For the past five or so years, many people have been predicting that online estate agents are the future of property sales; that high street agents will soon be swept away by internet models in much the same way travel agencies were. To date, however, there’s been little evidence to support the hype, despite some of the online entrants having been around for more than a decade.

While people may well be content to book their holiday on lastminute.com, it seems the general public simply isn’t happy, by and large, to sell their most valuable asset online. The new breed of online estate agents has cottoned on to this and in recent years we’ve seen the emergence of ‘hybrid’ models, which combine the traditional online model with the type of face-to-face contact high street estate agencies provide. Most visible among the hybrid agencies is Purplebricks, which was the first of the online agencies to float, listing on London’s Alternative Investment Market in December. Via its network of ‘local property experts’ it offers valuations and viewings in a similar way to traditional estate agencies.

“Seven or eight year s ago when online agents decided to launch they thought to themselves ‘If I can just get the customer onto Rightmove and Zoopla then I’ve won’,” says Michael Bruce, CEO of Purplebricks. “The reality was that they forgot the psychology of the consumer. Consumers are not ready to give their house to an entirely online estate agent. They still want the help and support of a local property expert, someone they can talk to, someone who they have met and has been to their house.

“What consumers really want is to ensure that you are not only going to save them money but that you are not going to cost them money. Your ability to be certain that you are not going to cost them money when all you are doing is negotiating on their behalf when you’ve never seen the house and you haven’t seen the area is limited.”

EXPECTATIONS

Chris Wood, director of PDQ Estates in Cornwall, says he’s seen examples of online agents costing vendors substantial sums of money in his patch, citing an example of one selling a property for £20,000 less than his agency had sold an identical house on the same street. “Call centre agents is a better way to describe them than online agents because all estate agents are online now. In terms of pure call centre offerings I think that business model is broken, it has been flatlining, now it is dropping, there is hard empirical evidence of that.”

As well as hybrids entering the market, some of the ‘call centre’ agents are realising they simply can’t continue to operate from afar. Emoov, one of the longest established online estate agents, is among those making changes, says Russell Quirk, its founder and CEO. “We did a load of research at the beginning of last year and what we heard loud and clear from the consumer is that they loved the fee savings that come with our proposition and they loved what we were doing with technology and the service provision. But one thing they did want was to see somebody in the first instance. They wanted someone to come along and maybe give a valuation but also give a bit of handholding and a bit of confidence that we are real and we exist.

“So we have embraced that and we put a couple of local property directors in place last summer as a pilot. They did very well — we now have 10 and will roll out to 50 by the end of this year.”

But Chris Wood says the experts provided by online agents are often nothing of the sort. “There are still big problems with agents saying they have local experts when those local experts live 100 or 150 miles away covering an area of 3,000 or 4,000 square miles. You can’t possibly call yourself a local expert when you are covering two counties, it is nonsense.”

Our average radius is 35 minutes drive time and our end-game is to get enough volume so that it comes down to 15 or 20 minutes. Daniel Attia, Yopa.

Daniel Attia, Founder and Chief Executive of Yopa, the newest entrant to the hybrid online agency model takes the point, but says, “Look, radiuses are bigger to start with and as you get busier – as we are now – we are bringing them in. At the moment our average radius is 35 minutes drive time, so it is pretty local and we are striving to get more and more local. Our end-game is to get enough volume so that this comes down to 15 or 20 minutes, so people are really local and they really know their market.”

TRUST AND CONFIDENCE

Tim Downing, senior partner at the Midlands agent Pygott & Crone, points out that it isn’t just local knowledge that’s required, but local connections. “It’s all very well getting a buyer, an online agent might perhaps be able to do that but if, for example, they have no knowledge of the local lawyer market then it is very difficult for them to pick up the phone and get it pushed through and get contracts exchanged for the buyer. High street agents often have relationships with local law firms.”

Online’ agents have made agents wake up and smell the coffee. You can’t just be an online firm or just a high street firm, the market wants more. Tim Downing, Pygott & Crone.

Ian Butcher, principal at Yorkshire estate agency Butcher Residential, also questions the franchise model adopted by some hybrids. “What proportion of these online agents is just a franchise run from somebody’s back bedroom as a second little business that has no substance to it whatsoever?”

He adds that the upfront payment model means there’s no incentive for these experts to stand behind their valuations. “When we go out to see a vendor so much of what we do is managing expectations. Not everybody, but a lot of people, want more and expect too get more than their house is actually worth. With online agents they are not bothered, they just put the house on the market for what the client wants regardless because they have got the money upfront – in most cases.”

Though online agents are now taking stock of how traditional estate agents work in some areas, such as face-to-face contact, they’ve been less keen adopt the ‘pay only if you sell’ model traditionally used by high street agents. Even the online agents that offer a pay later option are usually offering only deferred payment, rather than a ‘pay only if you sell option’ (although there are
some exceptions).

MODERNISING

This could prove a stumbling block to hybrids such as Purplebricks gaining real traction. Another challenge facing online agents is that while they’ve been taking aspects of the traditional model and incorporating it into their own businesses, many high street agents have been doing a similar thing and adapting their models to incorporate the aspects of online agents that people do like.

“Companies like Purplebricks and so on have made agents wake up and smell the coffee. We need to move on and do a better job and that is what we’ve done as a firm. We feel that you can’t just be an online firm or just be a high street firm now because the market wants more,” says Tim Downing. “At Pygott & Crone, we’ve recently done some customer surveys and found they like the online model but they also like to have face-to-face contact with a high street presence. So we’re increasing our online marketing. We also now have our own in-house web designer and in-house videography department and marketing department. Whereas before we would farm those things out to an agency and sometimes things were updated quickly and sometimes they weren’t. Now we update every half an hour throughout the day. Our presence on Rightmove and OnTheMarket is a massive part of our business now.”

Ian Butcher says that his firm has also increased its online presence by taking steps such as upping its activity on Facebook, while Wood has gone further still and created his own online selling service. “We have our own online version if somebody wants a cheap and cheerful solution. We offer a Simple Move service where a property will be put up on Rightmove, Zoopla and on our site. We’ll match the details for them, we’ll arrange viewings for them and we’ll submit but not negotiate offers for them. We don’t accompany viewings normally although if people want to purchase those as an add-on they can do, and they do their own sales chasing. We’ve been offering it for about a year and take up has been minimal but nonetheless we get one or two a month and it is a nice additional income stream as the money is upfront.

“In terms of hybrids I think it is probably a way forward for a lot of agents. It is certainly something that a lot of agents I know are doing or have been looking at doing for some time anyway.”

THE NEXT MOVES

It seems the move towards a more hybrid model is not only being adopted by online agents, but also by high street agents. As the hybridisation of the industry gathers pace in both directions, it will be interesting to see who comes out on top: will it be new online agents adopting facets of the high street model, or high street agents incorporating elements of online agency practice into their long-established businesses?

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