There has been a lot of debate within the industry over the performance and success of online and hybrid estate agents but there is very little information about the number of properties they actually sell. The change in business model has been around now for a couple of years and certainly the likes of Purple Bricks are still estate agents but with a brilliant business model. They are getting customers / sellers to pay up front for the estate agency service, whether they sell the property or not. Its a great business model and the result is their share price is going up and shareholders are very pleased at the profits being produced, without the need of actually selling the property.
I’m still undecided whether to adopt this business model, a DIY service for selling property at a cheap fee. It would be easy to do because I could cut all my advertising and costs that attract buyers and just rely on one platform but I still do not think its in the interests of the sellers and there is still a potential backlash taking all this money off consumers, not doing anything, except sticking an advert on a property portal.
A recent survey by ‘getanagent’ has conducted some interesting research. Obviously the online estate agents don’t disclose how many properties they are actually selling because it doesn’t matter. What matters in this business model is how many sellers they can sign up. The survey was conducted over a 14-month period and interestingly half of online agents listings hadn’t sold after 14 months on the market and that’s in a good and buoyant property market.
It’s important for homeowners to have this information when they are deciding whether it is best for them to use an online estate agent or a traditional high street estate agent. So, this data and research is really useful to help homeowners.
They looked at listings by Purplebricks, Tepilo, Housesimple and Emoov from January 2016. They analysed the success of each of these listings from January 2016 through to February 2017, allowing 14 months. They also sent out a questionnaire to customers who have used online estate agents to help understand their motives and their level of satisfaction. They then conducted telephone interviews with some of the respondents, which provided some in depth analysis.
With £45 million spent on TV and Radio by online estate agents in the last two years, it might come as a surprise to learn that only 30% of people interviewed heard about their online estate agent from watching TV. Most people came across the online agent from conducting an online search (43%) and 15% heard about their online agent through a friend.
The data shows that market share of online agents has grown from 1.1% to 3.7% from January 2015 to January 2017, which is a big jump.
Homeowners looking to save money
As suspected, over 80% of those interviewed chose an online estate agent to save money. Others liked the idea of having total control of the viewings themselves. A few respondents felt pushed towards an online agent due to the distrust they felt towards traditional high street agents.
Half of online agent listings remain unsold
The research found that around half of online agent listings hadn’t sold after the 14-month period. Purplebricks completed on just 57% of the listings from January 2016, as of February 2017. Housesimple completed on 58%, while Emoov and Tepilo were even lower with 51% and 48% completion rates.
The cheaper upfront fee could cost homeowners more
Online estate agents charge an upfront fee, which is payable even if the property does not sell. Traditional high street estate agents charge a commission on a ‘no sale, no fee’ basis.
When looking at the completion rates above and then the upfront fee paid to the online agents, some customers are being left with empty pockets. We have used Tepilo as an example:
Tepilo completed on just 48% of listings. That means over half of Tepilo customers paid more than they would have if they had used a traditional high street agent on a ‘no sale, no fee’ basis. What’s more concerning, is that 17% of homeowners went on to instruct a high street agent meaning they paid Tepilo and then paid a high street agent.
One customer interviewed felt that once the upfront fee was paid the online agent lost interest and lacked motivation to sell their home. Almost half of those interviewed felt the online estate agency they chose was poor value for money and 40% of respondents spent more time than expected managing the sales process.
Online customers switch back to high street agents
We found that many online estate agency customers went on to appoint a traditional high street estate agent to continue the selling process. Interestingly, 44% of homeowners who switched from Purplebricks to a high street estate agent did so in the first 2 months.
The Right Valuation
The research also showed that there were asking price changes in 65% of re-listed properties.
It’s understandable that homeowners are attracted to cheap online estate agents – who like the idea of saving money! However, research shows that you won’t necessarily be saving money by appointing an online agent and it could be an expensive error.
In conclusion, we recommend our homeowners do their research and speak to a number of estate agents before making a decision.
If you have any comments, we’d love to hear from you.