What next for the online agents?

The online agents have made considerable progress in the last year but I do not believe that this will continue.  Why do I say this?  Because I suspect that they are not selling enough houses.  A really good estate agent will sell 90% of the houses that they take on and will get 90% of these sales through to a successful completion.  This means that 81% of clients who instruct them achieve a sale and the remaining 19% who don’t sell pay nothing.

A really sloppy agent who does no more than stick their properties on Rightmove and wait passively for someone to buy them, might sell 60% of the properties that they take on and get 70% of their sales through to completion.  This means that only 42% of clients who instruct them achieve a sale.  However, the 58% who do not sell will pay nothing so they are unlikely to complain about the service that they received.

Nobody knows what percentage of instructions the online agents are selling.  It is a closely guarded secret.  However, the very fact that most of the online firms have chosen not to publicise their success rates is an indication that they are not proud of the results that they are achieving.  It is also reasonable to assume that a very significant percentage of homeowners who pay an upfront fee get nothing for their money.  In this online age, it cannot be long before these disappointed clients start to complain about the service that they have received.

In the short-term, it is perfectly possible for a firm to maintain their online reputation by featuring only positive reviews but when many thousands of clients are disappointed with what they get for their money, the frustration will inevitably come out.

When this happens, the online agents will need to change their business models.  Some will start to offer a “No sale, no fee” option.  It will have to be sold at a higher price than the upfront fee but if service levels are low and cheap to provide, it may be possible to make a profit from the properties that do sell.

Other firms will start to improve their service levels.  They might set up a central call centre in a provincial area where wages are low and hire a team to register applicants and call them to encourage viewings.  This of course will be sold as an extra cost option.

Some might hire regionally-based self-employed accompanied viewers to conduct viewings in a more professional way.  Again, this will be an extra cost option.  Some might hire a centrally-based team of experienced negotiators to follow up viewings and encourage offers and handle the price negotiations.  Again, this will be an extra cost option.

Some might hire a centrally-based team of experienced sales progressors to check out the chain and help to resolve the problems that inevitably arise during most sales.  Yes, this too will be an extra cost option.

When you add up all the extra cost options, you will probably find that the cost of using an online agent is very similar to using a traditional agent.  At this point, the very term “online agent” will become redundant and what we will be left with is a choice of agents offering different levels of service.  At the bottom, there will be agents whose proposition is “Give us £500 upfront and we will stick your property on Rightmove and with any luck someone will buy it”.  This is a bit like putting £500 on the 4 o’clock race at Newbury and if the horse comes in, you can pay the estate agency fees.

Next on the scale will be the “No sale, no fee” agents whose proposition will be “Give me £1,000 if I sell your house and I will spend a maximum of £750 trying to do so”.

Next on the scale will be the “Centralised Full Service” agents whose proposition will be “Give me £1,000 if I sell your house plus another £1,000 for all the extra service options and I will do a proper proactive job of finding a buyer, negotiating the best price and getting the sale through to a successful completion”.

Finally, we will continue to have boutique local agents and specialist agents who offer the additional benefits of local knowledge, specialist skills and personal service from one individual from start to finish of the transaction.

There is room in the market for every type of agent but you will soon need to decide which sort of agent you want to be.

Adam Walker is a management consultant, business sales agent and trainer who has worked in the property sector for more than twenty-five years.