The term Estate Agent is a couple of hundred years old and was first coined to describe someone with expert knowledge of a local community who managed an estate. The definition may have changed, but the industry’s reputation has not flourished in the intervening period.
Conduct a poll on trustworthiness in professions and estate agents regularly come out at or near the bottom. As this Ipsos MORI poll shows, only 25% of respondents trusted estate agents to tell the truth. Only politicians and government ministers are viewed a less trustworthy.
Everyone’s heard a horror story. Agents are accused of playing both ends of the market. Their motives are frequently questioned.
If ever there was an industry that’s ripe for disruption, it’s estate agency. Ten or 15 years ago people wouldn’t have dreamed of conducting their banking through the internet or booking a flight online. Now we do it without a moment’s thought. We have seen Uber challenge the taxi industry and Airbnb change the way we find a holiday home, yet the property business has remained largely resistant to change.
Maybe it’s because the process of moving home is so stressful. Selling your house can be a long and arduous process, taking several months and full of hitches and complications. It fills many of us with panic. Will we ever find a buyer? Will we get the price we feel our property deserves?
Even Millennials have been reluctant to abandon high street agents. Happy to go online in every other aspect of their lives, they look for the reassurance of the traditional bricks and mortar model when selling their greatest asset.
What to look for when choosing traditional high street agents
Traditional high street estate agents will typically charge between 1% and 2.5% plus VAT for a sole agency agreement of the price at which you sell your home. Add 20% VAT, and you will have to pay them between 1.2% and 3% of the value of your home. This means, for a £300,000 home, you’ll probably fork out between £3600 and £9000.
For this fee, a seller should receive a fair valuation and have their property marketed on all the online portals, such as Zoopla, RightMove and Prime Location. You should also have a For Sale board provided, and help offered with things like conveyancing. With high street agents, most of the value should (in theory) come from having three things:
- Local expertise. Local agents should know their area and are situated near to respond in real time.
- The personal touch. Face-to-face handling of things like valuations and viewings.
- If your property is unusual or especially expensive, certain national estate agents exist that may specialise in your type of home.
The main argument in favour of high street agents comes down to the belief that they will achieve the best price for you home versus the price that might be achieved by online alternatives. This argument is as yet unproven, it is probably correct for properties with very high values – where the sellers want the psychological comfort that comes from proven high street and national agents.
But there are several things to watch out for when choosing a traditional agent. The first of these is to decide whether to use a sole agent or multiple agents. Agents will offer lower fees to entice you to work on an exclusive basis. If you want to increase the chances of a higher selling price, it seems logical that by going for a multiple agency agreement – and picking any agents you warm to – you will do this, while avoiding the stress of having to choose between agents.
The next thing to be aware of – and this only really matters if you’re considering a sole agreement – is the fact that some agents may give deliberately optimistic valuations to entice you. Listen to their advice, but be sure to do your own research because in the end it is you, not the agent, who decides the price to market the property at.
One more thing to watch out for is whether an agent is an OnTheMarket.com member. This portal was set up by a group of high street agents wanting to broaden their control of the online market. Just watch out for the fact that members can only list your home on one of the other two leading portals – either RightMove or Zoopla, which can mean halving your property’s marketing exposure.
Overall, the decision of whether or not to go with a traditional agent comes down to whether you believe using an alternative, such as an online agent, may eventually cost you more off the price of your home than the extra you are paying in fees to the traditional agent. And that will require a thorough understanding of the online and hybrid estate agency space.
Should you choose an online estate agent?
While 98% of property searches are conducted online, only 5% of property sales currently take place in the online market.
Many new innovators believe it’s time that changed. A customer-led overhaul of the sector is long overdue. These new online innovators believe the customer should be at the heart of the property sales process, empowered by technology. It is said that just 2% of buyers find their new home by looking at pictures in an estate agent’s window and almost one in three never set foot inside an estate agent’s office, so the logical next step is to put the buyer and seller directly in contact with each other.
Online-only agents like House Simple, eMoov, and easyProperty have attempted to do this by providing sellers with a platform to market their properties via the online portals, and connecting them to prospective buyers, with whom sellers can communicate directly online.
The main upside is that they are much cheaper than the conventional alternatives – especially for properties over £100,000 in value. Prices and pricing plans vary between £300 and £600, but the fundamental difference is that the more paid up front, the less paid on completion. Another upside is that online platforms accommodate activity 24/7 – especially during unsociable hours, when traditional office are closed for business.
One concern is that a valuation from an experienced local agent, for example, will probably prove more accurate than one from an online only agent that has more limited local knowledge and will rely on online data alone. That said, this would be easily overcome by asking a few high street agents for valuations then shifting online.
Another downside is that many customers are not ready to dispense with estate agents altogether because they miss the personal touch, greater trust and experienced insights into the local community.
It seems then, that the best thing would be a solution that offers the best of both worlds. This is where hybrid agencies come in.
What are hybrid agents and how do they differ from traditional agents?
Hybrid agency is the radical change to the industry model that began with Purple Bricks in 2014 and is continuing to transform the face of estate agency with players like YOPA, Tepilo and Hatched. Purple Bricks now commands a 60% share of the online market and is the UK’s fourth largest estate agent.
Hybrid agents have used the power of technology to create a platform where buyers and sellers can interact directly, breaking down barriers and bringing greater transparency to the process, but sellers can also use the services of a nationwide network of local agents to oversee aspects of the sale they need help with.
If the average high street estate agent will charge 1.8% of the price of the property for their role in a sale, in the case of hybrid agents, customers instead pay a small fixed fee that starts at around £750 mark.
The potential savings compared with paying a high street agent commission are almost identical as with online-only agents – usually in excess of £5000 and far more in London or south-east England.
But the additional benefit of a local agent means they are more likely to achieve a price that a traditional agent would achieve. Not to mention, that a face-to-face valuation from a local agent is also likely to be more reliable.
Perhaps the best approach for a seller would be to go with a spread: get multiple high street agents on the case and choose one hybrid agent. That way you can compare the results and use the feedback as an indicator of whether you’ve priced the home correctly. If the hybrid agent manages to sell your home at a price you’re happy with before the local agents do, then you’ve saved several thousand pounds. If, however you do get a better price with the traditional agent, then that should balance out the cash spent on the fixed fee.
Challenger property models are not going away. Although only 5% of homes are currently sold online, by 2020 this is forecast to grow to 50%. Most recently, upmarket estate agent Savills led a £16m round of funding into YOPA in a bid to secure its future as consumers rush to sell their homes online.
This article has been brought to you by YOPA, who will sell your home for a fixed fee of £780. Find out more to book a free, no obligation, face-to-face property valuation with their local experts.