Over-valuing is one of the main complaints against estate agents, yet if you are an online-only agent (offering the standard approach of a listing fee) it does not actually matter what the property gets listed for, given there is no link between initial valuation to successful overall transaction to receiving your commission for a job well done.
We had a case at the start of the year where a lower chain was selling through an online-only agency. Needless to say there was no pace or guile to the legal conveyancing process at their end, and they lost their buyer as the market tightened post investor stamp duty increase.
The house they had their heart set on through my agency (and it was a unique, one of a kind offering) went to someone who actually had their chain in order through a full-service agent.
If the agent had been paid on success and not just listing, it would have been fair to suggest that the initial couple would have bought their dream home, but alas they were trying to save a few thousand pounds and did not have an agent who could grab their transaction by the scruff of the neck and run with it.
The onus on fee for listing and not fee for success was pointed out by Jefferies, the investment firm, in advice to clients thinking of investing in Purplebricks during the summer, but why are we relying on an investment firm to gain publicity for this view and not defending our industry from the front?
The net difference
I, like most of my clients, would dread selling my own property. In fact, most clients don’t even want to be in for the viewing let alone try and sell the property themselves.
The crux of this is that you contract a selling agent as the emotion is removed from the transaction and the property should be more effectively sold on viewings.
When you couple that ideology with a focused, full-service local estate agent who has his or her finger on the pulse of the market, you are then in a prime position, ready to achieve the optimum selling price for your property.
As an industry we should be highlighting more the price achieved differences by local full-service agents in comparison to online-only agents.
The difference in many cases can be huge, as evidenced above, and while someone may be tempted by a listing fee at £500-£1,000 (with no guarantee of sale), if there is a body of evidence that actually indicates that using a local full-service agency can achieve thousands more, or as the above example shows hundreds of thousands more, well, let’s push the message out there.
We could turn on its head the claim that online-only agents save thousands when my own evidence of seeing their business model evolve in the last few years (I even tried to buy a house through one four years ago as it represented such good value) is that they actually don’t achieve the level of pricing that a good full-service agency does.
What does the industry actually do?
Instead of coming together in the form of an industry body (think press or radio advertising bodies) which can collate the type of information above in a scientific, large-scale manner and look to protect the industry through concise and mass communication of this information.
We seem to be folding like a pack of cards and using the advent of online agencies to mask difficulties in our own markets while seeing large-scale corporate institutions buying internet-only offerings for questionable, inflated valuations and others moving towards a ‘hybrid’ type of agency.
All of this plays into the hands of those hoping to eradicate traditional full-service agency and replace it with a listing fee service while having viewings conducted by those on zero-hours contracts (or let’s call it the ‘gig’ economy to sex it up a bit).
At the moment the industry needs a leader or leaders who actually stand up for it, and there may be a tremendous opportunity for an experienced figurehead to bring together full-service agencies with a subscription service that means we can work together (yes, together!) to protect our industry over the next 15-20 years.
I am not advocating we need a response to cope with today’s threat – if you cannot compete against 3-5% of the market then you need to take a good look in the mirror or in the eyes of your team.
For the longer term, though, we need a response that combats further eradication of our market.
The world and its consumer is changing and unless you validate your presence within it you might turn into the next Blockbuster, Bhs (minus the yacht maybe), Jessops, Blackberry, Comet, HMV…
We need to protect our patch.
* Donald Collins is sales director of agent Go View London, based in Ealing