Are we seeing the demise of the online estate agent from the premium property market?
In 2012, the property world, and estate agents, in particular, were shaken up by the introduction of a new company, and method of selling a home. But it didn't stay this way for long. Could we be seeing the end of the online agent?
In 2012, the property world, and estate agents, in particular, were shaken up by the introduction of a new company and method of selling a home. Purple Bricks.
An online estate agency service that would undercut virtually every agent's fee in the UK. They charged a fee upfront of just £799.
Agents around the UK at this time were charging an average fee of 1% + VAT. At this time, the average property value in the UK was around £170k, so clients were looking to save approximately 50% on the estate agent fees when they sold their property.
Independent Estate Agents tried to compete with Purple Bricks and offered fee deals, cutting their fees to such eye-watering low levels that they barely made a profit. Otherwise, sellers would use the new cheaper option.
But it didn't stay this way for long.
Soon sellers realised that the concept of paying an upfront fee meant that although it was cheaper than other agents would charge them, they would pay it whether the house sold or not. A stark contrast to how an estate agency usually works, where the agreed percentage fee is not paid until the job is done and the property is sold.
This brought the service levels into question. Sellers had paid £799 to someone and then received no contact from them. Ultimately, it began to feel like a scam. Independent agents started to hope that this could see the demise of online agents.
But, instead of going down without a fight, Purple Bricks introduced a deferred payment option. The fee would stay nice and low, and you could choose to pay upfront or when the property sells (or within 6 months, whichever is sooner). Fine, you might think, but with no real service option, the properties often didn't sell within 6 months, so a bill was sent to the sellers to pay the fee anyway. Any seller that tried to contest it would soon realise that when they signed the agency agreement, they were also signing a credit agreement, so they had to pay.
Not a great experience, really, is it?
And the majority of these sellers were still not sold!
Those properties over £ 1 million could undoubtedly afford to pay for a complete estate agency service - they wouldn't need to take the discount option.
But, if the average agent charged 1% +VAT back in 2012, the savings for a property over 1 million are huge. Their fee will be £12,000, which if they use an online agent could reduce by over £11000! It's a lot of money.
So with such huge savings available, how come the various online and hybrid agencies in the market today are losing their market share of properties in the premium market?
70% of the market share of online agents in the UK today comprises 3 main companies, Purple Bricks, Yopa and Strike.
But, in Q2 of 2022, their market share was only 7% of the total housing market.
This was a reduction since 2020, when they had a high market share of 8%.
I'm sure you will know that Purple Bricks have been struggling recently. Their share price is through the floor, and they have had an endless stream of new CEOs trying to sort it out. They had to change the business model in how they paid their staff and increase their fees. So now, they are not that cheap compared to an independent agent if you sell at the market's lower end.
But what is interesting is the make-up of the properties within their market share.
Looking at the 7% of the market using an online agent, 9.7% of those sellers are below £200k. Only 1.2% of the properties they are marketing are for over £ 1 million.
Interesting when you think that those properties over a million stand to make the most astronomical savings!
So why are they not choosing the cheaper option?
It is likely for the same reason that they choose to shop in Waitrose over cheaper budget supermarkets. Wealthier consumers will pay more for the things they buy if they believe the quality or service is better. You can buy bread from Aldi too, but I bet the Waitrose loaf is much better!
As the saying goes - good isn't cheap, and cheap isn't good!
And when you're selling your property, whether it is worth £200k or £ 2 million, you want to ensure that you are getting the service you are paying for. If you pay a low price, but the service is even worse, you may as well have set fire to some cash because you are still not getting value for money.
You wouldn't take your Rolls Royce through a garage car wash, would you?
You wouldn't put wine into your custom-made wine cellar that you bought 3 for £10 from the petrol station, would you?
You wouldn't wash your Italian porcelain floortiles with dish soap.
So, why would you put the most valuable asset that most of us will ever own into the hands of someone who is 'cheap'?
High-net-worth individuals understand that you get what you pay for, so the clear option is to seek an excellent estate agent who can prove to you they will sell your home and have a great experience working with them.
This is what you will find with a By Design agent.
Hands-on, proactive and pragmatic. Using innovation and technology to the absolute max ensures that your perfect buyer sees your home. They will pinpoint the precise location to market your property and promote it where it needs to be.
They will work tirelessly to sell your home for the maximum possible value. Imagine if they could achieve a sale price of more than £10k higher than an online agent might - they've effectively paid for themselves. You can comfortably delegate the task of selling the home to the agents and get on with your life. And you've had an incredible home-moving journey, safe in knowing that you employed the best people for the job.
We are all busy. I am sure that you don't have time for messing around doing the property sale yourself.
Let By Design do what they do best - selling high-value homes.
