Much has been made in the press of the rise of what are popularly referred to as “online agents”. The traditional estate agent, if we are to believe all the hype, has had his day.
We hear all too often that only politicians, bankers and journalists are trusted less than traditional agents by the public. Ironically, it is journalists who peddle much of the PR regarding their new best mates, the online agents. Make of it what you will.
It seems that the online agent can do no wrong; he is the new vendor’s saviour by virtue of the fact that he charges so much less for his services. By eschewing shop-fronts and the resultant staff and doing everything online, he can save vendors thousands of pounds. It would appear that since he seems to be doing vendors a favour of such magnitude he must be much more honest than a traditional agent.
Occasionally, the Advertising Standards Authority slaps an online wrist or two for being disingenuous in an advertisement. But once the seed is sown into our subconscious, it’s sown; if a West London agent charges 2.5% for selling a property, every agent and his neighbour must also be doing so. If many thousands of pounds may be saved in W1, then surely the same must be true of RG21? On the surface, it sounds like a compelling argument and, were agents in Basingstoke really charging 2.5%, or anywhere near it, this might hold a drop of water. In truth, properties in Basingstoke are rather cheaper than SW1 and I don’t know of a single agent asking for anywhere near 2.5%. The most expensive seem to work on perhaps 1.5%. Instead of the saving being many thousands of pounds, in truth, it is a matter of a few hundred. Perhaps.
There was a time when an estate agent needed a local presence. Those with large newspaper adverts and bright shop windows often did very well. It’s fair to say, however, that an agent doesn’t necessarily need large newspaper adverts anymore. When, in all honesty, did you last pick up a local newspaper to look at houses? You might browse at the vastly reduced number of adverts if you’re killing time at the barber’s or while you’re waiting for a take-away, but those with serious intent will pick up a mobile phone or a tablet or possibly even resort to logging on to a p.c. somewhere and search on the internet for details. A surprising number do also look in shop windows which is an inconvenient truth for the online agent.
Having logged on, if you don’t know any better, you’ll search for “houses for sale in Basingstoke” or something similar, but you’ll probably only do this once. Very shortly thereafter, you’ll simply go to Rightmove or Zoopla, register interest in a particular type of property and wait for the emails to drop into your inbox. Ironically, the vast majority of the property details you receive as a result will likely have been prepared by a traditional agent and not an online agent.
Newspaper adverts may not be so important, but I would argue that some form of physical local presence is of paramount importance. More on this matter later.
Online agents are a relatively new concept, but ironically, it is the traditional agent who first starting harnessing the power of the internet to market properties. All estate agents must advertise online and the newer breed do nothing online that the remainder cannot or do not. We all produce online brochures, we all send out emails with pdf attachments and we all have the facility to book appointments online. Many of us choose not to book appointments in this way, however, for very many valid reasons. The newer breed of agents do this not because it is slick or efficient, but because they lack on-the-ground resources.
At this point, it is becoming apparent that perhaps the differentiator online vs traditional isn’t particularly valid.
According to many of the adverts, this new breed of agent will appoint a “local expert” to take care of you. A high street agent might mention this, but surely it is taken for granted that we all have a team of local experts. In our case, they all live locally and have worked in the industry for some time. In a case recently reported, the expert local to Kings Lynn lived in Colchester, some 80 miles away. This is extreme, but illustrates the point. I don’t believe that we would employ someone without an intimate knowledge of the area. If a negotiator were born and bred even in Newbury, I would expect him to work in Newbury and the surrounding villages. In Basingstoke, one of the online local experts lives in Guildford. According to Google, this is 31.3 miles and 42 minutes away. Winchester is only 20 minutes away and I live there, yet we deliberately don’t stretch ourselves that thin. The online chap also looks after Guildford and a variety of other nearby towns. Unless he is phenomenally well-informed and extremely dedicated to his cause, my suspicion is that his local knowledge of Basingstoke will be limited to the time taken to get there from all the other towns in his area in busy traffic in order to appraise a property and sign up a vendor.
Online agents will tell you that they use Rightmove, Zoopla and other online resources to value your home. In fairness, amongst other things, most traditional agents also use these resources. But, online agents, by virtue of the fact that their territories are so large, cannot have the same depth of local knowledge. Nor do they have quite the same opportunity to establish an in-depth rapport with buyers that a high street agent so often does. A traditional agent might have even sold them their house in the first place and have a real understanding of their circumstances. The on-liner won’t know of the chap who popped into his shop and over a coffee expressed an interest in something similar to what he is selling and who has been waiting in the wings, ready and willing to move quickly. And, even were he to be sufficiently motivated to wish to nurture such relations, he doesn’t have the time, since he needs to be in Surrey for his next appointment.
A traditional agent doesn’t spend all day driving from town to town, but neither does he have the time to spend on viewings with what might be referred to as “time-wasters”. Any potential purchaser is, therefore, pre-qualified to ensure that he is likely to be able to afford the property and that he is actually in a position to proceed. This is one very important reason for not allowing carte-blanche viewing appointments to be arranged in the ether.
The online model generally works on a fixed fee. Very often this is paid upfront, but even if it is paid on exchange of contracts, exactly how hard do you imagine that they will work on your behalf to secure the best price? Selling on a no-sale, no-fee, percentage based commission on the other hand, provides an agent with a real incentive to get the best possible price. Whilst a few agents with high street presence are offering fixed fees and for some reason calling themselves “hybrid” in an attempt to compete, most estate agents in Basingstoke and elsewhere will continue to sell using the traditional percentage based commission.
This local expert is generally about all you’ll get. Anecdotally, we understand that they all enjoy their jobs, because all they have to do is find vendors of properties to sign up with them. They generally don’t even include viewings in their standard model, relying upon the enthusiasm of the vendor to secure the offer.
Now, you might think that showing someone your own home is easy; after all, you know far more about it than a relative stranger. The problem is, a home owner isn’t necessarily a salesman and saying the wrong thing may create problems. And, for good measure, you’ll both have each other’s telephone numbers and there’s a good chance that you’ll speak to each other while the sale is going through. Sounds great doesn’t it? But what about the risks associated with one or other making a promise that can’t be fulfilled? You both know your own circumstances and you may know each other’s, but in a sales chain there are invariably other parties who also have to agree on dates for exchange and completion. Just because it suits the two of you, it doesn’t mean that you should go setting your heart on it and booking removal firms. But, sadly people do. And then, if the chain doesn’t fall apart entirely, someone needs to spend hours putting it all back together again. And most assuredly, it won’t be the on-liner.
I haven’t yet met an agent with a high-street presence who is happy to leave sales progression to an online agent. The on-liners generally use central call-centres where the staff have vast work-loads and absolutely no familiarity with your town, let alone your home. At Belvoir, our sales progressor sits next to the valuers, negotiators and the sales manager. He doesn’t have to make a call to his local expert, because all the local experts involved in your transaction are there and he can hear for himself what is going on.
Having already stated that the differentiator of online vs traditional isn’t valid, I suggest that there is sufficient evidence to suggest that the actual differentiator ought to be DIY vs engaging the services of an agent. Unless you pay extra, you’ll do your own viewings. You’ll be involved personally in the negotiations, without the benefit of broad on-going experience of the prevailing market conditions. You’ll end up being frustrated with the sales progression and might even be involved in it yourself. And, let’s be honest, exactly how familiar are you with the intricacies and legislative issues involved in house purchase and sales?
The on-liners have, however, had some success. I personally know of someone who has sold his house for about £1000 all-in. He moved out a week or so ago and is currently living in a caravan on his in-laws’ driveway whilst he waits a couple of months for his purchase to complete. It is as I write, the end of November. He’s saved himself perhaps £2000 and is currently enjoying the novelty. I am unconvinced that many families would feel equally content at the prospect of such a holiday, no matter what the perceived saving may be. It’s worth noting that he sold it to the first couple to view it. I’m not sufficiently uncharitable to suggest that he might have saved the driveway holiday and sold for a better price with a high street agent, but I can’t help but wonder. I can’t recall an occasion that a vendor of ours was forced into this position. Sometimes a vendor will sell prior to buying in order to become a cash purchaser and place himself in a strong buying position, but this is a conscious move taken for tactical reasons. This particular example does point towards a buyer and seller agreeing to something between them and not ensuring that the chain is properly synchronised.
It is also worth looking at some recent statistics. In July 2016, analysts calculated that between November 2015 and March 2016, (5 months) one national online agent managed to complete on just 14% of properties listed in Bournemouth, Southampton and Birmingham. I’m not naming the firm, since this article is about the generalities rather than the specifics. But, as a rule of thumb, with the exception of perhaps 20% of offers which fall through for whatever reason and need to be re-sold, houses sold by high street agents complete within 3 months.
How many home-owners have elected to go the DIY route and paid an on-liner a fee, only to instruct a full-service agent at a later date in order to sell their home? The truth is that I don’t know, but I can certainly name a few and I imagine that most other high street agents can.
Are the on-liners’ listings in Bournemouth, Southampton and Birmingham that don’t appear to have sold falling through entirely? Again, I don’t know, but even if they aren’t, someone is going to have to put plans on hold and possibly live in a caravan for a considerable amount of time whilst the on-liners are sitting in traffic instead of managing your deal through to completion.
