Thursday, Jan 17, 2008
Gorgeous Merryn with some more bear food.
MoneyWeek: Why estate agents are selling up
The managing director of a business broker told me that in the last three weeks he has been contacted by 17 estate agents, all looking to dispose of their businesses in a hurry. It is not, as the firm’s MD pointed out, a “ringing endorsement of the property market.”
Estate agents don’t necessarily need house prices to keep rising to keep making good profits but they do need people to keep buying and selling houses. Whether they sell a house for £500,000 or £550,000 is neither here nor there to the average agent but whether they sell one of them or two houses is (that makes a difference of £10,000).
Right now transactions are in free fall and likely to stay that way.
Posted by little professor @ 11:02 AM (342 views) Add Comment
5 Comments
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1. Scouser said...
Interesting information, but who is going to buy these agents now and how will they raise the financing?
Just prior to the last HPC the large banks bought many independant agents and set up their own chains. This time the banks are in trouble themselves (first) and raising cash to buy any business let alone estate agents may prove difficult. I fear EAs wanting to sell up will be in the same position as the average house seller ie. sitting & waiting a very long time before they get any viewings.
2. Clive said...
The message should be loud and clear. To stay in business EAs need on mass to start down valuing properties, and quickly, to get the market moving. An interesting business model. In a rising market an EA can overvalue to get the business, confident that the market will soon catch up. How do you persuade a seller to retain you, if you're providing the lowest valuation?
3. lvmreader said...
@Little Professor,
Great post . Thanks for this.
4. drewster said...
Agreed - top post! These kinds of early indicators are far more revealing than the self-important market-pumping drivel spouted by the estate agents themselves.
Jon Hunt, the boss of Foxton's, sold up in April 2007 to a private equity group. Now the little agencies around the country are doing the same. As usual the pattern starts in London and radiates outwards.
5. talking rot said...
Estate Agents are, first and foremost, business people. I am sure many have memories of the last house price crash which resulted in a large number of Estate Agents going to the wall. Selling up before things get nasty is a clever way of securing the money you have made.
This is an indicator that Estate Agents believe hard times are ahead. Will times be hard because there will be too few sales to be profitable? Or are these Estate Agents seeing how the interenet and low-fee sites (such as Tesco's property site) will destroy the current Estate Agent business model?
I hope it is the former.