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Bridging the estate agency income gap

Every estate agency could be making additional income from each sale or let in one way or another. Nigel Lewis talks to those who can show you the way.

Nigel Lewis

estate agency

It has been an accepted part of the estate agency business model for decades and the rewards can be high for those who energetically mine this seam of extra income.

Even a struggling giant like Countrywide generates income of 44p in ‘complementary income’ for each £1 earned from selling homes, while its more robust competitors earn considerably more. These can be big numbers even for small and medium size agencies and are even more important in today’s lower-volume sales and tenant fees ban dominated lettings markets.

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Based on the Countrywide figures, an estate agency turning over £250,000 can, if they work hard at it, increase that to £360,000, much of it from mortgage referral fees.

“If you look at the big estate agency brands like Connells or Countrywide they have their own in-house mortgage brokerages, which are the biggest in the UK,” says Matthew Fleming-Duffy of Cherry Finance.

“A lot of independents I deal with are former employees of these corporates who quit because they get fed up with all the cross-selling and just want to sell homes.

“But sooner or later they realised they have to deal with lenders if they want to grow their business, and have sought out brokers to help their clients move home.”

Letting agents, on the other hand, face the challenge of recouping the lost income following the fees ban.

Lettings platform HomeLet says it recently canvassed agents and that the overwhelming feedback was that they were facing an income gap of 10-25 per cent.

“HomeLet’s proposition has always been about income generation but over the past 12 months we’ve been holding events at which hundreds of agents have been turning up to hear what we’ve got to say, which probably wouldn’t have happened two years ago,” says its Head of Sales, Vicky Quinn-Campbell.

 

COMMISSION PARTNERS

Here we showcase some leading players offering estate agency firms some interesting income opportunities:

Mortgages: CHERRY FINANCE

Link to Business feature estate agency

Matthew Fleming-Duffy of Cherry Finance says it’s fairly common for agents to be paid 25 per cent of the referral fee given to brokers by lenders, although he says there are exceptions to this rule depending on the level of customer detail passed to Cherry.

An introducer such as an IFA who does more of the back office work prior to referring a client, or an estate agent who can give us a higher volume of good quality enquiries will get 40 per cent”, he says.

“Most agents just pass us the basic contact details of the customers and refer that way but that tends to be the start point on negotiations on fee level.”

Lettings platform: HOMELET

HomeLet is one of the largest tenant referencing and insurance players in the market with 4,000 letting agents on board, referencing half a million tenants every year.

The company claims to be one of the best income generators for letting agents in the UK and, although it doesn’t pay the highest commissions, says its advanced tenancy management platform offers the best conversion rate of tenants for its range of insurance products tailored to the lettings market.

Link to Business feature estate agency“Following the tenant fees ban we’re not claiming we can fix their income gap, but we feel we’ve got some of the best products in the market to help generate income that will be part of their solution,” says Vicky Quinn-Campbell.

HomeLet offers agents protection for their landlords via its eviction and rent payment guarantee products that it charges agents for and which, it argues, enables them to charge landlords more for a better service, including a free-of-charge referencing service.

Agents earn commission as a percentage of a premium or a cash amount directly from HomeLet via its tenant facing insurance products. HomeLet’s platform offers a good tenant journey – engaging tenants, driving conversions into insurance and other products including utilities and even removals.

“All the way through the journey the tenant has the option of having the full package,” says Quinn-Campbell.

Rent guarantor: HOUSING HAND

The new kid on the revenue-sharing block is rental guarantor specialist Housing Hand which is currently trialling a referral system with 25 letting agents. The deal enables estate agency companies to earn £25 per tenant for the first batch of 15 tenants it refers, £35 per person for the next 15 and £50 each for any further tenants.”.

Link to Business feature estate agency“We’ve endeavoured to develop a system where everyone wins. Housing Hand has worked with over 3000 accommodation providers, helping and processing more than 70,000 applicants and covering £120 million in rent,” says Jeremy Robinson, Group MD of Housing Hand.

“This gave us a deeper understanding of the issues that both tenants and letting agents face when guaranteeing rent and managing risk. While many companies are dressing up what are essentially just insurance products as ‘rent guarantee services,’ we’ve worked to develop a completely different product – one that works more effectively for both parties.”

Branch advertising: INTOUCH DISPLAY

Agents who have always wanted a high-end branch window interactive display to help generate leads from footfall but who have shied away from the expense can now self-fund the system via InTouch Display.

“We have devised various options for advertising in our 24-hour display in return for a nominal advertising fee,” says director Kevin Webb. “We were overwhelmed with the response and the number of users has increased month-on-month. The hire cost is now amply covered by local advertisers, meaning that our eye-catching display even generates a monthly income.”

LETHQ

Tenant referencing and rent guarantee insurance provider LetHQ has launched a utility transfer tool. If agents refer tenants to its team to enable them to manage a property’s utilities and help tenants find the best deals, agents receive a quarterly payment of £20 per utility if the tenants switch provider, or (water, power, council tax and broadband) £80 if tenants switch. “We wanted to find a way to get agents on board and incentivise them to help tenants find the best-value utility providers for their property,” says Simon Skinner of LetHQ.

As well as a free management tool, we realised that a fee sharing structure was also the best way forward and we think it’s a win-win for all the parties involved. “The tenant fee ban has been interesting, we’ve definitely seen a surge in agents coming over to our service,” says Skinner.

PICKFORDS

As the UK’s best-known removals firm, Pickfords has had informal arrangements with many estate agents over the years but has only recently moved to put this on a more formal footing.

All referrals from estate agent partners now go through the company’s account management centre in Manchester, which manages the company’s new and more structured commission payments system.

“We just made it more professional, to be honest,” says spokesperson Adam Wilding. But we see it as an extra string an agent’s bow when offering services to customers.”

Agents can refer leads for three different kinds of client including small movers who are offered a van and a crew, its core professional move for larger homes and also its ‘gold move’ for up-market clients with prime homes and belongings.

Pickfords commission is based on a five per cent of revenue payment, while movers who are referred via an agent are also offered a 10 per cent discount as an inducement to book. Pickfords work with brands including Hunters, Chancellors and Mapp & Co, completing 12,000 domestic and 10,000 international moves a year. Email: partnerwithus@pickfords.com

Utilities: TILI

Tili is an end-to-end solution for letting agencies that offers estate agents both a seamless utilities void-management solution and an award-winning, customer-facing digital home move service.

By helping tenants to set up their homemove essentials in as little as three minutes and 10 clicks. Agents earn referral fees each time customers organise their energy, home phone, broadband and television packages.

“Even better, we don’t just offer agents a financial incentive, we help cut down on hours of admin time, taking away many of the common headaches – such as council tax and water authority notifications,” says Scott Holmes, Marketing Manager at Tili.

Agents who send their home-movers through Tili earn £15 just by successfully onboarding customers via the platform, with an opportunity to then add to this if tenants opt for added-value offers and third-party services.

“By working with hundreds of branches across the UK, we’ve helped thousands of agents to generate new revenue, with some earning over £100 per tenant,” says Scott.

ZERODEPOSIT

Zero Deposit offers agents a cut of the fees charged to tenants for their deposit alternative product which it distributes through different agent networks. The level of fees, the company says, is dependent on volume. Although Zero Deposit doesn’t currently disclose how much its fee percentage is, other operators in this growing market offer between 20 per cent and 30 per cent of a week’s rent per tenant. Zero Deposit already has deals with several high-profile estate agency networks including Foxtons and Your Move and currently claims to have processed deposits for between 11,000 and 12,000 tenants.

September 26, 2019

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