Estate agents are certainly not immune from the challenges currently facing retail. With former industry leaders beginning to look rigid and outdated, those that refuse to bring their business models into the digital age may struggle to survive.
At the same time, online agents are still unable to deal with the enduring problems that frustrate home buyers and sellers alike. It remains evident that 1 in 3 houses sales falls through, vendors wait 10 months on average to complete and over a third need to reduce their prices.
With so much investment being ploughed into the sector, in this post we ask what progress technology has brought to the estate agent industry. Towards the end, we also make a broad suggestion on where things can be improved.
Online estate agencies march on…
The tech-focused estate agency’s underlying proposal is to offer an enhanced and more streamlined service relative to the traditional ‘bricks and mortar’ operator.
24/7 booking, fast ‘on-boarding’, smartphone apps, instant viewing feedback, automated sales progression updates are some of the features that buyers and sellers increasingly have at their disposal. In the coming years, we can also expect drone technology, VR and AR to all play a pivotal role in shaping the industry’s growth.
Removing many of the manual processes has also meant that online agents are able to charge less. Although largely non-refundable, fees currently lie in the region of £800-£1,500 – paid up-front or between 10 and 12 months after the instruction. Replacing a percentage commission on the final sale price of the property, the savings can therefore be significant – especially in higher valued areas.
Does this mean the death of the high street estate agency?
The short answer is no. Although online estate agents have captured a noteworthy market share, home sellers still appreciate the benefits of using traditional firms.
The fees are generally higher, but there is much to be said about a friendly local agent that genuinely understands his/her patch. Both sellers and buyers often prefer having a primary port of call, especially if the property is located in an affluent area where a more specialist level of service is required.
High street estate agents also assert that they can achieve a better price compared to their online counterparts. Many also claim that homeowners end up selling through them after a disappointing experience.
The hybrid model…
While both these models clearly have their pros and cons, a growing breed of estate agencies is attempting to offer more of a blended service.
In addition to local experts who accompany the sales process from start to finish, the hybrid estate agent seeks to maintain the ‘personal touch’ of traditional agents whilst still incorporating all the benefits of tech.
The challenge here is to strike the right balance between offering all the ‘bells and whistles’ of a traditional agent, incorporate the most up-to-date IT infrastructure and still achieve a decent margin.
The real problem with estate agents…
Regardless of whether a seller chooses a traditional, online or hybrid estate agent, little is being achieved in the face of what is debatably the industry’s biggest issue: price speculation.
It’s a well-known fact that most estate agents ‘talk up the market’ – often based on a lack of knowledge, ill-informed data and hearsay. More commonly, however, it’s a simple ploy to win business and gain one-upmanship against competitors.
The result is that vendors sign up with a mistaken idea of what their property is worth. With an over-inflated valuation engrained in the mind, properties often sit unsold for many months as buyers refuse to bite.
Of course, there are times when properties in a hot market end up selling for over their asking prices. But such occurrences are rare and there’s still a strong chance that the property will get down-valued at survey, even if a buyer is raring to go.
The next step for tech in the estate agency industry…
These days, although it’s easier than ever to see sold prices of neighbouring properties online, getting a true valuation remains within the realms of the surveying experts.
The varied nature of British housing stock also means that ‘like-for-like’ comparisons are not so easy to observe with the naked eye. For example, end of terraced houses typically have more floor and garden space compared to mid-terraced properties. A flat with a nice view will sell for more than one that doesn’t. Or a property may have been extended or undergone refurbishment. It wouldn’t make sense nor be fair to value many of these properties equally.
Having bought and sold properties for 15 years, here at Property Solvers, we argue that tech has an enormous potential to provide buyers and sellers with more precise valuations that take into account a range these and other key characteristics.
Digitally transposing methodologies already adopted by professional surveyors, each property will possess its own dataset correlated to its intrinsic value. This could include: square footage, condition, improvements, depreciation factors, proximity to amenities/public services/hazards, contamination, flooding risk, ground stability, local pollution, noise, crime, housing / infrastructure planning applications, legal restrictions and much more.
There is, of course, the mammoth task of individually characterising every property in the UK. The combined multitude of aspects that constitute a home’s value will evolve constantly and would require complex algorithms to ensure accuracy.
Yet, emerging technologies such as machine learning, artificial intelligence, blockchain and big data could all facilitate a logical and efficient approach – as is already occurring to some degree in the conveyancing and mortgage underwriting sectors.
Admittedly, expecting such valuation-based technology to remove all the emotions from the housing transaction process is perhaps a little too idealistic. The often-unpredictable nature of price movements is hard to avoid, especially given the supply-demand imbalance of UK housing stock.
Crucially, however, if estate agents’ precarious influence on valuation can be kept to a minimum the result would be a much healthier buying and selling environment.