Online estate agents currently have just 1.5% of the market. Many of them are run on a shoestring from the proprietor’s spare bedroom and many areas have seen a constant stream of online agents opening and shutting again. It is very tempting to dismiss them as just as a passing fad but I believe that this would be a terrible mistake. There was a time not so long ago when Amazon had just 1.5% of the UK book market and just look at them now!
Over the past few months some heavyweight names have announced their intention to invest in the online estate agency market including Sir Stelios Haji-Ioannou from EasyJet, Steve Smith from Poundland and James Caan from Dragon’s Den.
We must expect that business people of this calibre will have some impact in the marketplace so how worried should you be and what should you be doing now to defend yourself?
In my opinion, the pure online estate agency model is deeply flawed and poses relatively little threat. The first problem is that vendors are expected to value their own properties. Many put their properties onto the market at too high a price. The property fails to sell and goes stale. At this point, they go to a traditional estate agent.
The second weakness is that the sales process is passive and reactive. Properties are advertised online and prospective buyers decide whether or not they wish to view them. A good estate agent knows that applicants often do not buy the property that they register for and will spend time on the telephone actively encouraging people to view properties that they would not otherwise consider.
The third weakness is that the vendor conducts their own viewings and often does so badly. A professionally trained estate agent will have a much better chance of getting an offer. Finally, vendors are left to deal with the progression of the sale. An experienced agent has a much better chance of pre-empting and resolving problems and getting the sale through to a successful completion.
Online estate agents are very cheap and they do pose a threat to the worst estate agents. If your sales process involves sticking the property onto the internet and waiting for someone to buy it, you don’t deserve to survive. However, good agents who are doing the job properly have little to fear from the traditional online competitors.
But now the market is changing again. The new generation of online agents are much more sophisticated and several of them are now offering a halfway house between online estate agency and traditional estate agency. Some have regionally based valuation teams. They may not have the level of knowledge of a local agent but they know enough to get properties onto the market at more or less the right price.
Some of the online agents also have central telesales teams. Their job is to deal with enquiries in a more proactive way and even in some cases to ring applicants who have requested details in order to encourage viewings. Some of the online agents are also now offering to handle the sales progressing in return for an extra fee. This is done from a central call centre but the calls are made by experienced and knowledgeable staff with an estate agency or legal background.
These hybrid agents can justifiably claim to offer most of the services of a conventional estate agent but can still afford to undercut your fees because they do not have the expense of a local office.
There is a significant chance that these hybrid agents will start to get some traction in the marketplace so how can you fight back? The one thing that you cannot do is to start to reduce your fees. You cannot possibly win that battle. What you can and should do is to improve your marketing and service levels. You need to be able to convince your prospective clients that by paying you a higher fee, you will achieve a higher price for their property. You will achieve this by:
• Keeping a large database of prospective buyers.
• Running open houses to encourage buyers to compete with each other to pay the highest price.
• Following up every set of details with a phone call to encourage viewings.
• Actively encouraging applicants to view properties that they would otherwise dismiss.
• Showing properties professionally to encourage offers.
• Negotiating offers hard on the vendor’s behalf.
• Allocating an experienced member of staff to deal with the sales progressing.
There will always be a place for experienced, motivated, committed estate agents but the sloppy lazy agents may well find that they fall prey to the new breed of online competitors. The time to take action to protect your business against this is now.
Adam Walker is a management consultant and business transfer agent who has specialised in the property sector for twenty-five years. www.adamjwalker.co.uk