All That Glitters...
Over recent years we have seen the emergence of a new kind of estate agents, offering an alternative to the traditional high street agent who has been a familiar presence in towns, villages and cities across the country for many years.
With effective national TV advertisement campaigns, it is fair to say that the ‘online agent’ has attracted a share of the market and is now considered an alternative option by some sellers.
The advancement of technology has allowed for these ‘online agents’ who often advertise no commission or a very low fixed fee to sell your home, giving sellers the option of avoiding or slashing the costs associated with a traditional high street agent. But is it as good as it sounds?
I joined estate agency over 30 years ago and have embraced innovation when it has added value to the job we do. The advent of the internet is of course one of the best example of this and has not only changed how we do our job but changed the way we all live our lives. There remains a degree of uncertainty over this new breed of estate agents and we are often asked by clients how it all works and how they can make any money if they don’t charge commission…
Just over a year ago I took ‘time out’ from my estate agency career. I wanted some time to step away and look at my future whilst looking after my wife who had just come out of hospital.
Three months (and a fully recovered wife) later, I was approached by an online agency who were looking for an experienced estate agent to manage their south west region. With nothing else to do and little to lose I agreed to meet, intrigued by their business model. In short, a huge cash investment gave the online company an opportunity to break into the traditional estate agency market allowing them to offer a ‘no commission’ based way of selling homes.
Partially fuelled by an interest in how they operate, I took the plunge and signed up as Regional Director for the South West. I lasted just over one month. I was lucky to be at senior level and thought I could make a difference if the system was not as good as it should be. It wasn’t and I couldn’t.
So why did I leave? Because I felt that the concept of low fee or no commission came at far greater risk to the seller than they cared to realise and there were several areas I could not come to terms with. For all the niggles, frustrations or problems a seller may have with their high street agent, the fundamental part of the traditional concept is that if your agent does not find a buyer that proceeds to exchange of contracts, then you don’t pay them. Plenty of incentive for the agent to perform and keep them on their toes, as if they don’t sell your home it is the agent who loses money not the seller. This simply is not the case when you pay your online agent in advance with an upfront fee (interest free for 10 months if you like).
It was obvious from the number of complaints I had to deal with from sellers on a daily basis that there seemed little or no incentive for the agent to find a buyer once the fee was in the bank. This complaint was often exacerbated when a potential buyer attempted to book an appointment to view a property online (there was no way to talk to someone in the local as there is not one!) The local agent often covered a huge area, in some cases most of a county, and simply could not get to the viewing because they were many miles away on another appointment. Had the seller elected to do their own viewing this wasn’t a problem but when they had paid £300 on top of their upfront fee for an accompanied viewing service, it certainly was an issue.
Don’t get me wrong, the appointed local agents were often good, experience individuals who had been lured off the high street by the opportunity to manage their own business (they are all self-employed) and earning a good income if they hit their targets by getting signed instructions.
For many, reality hit on early on. On call seven days a week, commission only, a large and often unrealistic area to manage, no admin back up, no support, and being self-employed no holiday, sick pay or pension.
As a result, the turnover of the agents was high and in some cases sellers who instructed one person were handed over to replacements one, two or even three times! This offered no continuity to the client, zero incentive for incoming agent (the first one having already been paid), no knowledge of the property and the most worrying part to me, frequent loss of keys to people’s homes.
I have never lost so much sleep in one month in my life!
An experienced negotiator is crucial to a successful service to the client. Of course, things can always go wrong, but the time a reputable agent puts in at this critical stage can help ensure a smooth conveyance or steady the ship should things get rocky. The role of the agent in ensuring regular communication between the buyer, seller and their legal representatives is key. Without this care and determination to progress the sale, the agent of course does not receive a fee for their efforts. At the online estate agency, there was simply no adequate resource to deal with this side of the business and the fallout of buyers and sellers was catastrophic.
I knew that the system would have flaws but I had believed that there would be a desire to improve the model to ensure that the concept became one that would really work for the seller at a much lower cost. The truth is it can’t.
If you pay a low fee then you a going to get a service that reflects that and we find a number of sellers who have tried to save money end up paying the online agent and then the second fee for a traditional agent when they simply cannot sell their home via the internet. Of course, this style does work for a few sellers, but my fear for many is that they are only finding out the shortcomings of this system once it’s too late.
Time will tell.
(Tim is the Manager of our Ilminster Office. He has been in estate agency for over 30 years and has a wealth of knowledge and experience in the industry).