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Sancho Panza

Estate agents race to the bottom continues

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The hilarity continues,especially in the comments

 

http://www.propertyindustryeye.com/online-agents-take-more-market-share-as-they-battle-it-out-for-second-place-behind-purplebricks/

 

'The market share of online agents is growing – and the race for second place is on.

But, questions commentator Mike DelPrete, is it a race worth winning?

In his latest analysis, DelPrete looks at listings by five agents and finds that Purplebricks is effortlessly dominant, while both Yopa and Emoov had had “strong gains” in inventory, followed by Tepilo.

However, he concludes, HouseSimple is going backwards.

He points out that both Yopa and Emoov raised large sums of money last summer – £27.6m and £9m respectively – and are deploying it in marketing campaigns.

He says Tepilo has not raised more money, but has significantly increased its marketing spend.

He claims that HouseSimple’s new CEO “pulled its marketing spend before a product relaunch”.

The conclusion, he says, is not rocket science – the more the onliners spend on marketing, the more new listings they get.

But the real losers, he says, are the traditional agents. Between them, Purplebricks, Yopa, Tepilo, Emoov and HouseSimple had listings in April up 32% from January.

Overall new listings market share for the online agents jumped fro 5.7% in January to 7.1% in April, while Purplebricks increased its market share from 4% to 4.5%, with 6.7 times the number of new listings of its nearest competitor.

So, with Purplebricks in the lead, the online agents are competing with traditional agents and with each other.

The race for second place, after Purplebricks, is on “with several players raising and spending tens of millions of pounds”.

There is, says DelPrete, clearly room to grow market share at the expense of traditional agents.

But here’s the million dollar question: “Can they make money, or is it an expensive race to the bottom?”'

 

'

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From the comments:

 

Quote
PepeM

Quite encouraging if you’re a traditional agent, rather worrying if you’re an online agent.

With around 6k monthly instructors PBS circa 720 LPEs producing an av of 9 instructions each, many will not be making anything like a sustainable living. Turnover of these people is clearly growing.

Even with huge marketing budgets Emoov, HouseSimple and Tepilo and others not generating anywhere near enough new institutions to be profitable, the move towards no sale no fee can only make that worse.

Yopa bit of an unknown quantity but they are going to have to ramp up marketing massively to grow, as PB have shown. Will investors keep pouring money in ?

In the meantime top quality, well run traditional agencies continue to “up their game” slowing down the online growth.

Interesting battle ahead.

 

Utter delusion.

Online market share up in a declining transaction market. Yes, encouraging for high street agents. How could a high street retail business possibly run into trouble in the coming years.

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3 hours ago, AdamoMucci said:

From the comments:

 

 

Utter delusion.

Online market share up in a declining transaction market. Yes, encouraging for high street agents. How could a high street retail business possibly run into trouble in the coming years.

It's incredible isn't it?

 

Even commission's have come down from 1.5% to 1% or less......Lettings fee income has bailed a lot of these businesses out.

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They seem to take comfort from online agencies not making a profit. But Im pretty sure Amazon and Facebook didnt make a profit for years either. The online guys are still new in the grand scheme of things. They are growing their business. The numbers are going in the right direction. The profit will come and then what will be the comforting excuse?

I am even seeing a number of online boards in my backwards, traditional area. Demographic changes too mean that the typical seller is going to have grown up with the internet and will have less fears about using online agents than the typical seller today. That could perhaps be a reason why estate agency is behind the times in terms of online. Clients are older on average compared to other industries.

Edited by AdamoMucci

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1 hour ago, AdamoMucci said:

They seem to take comfort from online agencies not making a profit. But Im pretty sure Amazon and Facebook didnt make a profit for years either. The online guys are still new in the grand scheme of things. They are growing their business. The numbers are going in the right direction. The profit will come and then what will be the comforting excuse?

I am even seeing a number of online boards in my backwards, traditional area. Demographic changes too mean that the typical seller is going to have grown up with the internet and will have less fears about using online agents than the typical seller today. That could perhaps be a reason why estate agency is behind the times in terms of online. Clients are older on average compared to other industries.

LE2 Estate Agents

LE2 transactions data

 

Excellent point on the demogrpahics.people under 40 I know that are selling are far more likely to use PB et al.As you allude,when these demogrpahic groups start owning homes,then the fortunes of High St EA's could plummet.

LE2 is a case in point.25 EA's, 100 transactions per month at an average of £200k.Assuming 1% fees,the EA's are splitting £50k between the 25 of them.

Assuming Branch cost-rent,rates, staff are circa £10k for a small branch with 4 or 5 workers, then the lettings fee ban is going to bite.

 

 

Edited by Sancho Panza

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45 minutes ago, AdamoMucci said:

They seem to take comfort from online agencies not making a profit. But Im pretty sure Amazon and Facebook didnt make a profit for years either. The online guys are still new in the grand scheme of things. They are growing their business. The numbers are going in the right direction. The profit will come and then what will be the comforting excuse?

I am even seeing a number of online boards in my backwards, traditional area. Demographic changes too mean that the typical seller is going to have grown up with the internet and will have less fears about using online agents than the typical seller today. That could perhaps be a reason why estate agency is behind the times in terms of online. Clients are older on average compared to other industries.

Next step a Purple Bricks Locker where you pick up a printed brochure of one of their houses for sale from a traditional high street estate agent?

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Another good thing about this shift is that most people will only sell 1-5 houses in their lifetime, so are extremely inexperienced compared to an EA. This balances the knowledge gap between buyer-seller, and means buyers might get some good deals with sellers who don’t know how to value their property or haggle. Of course, it might end up with even higher kite flying too.

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34 minutes ago, dropbear said:

This balances the knowledge gap between buyer-seller, and means buyers might get some good deals with sellers who don’t know how to value their property or haggle. Of course, it might end up with even higher kite flying too.

Not likely to happen most sellers have an idea of what their house is worth and there are so many info sources now to scan

Also they will not get 1 valuation so not even an on line agent can afford to undervalue 

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32 minutes ago, dropbear said:

Another good thing about this shift is that most people will only sell 1-5 houses in their lifetime, so are extremely inexperienced compared to an EA. This balances the knowledge gap between buyer-seller, and means buyers might get some good deals with sellers who don’t know how to value their property or haggle. Of course, it might end up with even higher kite flying too.

Hmmm I would sell my house using an online agent rather than high street next time I move but not because of the savings on commission. I had a bad experience with a high street agent. They want you off their books as quickly as possible, aggressively encourage you to take a low offer, lie about the buyers position and more... I just want to be in control of the situation and not have an agent on my back every ten minutes hassling me 'have found somewhere yet' etc etc just more stress and another person in the process which adds and complication.

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17 hours ago, AdamoMucci said:

They seem to take comfort from online agencies not making a profit. But Im pretty sure Amazon and Facebook didnt make a profit for years either. The online guys are still new in the grand scheme of things. They are growing their business. The numbers are going in the right direction. The profit will come and then what will be the comforting excuse?

I am even seeing a number of online boards in my backwards, traditional area. Demographic changes too mean that the typical seller is going to have grown up with the internet and will have less fears about using online agents than the typical seller today. That could perhaps be a reason why estate agency is behind the times in terms of online. Clients are older on average compared to other industries.

Surely For Sale boards are on there way out too.

Just have an online map and stick a pin on it.

 

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1 hour ago, houseface2000 said:

Hmmm I would sell my house using an online agent rather than high street next time I move but not because of the savings on commission. I had a bad experience with a high street agent. They want you off their books as quickly as possible, aggressively encourage you to take a low offer, lie about the buyers position and more... I just want to be in control of the situation and not have an agent on my back every ten minutes hassling me 'have found somewhere yet' etc etc just more stress and another person in the process which adds and complication.

People on this site are probably a self-selected group that know a bit about property.

I’m just imagining my gran trying to sell her house. She’d probably take the first offer that came in.

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1 hour ago, happyguy said:

Not likely to happen most sellers have an idea of what their house is worth and there are so many info sources now to scan

Also they will not get 1 valuation so not even an on line agent can afford to undervalue 

Haha, happyguy has made this site fun! Mega lolz. Btw you don’t write like you went to Oxford. Was it Brookes ?

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1 hour ago, spyguy said:

Surely For Sale boards are on there way out too.

Just have an online map and stick a pin on it.

 

I dont think so. Agents love them. It is advertising their company. They had to bring out a law about the use of lettings boards because agents were just going around putting "Let By" boards outside of properties where they had no corresponding business. Just amazing isnt it. I am sure they can talk vendors into having one for the drive-by advertising of the property too. Agents are certainly not going to be the ones to "innovate" them away though!

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46 minutes ago, dropbear said:

People on this site are probably a self-selected group that know a bit about property.

I’m just imagining my gran trying to sell her house. She’d probably take the first offer that came in.

I agree, many of the older generation will never use an online agent. But imagine the carnage on the high street if just 35% of people used online. Which will happen. That is many high street agents out of business.

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4 hours ago, houseface2000 said:

Hmmm I would sell my house using an online agent rather than high street next time I move but not because of the savings on commission. I had a bad experience with a high street agent. They want you off their books as quickly as possible, aggressively encourage you to take a low offer, lie about the buyers position and more... I just want to be in control of the situation and not have an agent on my back every ten minutes hassling me 'have found somewhere yet' etc etc just more stress and another person in the process which adds and complication.

I have some recent experience with two high street agents and I must say they were pretty good in general.

One was for selling purposes, they were pretty good at screening out idiots and timewasters. For buying purposes (which unfortunately didn't result in a sale for various reasons) another one was pretty good at dealing with an idiot vendor.

Agents sit between two parties who in general are not used to making large financial transactions. There are also a horrendous list of things that can go wrong in sales processes and it helps to have a neutral party to push all that stuff along.

I am sure there are some crap agents. Part of the problem is that it is an unregulated business.

To me the online stuff is a short route to an online listing. You can't really value it at anything more than that. If that works for you then fine, but there are lots of reasons why it won't work for some people.

I think there is probably going to be an intermediate step for high street agents where they offer the same service, but close down the high street office and work from home to reduce costs. A lot probably are already. That is probably a good compromise.

 

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3 hours ago, dropbear said:

People on this site are probably a self-selected group that know a bit about property.

I’m just imagining my gran trying to sell her house. She’d probably take the first offer that came in.

It's demographic,people under 50 will do online.People over 50 might do.Either way,High st EA's will reduce in number over the next ten years massively.

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19 minutes ago, Gigantic Purple Slug said:

I have some recent experience with two high street agents and I must say they were pretty good in general.

One was for selling purposes, they were pretty good at screening out idiots and timewasters. For buying purposes (which unfortunately didn't result in a sale for various reasons) another one was pretty good at dealing with an idiot vendor.

Agents sit between two parties who in general are not used to making large financial transactions. There are also a horrendous list of things that can go wrong in sales processes and it helps to have a neutral party to push all that stuff along.

I am sure there are some crap agents.

Anyone who has any says anything good about estate agents must be an estate agent.

They are lying scheming lowlife. All seem to be driving brand new mercs and beemers these days, despite the headlines of crashing houseprices and transaction lows.

Come on 'Fess up!'

 

Edited by GreenDevil

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No, I'm not an EA (probably would be a lot richer if I was).

I just thought in both cases they did a pretty good job that an online agent would not have been able to replicate, simply because once they have their commission they no longer have that much interest in pushing the sale through.

But then I was clear with them what my expectations were and did what I said I was going to do when I said I was going to do it, and that pushing me around was not an option.

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1 hour ago, happyguy said:

Stand outside the agents offices in Richmond or Twickenham.  All drive around in a leased merc or BMW.  Mind you a 3 bed semi sells for over 1 M !!!! 

 

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I agree with purple slug as I've bought and sold a few times and always used traditional EAs.  The easy bit of the whole process is the sale/purchase.  After that the good agents come into their own as a third party pushing along the process and preventing a lot of potential hassle from the buyer/seller.  They only get paid when the process is complete.

Any agent worth their salt gets to be a good judge of character and is able to get rid of the time-wasters and idiots.

 

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6 minutes ago, janch said:

I agree with purple slug as I've bought and sold a few times and always used traditional EAs.  The easy bit of the whole process is the sale/purchase.  After that the good agents come into their own as a third party pushing along the process and preventing a lot of potential hassle from the buyer/seller.  They only get paid when the process is complete.

Any agent worth their salt gets to be a good judge of character and is able to get rid of the time-wasters and idiots.

 

Probably more than that the agent has seen the timewaster before and knows not to bother.

There was one offer I had where they told the agent that the place was only worth 75% of the asking price, and then proceeded to offer 50% of the asking price - and the place had only been on the market 2 weeks ! We had a good laugh about that one.

WTF ? HPC school of negotiating I bet !

Then there is the whole range of personal issues such as my cats at the vet so I can't exchange (??!!)

The agent I had had this facilitator department whose job is was to push the sale through, and they actually did a pretty good job on chasing up on all the crap.

Anyway, I'll leave it there before I get hung, drawn and quartered.

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56 minutes ago, Gigantic Purple Slug said:

I have some recent experience with two high street agents and I must say they were pretty good in general.

One was for selling purposes, they were pretty good at screening out idiots and timewasters. For buying purposes (which unfortunately didn't result in a sale for various reasons) another one was pretty good at dealing with an idiot vendor.

Agents sit between two parties who in general are not used to making large financial transactions. There are also a horrendous list of things that can go wrong in sales processes and it helps to have a neutral party to push all that stuff along.

I am sure there are some crap agents. Part of the problem is that it is an unregulated business.

To me the online stuff is a short route to an online listing. You can't really value it at anything more than that. If that works for you then fine, but there are lots of reasons why it won't work for some people.

I think there is probably going to be an intermediate step for high street agents where they offer the same service, but close down the high street office and work from home to reduce costs. A lot probably are already. That is probably a good compromise.

 

 

They will tell you they are already regulated by the industrys self regulating body. That body is clearly just a company selling services to the EA industry though. One of those services is government lobbying. Another is industry "education".

Regarding the pushing for a sale, that could be a genuine benefit of the commission model. I know someone who recently used a EA owned by Countrywide and they do seem to chase sales aggressively.

I also know a local independent mainly letting agent is is trying to do more sales because it is "easy money where once you have got the sale you send all the details to both sides solicitors and your work is basically done".

I may be of a somewhat contrary opinion to most in that I believe it is the smaller independents who are going to cease trading first rather than the corporates. I dont buy that whole local expert with community roots and special bespoke personal service. Some will manage it, but most wont.

I also think you are right that some will shut up shop and work from home. But that will be a big shrinkage of their business. They are not going to have couple of negotiators and a back office person in that situation. Which is why I do not believe, when they work from home, they will continue to even own their own business really. They will end up working for Purple Bricks as a franchisee or whatever the set up is. So in effect online has still taken a chunk of their income. They have forced their way into becoming a parter of that business without even paying that owner. I wonder how many PB franchisees own a merc.

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5 minutes ago, AdamoMucci said:

 

They will tell you they are already regulated by the industrys self regulating body. That body is clearly just a company selling services to the EA industry though. One of those services is government lobbying. Another is industry "education".

Regarding the pushing for a sale, that could be a genuine benefit of the commission model. I know someone who recently used a EA owned by Countrywide and they do seem to chase sales aggressively.

I also know a local independent mainly letting agent is is trying to do more sales because it is "easy money where once you have got the sale you send all the details to both sides solicitors and your work is basically done".

I may be of a somewhat contrary opinion to most in that I believe it is the smaller independents who are going to cease trading first rather than the corporates. I dont buy that whole local expert with community roots and special bespoke personal service. Some will manage it, but most wont.

I also think you are right that some will shut up shop and work from home. But that will be a big shrinkage of their business. They are not going to have couple of negotiators and a back office person in that situation. Which is why I do not believe, when they work from home, they will continue to even own their own business really. They will end up working for Purple Bricks as a franchisee or whatever the set up is. So in effect online has still taken a chunk of their income. They have forced their way into becoming a parter of that business without even paying that owner. I wonder how many PB franchisees own a merc.

Generally I'm in favour of less regulation, but I think the lack of it in estate agents causes issues.

For example, there is a low barrier to entry in terms of starting up a business. I get the impression that when volumes collapsed in 2008 a lot of ea's were made redundant from the high street and started their own business. The problem is then you get lots and lots of businesses fighting over the scraps. This encourages overvaluing to obtain business.

More regulation would impose a higher barrier to entry and reduce the number of agents which might reduce overvaluing, but of course the cost of compliance would ultimately end up with the consumer.

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6 minutes ago, Gigantic Purple Slug said:

Generally I'm in favour of less regulation, but I think the lack of it in estate agents causes issues.

For example, there is a low barrier to entry in terms of starting up a business. I get the impression that when volumes collapsed in 2008 a lot of ea's were made redundant from the high street and started their own business. The problem is then you get lots and lots of businesses fighting over the scraps. This encourages overvaluing to obtain business.

More regulation would impose a higher barrier to entry and reduce the number of agents which might reduce overvaluing, but of course the cost of compliance would ultimately end up with the consumer.

 

Back during the GFC I fell for the "Peter Schiff was right" stuff and became a Mish Shedlock type libertarian no regulation blah blah. But it is clearly nonsense. Without regulation there will always be the shady types who cut too many corners and are dangerous in one way or another. The trouble with that is that they squeeze out the legitimate businesses who are trying to maintain minimal standards. No regulation is just not practical. It is too destructive and causes too much volatility IMO. I do not think "the public will figure it out and vote with their feet" works in the real world. The public do not have complete information and it will always be tempted by the cheapest. They will find out too late.

There needs to be laws in place for minimum standards. Seems reasonable that as a society we can generally agree on minimum standards below which nobody in the right mind could want. That is a tough one to swallow for someone like me who is generally libertarian minded but I think it is the most pragmatic.

I think this also applies to wages too in the absence of a citizens income. A business that depends on ultra cheap labour is of marginal economic benefit to society at best.

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