Emoov has just collapsed into administration. Hatched has been shut down and even the mighty PurpleBricks has seen its share price fall significantly from its peak. So what exactly is happening to the online agents and what does the future hold for them?
Over the last few years, I have consistently said that online estate agency does not work because the fees being charged are simply not sufficient to allow agents to offer the proactive service that is necessary in order to achieve the best price for a property.
There are three simple lessons here.
1. A high street office is not essential.
2. Many functions can be automated.
3. Modernise… now!
A full service agent will maintain a database of several hundred purchasers to whom details of new properties can be sent. An online agent will just list their properties on the portals and wait passively for buyers to request viewings.
- A full service agent will telephone the hot buyers in order to encourage viewings.
- A full service agent will accompany the viewings.
- A full service agent will follow up the viewings to get feedback and encourage offers.
- A full service agent will negotiate an offer.
- A full service agent will check the chain out and qualify the buyer thoroughly before the offer is accepted.
- And a full service agent will play a proactive part in monitoring the progress of the sale and addressing any problems that arise that may jeopardise it.
This level of service is, without doubt, expensive to provide and it cannot be offered by firms that are charging a cheap flat rate fee. This is why the full service estate agents have been able to hold onto so much of their market share.
The online agents have taught us some very valuable lessons.
The first is that a high street office is not essential in order to either win instructions or to sell properties. Many traditional multi-office firms have offices that are just a mile or two apart from each other and in an age where so few people visit the office, this is simply not necessary.
Fewer offices covering larger areas or the hub and spoke model with most of the staff housed in a cheap out of town office building with a few smaller cheaper high street offices to feed them would seem to be the way forward. The cost savings can be huge and many traditional agents have been slow to respond to this.
A second lesson is that many functions can successfully be automated.
There is absolutely no need to spend hours every day telephoning every applicant as statistically only about 5 per cent of all the applicants who register will ever buy anything. The applicants need to be screened and graded scientifically so that those that are less likely to buy can be serviced by an automated email system rather than by an experienced negotiator.
The third and most important lesson is that traditional agents must improve their online marketing. If you type into Google the search term “estate agents in xxx town”, most of the top results will be for the online estate agencies. This is not just because they have more money to spend. It is also because they have a more sophisticated understanding of how Google works and how to use online marketing tactics to convert visitors into valuations quickly and cost effectively.
Many independent agents are owned by people who set up their businesses in the 1970s and 80s and who are now coming up to retirement age.
Many of these business owners do not have the skills to change their working practices to accommodate the online age and this is why the consolidation of the estate agency and letting sector will continue.
However, this will happen not because of the online agents but because traditional business owners have been too slow to modernise.
Adam Walker is a business transfer agent and management consultant who has specialised in the property sector for more than 25 years. www.adamjwalker.co.uk