Does the rise of the internet estate agents really threaten traditional high street firms?
The simple answer is NO, it just changes the way we do things.
I have heard the foretelling of the demise the High Street agent for years and whilst the business has changed to meet this challenge, many agents are expanding the number of offices and corporates are on the acquisition trail.
I respect many internet based agents and sincerely believe they have introduced innovation and evolution, but they will not replace us. They did make us pull our socks up and embrace the cyber generation and have actually made us more efficient. The local knowledge to do this job well is at odds with the on line model unless they employ local people who are effectively operating as agents without an office.
The simple truth is that ALL good estate agents are now internet agents. In fact, our web ranking is higher than mosy internet agents, our bounce rate is better and our visitors spend more time viewing more pages. We are NOT labelled as internet agents simply because it’s not the only place we do business. I find it incredible that we have a more successful on-line presence that many firms how claim to be on-line agents. They do not even dominate their own market place.
Property is different from buying other products. A camera for example is a fixed specification and it is easy to shop around on-line and find the best deal. Homes are different – there is a ‘feel’ which cannot be conveyed without viewing.
I could have bought my car on-line, but the service I received from the local dealership was fantastic. They knew the product inside out and, more importantly, the service provided didn’t cost me a penny. I don’t care how much BMW pay them, but had I bought it on-line, I would have selected it by the cheapest price.
Sainsbury’s, Marks & Spencer and others have very advanced on-line sales capabilities, but they too are opening more outlets. The internet hasn’t destroyed them. In fact, it has done the exact opposite because they have embraced the opportunities it offers and they have more outlets than ever before. The shift has been away from huge out of town superstores to smaller, local shops. Local is the key word here.
Internet agents have massively lower overheads, but sometimes it is impossible to know with whom you are dealing, and in some cases, you have no idea where the agent is actually based. It could be overseas or in a spare room next door. You have no idea of their resources nor experience.
Local knowledge of what is selling and for how much is another issue. I appreciate that there are many websites that record sales prices, but these records are not added until some time after completion, not when the price is fixed at the point of sale; when an offer is accepted often months earlier. Likewise, whilst the press may quote house price movement using a single figure, it fails to account for the immense regional and local variations.
Traditional agents also accompany viewings. The office is a place to meet and ensure that viewers are genuine. Staff have the opportunity to get to know their applicants and listen to their needs and wants. Local staff can point out places of interest, stations, schools, local tradesmen and much more. I often hear applicants advising that they telephoned an on-line company to enquire about registering and were asked to visit the website and call back if there was anything of interest. Madness.
Buying and renting is a people business. It’s about communication and interaction from which understanding is born. Yes, internet agents offer lower fees – but they would, because they can. I am also sure that despite these lower fees, their profit margins per sale are much higher than ours. We have office costs, premises, paper-based advertising, boards, cars, staff, and so the list goes on. Great for a landlord or seller, but this is the key issue: buyers DON’T care because the agent charges them nothing.
Buyers want service. They want assistance. They want advice and recommendation. In fact, a good agent will provide buyers with an all-inclusive one-stop service – and what’s more, it’s a free service. Not many internet agents subscribe to any form of regulation. Some are members of the Property Ombudsman Scheme but customers often don’t realise that the TPO is NOT a regulator, but rather a redress scheme. If an agent goes bust or your money is not where it should be, it’s too late for a complaint as all the TPO can do is impose a financial penalty. Surprisingly, there are many tenants who do not think twice about handing over large sums of money to a company with no office to people they have never met.
We shop around for products based on price. We may buy many of the products on-line, but ask someone whether they would buy their Sunday joint over the internet. Services are also harder to quantify. Even Sainsbury’s offer to do your packing as added value.
There is of course a place for the on-line model as there will always be those who simply want the cheapest price. Some on-line models are little more than noticeboards for what are effectively private listings.
On-line agents claim they can save £1000’s in fees, which may fit the London & South East model, but how can they claim that for a property in Liverpool we just sold for under £40k and for which some agents were pitching a fee of 1% plus VAT? Where I live, there is a huge shortage of properties. I can get a great deal from the local agents all of whom are very optimistic about the sale price. One even offered to send their contractor round to quote on a couple of things which need doing. I am away a lot, so they would have keys and undertake viewings and another even offered to top up the cat food – would I entrust an online agent to do that? (keys, not cat food) In the scheme of things, does 1.25% commission really affect my decision to select an agent? Vendors often consider an offer of maybe 5% below asking price, so is this ‘saving’ really material? After all, buyers really don’t care. A friend recently tried to see privately, 2 potential buyers offered on the basis they wanted a cut of the saving on agents fee. Eventually, he sold through a local agent and got £12k more than he was asking though informal tender. The fee was £6k plus VAT.
Internet based agents offer an alternative to high street agents. And that is the key word – alternative. Not replacement.