A new report published today by Rix & Kay solicitors, suggests that traditional estate agents are having to step in to support clients who have chosen to be represented by online estate agents to ensure that chains do not collapse and that sales complete.
The result is rising costs for traditional estate agents whilst the home buying and selling process becomes more protracted, more expensive and more stressful for individuals.
The news follows a recent research note published by stockbrokers, Jefferies who suggested that Purplebricks’ sales success rate was just over 51%. By comparison, the HomeOwners’ Alliance consumer group suggest traditional agents with a local office sell more than 84% of homes.
Rix & Kay’s report, which publishes the findings of six months of detailed face-to-face interviews with traditional estate agents across the South East, says that sales progression, the support an estate agent provides once an offer has been accepted on a property, is the most skilled and critical phase of the home buying and selling process and that without it, any transaction is more likely to collapse.
In fact, 98% of traditional estate agents who were surveyed during the research, agreed that the home buying process is more likely to collapse in the absence of experienced professionals.
The report goes on to suggest that the business model adopted by alternative online estate agents, who charge an upfront fee and are not reliant on a sale completing to get paid, means there is no motivation or incentive for online estate agents to support their clients during the sales progression phase. Traditional estate agents are left to pick up the pieces and fill gaps left by online agents, increasing their costs and adding additional pressure to already squeezed margins.
James Baring, Principal at Ibbett Mosely estate agents who have offices covering Kent, Surrey and East Sussex as well as London, participated in the report commented,
“Rix & Kay’s report throws light on a wide range of challenging issues that are having a direct impact on the home buying and selling process. There’s no question that there is a market for the cheaper alternatives, both for online estate agents and volume conveyancing firms, but that comes at a price for the client, as they are left to fend for themselves. Ultimately, this only serves to slow the whole process down, making it more expensive and more stressful, not just for them, but for everyone else who happens to be in the chain.”
“Personally, I cant understand why anyone would choose a cheaper, less proficient service, to sell their most valuable asset. Our challenge is to educate the public to ensure they are left in no doubt about the difference between services and how important it is to have a skilled agent that will support them from day one right through to completion.”
Zoe Woodward, Consultant at John Hoole estate agents based in Brighton, participated in Rix & Kay’s research and commented,
“We’re caught. We prefer open communication and know that as soon as one of the links in the chain is not informed or keeping us informed, the chain is vulnerable. What to do about it though? The likes of Purple Bricks are laughing all the way to the bank because the traditional agents are doing their work for them – and their customer is ‘happy as Larry’ potentially because the rest of the chain are paying for their post-sale service. So do we refuse to have any communication with the part(s) of the chain that has paid an online agency? We don’t, because we want a successful completion at the end of the day and our professionalism doesn’t allow us to be slack.”
Tracey Wells, Director at Home & Castle Estate Agents based in Polegate, East Sussex, participated in the report commented,
“Online estate agents are not a direct threat to most traditional estate agents and it’s not market share that is our concern. What’s more worrying is the strain and additional pressure online agents are bringing to the home buying and selling process because they are not concerned about completing a successful sale and are not providing the support that clients need. Unfortunately, traditional agents feel obliged to step in to try and support the whole process or run the risk of the chain collapsing.”
“This is not just because we want to get paid at the end of the process but because I honestly believe that most successful agents have strong desire to really help people move in a way that is as stress free and cost effective as possible.”
Scott Garner, Head of Business Development at Rix & Kay and author of the report commented,
“During the last six months I’ve witnessed unrivalled passion for an industry which has suffered for decades from a tarnished reputation. The traditional agents I spoke to have been central to their communities for a long time and their primary concern is helping local people move home. The challenge for them is to be seen as a key advisor to the home buying and selling process and not an unnecessary expense. That challenge is now even harder as new entrants continue to de-value the profession and increase pressure on margins.”
Other key themes emerging from Rix & Kay’s report include:
The public don’t understand the value and importance of having skilled sales progression support, and the difference between services offered by traditional agents and alternative online providers. Traditional estate agents need to do more to communicate the value and differentiate their services from the cheaper alternative model
- Rising costs mean traditional estate agents need to consider alternative business models if they want to remain profitable and sustainable
- Traditional estate agents are calling for better regulation to improve service quality and to improve the reputation and credibility of the industry. This is seen as fundamental to improving the home buying and selling process
- Traditional estate agents need to adapt to the changing needs of clients driven by the advance of mobile technology, online services and innovation
- Traditional estate agents need to embrace new technology to improve their services
- Traditional estate agents need to consider the impact of any proposed lettings fee ban on the sustainability and profitability of their business now
About the report
Between August and December 2017, members of Rix & Kay’s dedicated Residential Property Team conducted detailed face-to-face interviews with 14 traditional estate agents, who between them operate 127 offices across the South East. All the interviewees were either Owners, Partners or Senior Managers.
The purpose of each interview was to uncover a range of common themes and challenges that traditional estate agents were facing in the market and particularly given the prominent rise of online estate agents who were challenging the traditional model.
To further support the detailed face-to-face research, an online survey of 60 traditional estate agents was conducted, to gauge their opinion of the key themes that had already emerged from the face-to-face interviews. The online survey was conducted in December 2017.
See the full report here