‘Realtor’ is a trademarked term in the US: agents have to be licensed to use the word Realtor to describe themselves. And the public rarely use someone who isn’t licensed.
The industry body, the National Association of Realtors, lobbies to ensure that only licensed individuals can operate in the space. It’s much more than branding – it’s about legislation.
The US gets these things right – agents take care of each other in the face of existential threats.
They might have largely missed the rise of portals – Realtor.com is second to Zillow by quite some distance now – but agents flex their might every now and then.
Recently StreetEasy, a New York City based portal that dominates rental listings, decided it would charge agents per listing. Local agents got organised and boycotted the portal.
According to The Real Deal, StreetEasy’s listing inventory fell by about half – in just 24 hours*.
What did StreetEasy want to charge? $3 a day per listing.
Interesting that in the UK, Rightmove has enjoyed double-digit revenue growth every year except for the financial crash – when a number of agencies hit the wall.
It’s difficult to quantify whether Rightmove is good value for money. I’ve always used the line that at £911 per branch on average, Rightmove does all your marketing for less than half the cost of a dedicated marketing hire.
That is after all the premise behind the rise of online and hybrid agents: Rightmove exists, so selling property is taken care of and all you need is to find sellers and landlords.
In the US, it has been this way for decades: the best agents have sellers flocking to them, yet the ‘listing agent’ doesn’t find the buyer.
Buyers come through the portals and/or other agents.
Purplebricks has got very good at finding sellers and charging them up-front – how long does the average high street agent wait to get paid?
And the firm is now filming its TV adverts to launch in California.
But there’s a fundamental question to be asked, and it’s about profits. As Purplebricks expands, when will it ever stop losing money?
And there’s context: Redfin, arguably the Purplebricks of the US, floated on the stock market last week**.
Redfin lost $22.5m last year and $30.2m the year before. And this is on revenues of $267.2m and $187.3m respectively in 2016 and 2015.
Yes, the prize in the US in bigger. Yes, Purplebricks has nailed TV advertising. But no, not even Redfin has turned a profit by offering to cut their fees to win business.
And that’s what is bewildering with Countrywide’s strategy – and that mirrored by several UK agents: why reduce your fees?
Countrywide’s performance hasn’t been anything to shout home about, but it still turns a profit.
If you reduce fees to ‘gain market share’, sure you get the vanity of revenue but lose the sanity of profits.
There’s no arguing with the fact that agents’ roles have changed – Rightmove does finding buyers and agents concentrate on winning instructions.
And the evidence is that less than 5% of sellers go with fixed-fee online/hybrid agents***.
If I were a shareholder in Countrywide, I’d be asking:
- How they intend to win more sellers;
- Does shutting 200+ branches reduce the number of sellers they can acquire?
- How many sellers using their low fixed-fee offering are profitable to the company – i.e. how many actually buy the upsell?
And if I were every other high street agent, I’d be asking myself what the future looks like in a world where Rightmove’s fees are going to increase by at least double.
For Purplebricks, it just means raising prices each year – as they have been doing.
For high street agents, who have been lowering their commissions each year: how low can you go?
The US agents club together to ensure their future as an industry is profitable.
What are agents in the UK going to do about their future?
If only there was a way to get organised, a mutual way to plot a path to a profitable future.