Online agents – Big savings or, paying up-front for failure?
See also “Cheap agents could cost UK consumers half a £Billion in wasted fees”
As an agent who has always embraced new technology and working practices, I have no problem with on-line agents, in fact, PDQ now has an on-line only hybrid model in addition to our traditional estate agency service. However; what I do find unsettling, is when agents of any camp (on-line or high-street), make bold claims about being better than anyone else, or saving the consumer money etc, without giving a full account of the facts.
Having had some spirited debates on social -media with one or two online agents and, being a bit of a pedantic statistics nerd, I thought I would take a look at some of their claims and the facts behind them. If you are thinking of selling your home using an online agent*, the results make for interesting reading.
For my research, I’ve used data from ZooplaPro* in the West Cornwall area and the data for one online agent who has the largest market share of online agents in that area. To save blushes (and law-suits if I have got my maths wrong), I have invented a fictitious trading name of ‘Hapless’ (please see note below) estate agents; no inference of any actual estate agent trading with that name is implied or should be inferred. Here are the facts for the area surveyed*
Zoopla shows an area total of 5,105 new instructions since Jan the 1st 2014
Of which, 7 were Hapless instructions– a market share of new-instructions of 0.14%
Hapless currently have a total of 11 properties available for sale with an average time of 22 weeks on the market against an area average of 27 weeks.
Of the 11 properties on with Hapless, 18% have been up for sale for over 40 weeks and 64% have been up for sale for 20 weeks or more
Since January the 1st, Hapless have sold 2 properties (a 29% success rate against their new instructions YTD but a 18% success rate compared to their current total register)
In comparison the average instruction to sold rate in the area is 60%, with PDQ’s average being 79%)
Of the 2 properties that Hapless sold, one sold at £175,000 after a £15,000 drop and 10 months on the market – an almost identical property next door, however, sold at £200,000 3 months previously after 5 months on the market; a potential £25,000 loss for the sellers of the agents using Hapless?
With a market share of 0.14%, you can see why I don’t spend sleepless nights worrying about on-line agents (at least, not at the moment). However, as a consumer, what do these figures really tell you?
Almost without exception, on-line agents say how much they can save sellers and that they are just as effective (or more effective in some cases) at selling as high street agents. Without doubt, if you sell your home with a typical on-line agent, you will pay less than with a high street agent but that, in itself, is not a real saving. (UPDATE – Some of these claims have now been proven to be misleading by the ASA )
What do I mean by this?
Firstly, all online agents that I am aware of, charge an up-front fee of several hundred pounds. This is payable whether you sell or not. So if you don’t sell, you haven’t saved. Quite the opposite to most high-street agents where you have a no-sale-no-fee guarantee. If you don’t sell with my firm, we won’t charge you a penny; a saving of around £600 compared to a few on-line agents.
In the case of Hapless estate agents, they have only sold two properties this year out of seven new instructions and four existing ones that have been up for sale since 2013. Even using the most favourable instruction to sale ratio, this means that (based on 2014 figures) 71% of all of Hapless’ customers in the area we surveyed will pay for a service (selling their home) that they won’t actually receive. For Hapless’ (and other on-line agents) press claims about saving customers money to be accurate, they should, in my opinion, factor in the amount of customers who do not sell through them but, who have still paid for a service.
But what if they DO sell your home?
Again, to fully check the claim of any real savings, we have to compare the whole price including sale price of any property sold. By that I mean that if you have sold your home at a lower price than you might have with another agent, even if you have paid less for the privilege of doing so, you have not saved. Hapless have only sold two customers homes this year but one of these sold for £25,000 less than a very similar** neighbouring property. No doubt, this seller ‘saved’ on agents fees but, by my calculations, were potentially worse off by around £21,000. The other property sold at the asking price however, it is not possible to compare like for like with that property as other properties in the same road vary in price and style dramatically (by several hundred thousand pounds in two cases we found).
To be even-handed, assuming the property actually sold at its full market value (unlike the other Hapless sale), the owner of that property probably saved in the region of £8,526 including VAT. However, viewed as a whole, the other 9 Hapless customers who haven’t/ didn’t sell have lost a total of around £5,400 between them with, of course, the other seller having a potential loss of £21,000
No doubt, this seller ‘saved’ on agents fees but, by my calculations, were potentially worse off by around £21,000.
What are the chances of you actually selling with Hapless?
Not all agents are the same as our monthly property market report for Cornwall clearly shows (link is a PDF download). From the data we have analysed, there appears to be a possible inverse correlation between the size of an agents register (how many homes they have for sale) and the percentage chance they have of actually achieving a sale, I.e. The more properties an agent has up for sale, the less likely it appears are your chances are of actually selling. In the case of Hapless agents, the size of their market share is statistically insignificant in our dataset area but, they may have a larger share nationally. However, what is clear from the data is that if you choose to sell through Hapless, you are more likely NOT to sell, than sell – only 18% – 29% at best, of their customers homes have achieved a sale. Put another way, Hapless have failed to sell between 71% and 82% of every customers’ home they have taken money from this year.
So how does this compare to high street agents?
As you see from the table above, the average agent in the West Cornwall area, has sold 60% of all they have taken on this year with (forgive the plug) my own company, PDQ, selling 79%. Again, these claims need to be looked at in the whole – how much have each of these homes sold for, were they correctly priced etc but, I’m afraid, I simply don’t have the time or resources to analyse over 2,000 housing transactions in the west Cornwall area. Whichever way you look at it, the High Street Agent offers a statistically far greater chance of actually selling than Hapless do in the West Cornwall area.
Put another way, Hapless have failed to sell between 71% and 82% of every customers’ home they have taken money from this year.
How about the speed of selling/ time on the market?
Unfortunately, extrapolating figures for the “speed of selling” is not as easy as finding out the average “time on the market”. Although these two concepts sound the same, they are not. As we have already seen, not all properties sell and many of these are taken off the market or, try another agent. Consequently, the portals tend to show only how long a property was up for sale and not, how long the properties that actually sold were up for sale for. A subtle difference but, an important one. For this comparison, I am using ‘time on the market’.
Using time on the market as a heading, as can be seen in the table above, Hapless agents do quite well against the average of 27 weeks for all agents, with an average of 20 weeks. However, consumers thinking of using Hapless might again, want to view this in the light of three very recent instructions bringing that average down quite dramatically and, the fact that, as I have shown above, 71-82% of all of their customers homes have failed to sell.
On the face of it, using an on-line agent seems like a bit of a no-brainer; the savings and speed of sale that many boast of sound like a great deal and, no doubt, in some parts of the UK and in certain niche markets, they may well live up to those claims. However, in the sample I have looked at, they fail on every count and, on every claim I have debated with them, at length, on Twitter. Not only do Hapless agents not have a large and growing sector of the market as they claim, they don’t even have a 1% share in the area I looked at. More importantly, their claims to save people money simply do not stack up as the majority of their customers have already paid for a service they are statistically very unlikely to receive, hardly a saving or, in my opinion, a fair and legitimate claim.
As for real ‘savings’, this needs to be seen in the whole and, based on the evidence I have shown; of the two houses they have sold this year in my area one appears, on the face of it, to have been undersold by a significant sum of money and the other is impossible to check accurately. As with all things, you pay your money (up-front in the case of on-line agents) and you takes your choice. My advice. Don’t just look for an agent with the biggest claims, the cheapest fees or, the most for sale boards. Do your research before you choose an agent and always look deeper into agents claims. Challenge your agent to prove why they are worth your business; good agents will be happy to answer your questions.
Sign up for PDQs’ property Newsletter here
Fictitious agents name change – An explanation. We have been asked to change the name of the fictitious firm we invented as it contained the same four letters of part a much longer trade name used by another online property business and the owners of that business believed it was damaging their brand. We are happy make it clear that, whilst we do not believe that any reasonable person would have drawn the conclusion that the name we used was in any way related to another company that does not even deal in online property sales at the moment or even any online properties in the area we mentioned in this post, we intended no confusion or slur on our part. We would also like to point out that when and if that business secures enough market share in the area under review for us to make a reasonable comparable analysis we will, however, be happy to run a similar exercise using the same data sets and their full trade name alongside our own trading data in order for a fair comparison to be drawn by consumers.
*The data was taken from West Cornwall only. Success and failure results of online and traditional agents are likely to (and do) vary significantly in other parts of the UK.
*Journalists: On request, I will provide all of my working data and remote screen access to online data used in this post for verification to a panel of independent property journalists for verification and checking.
All data taken from Zoopla Pro
Using postcodes TR3, 11, 12, 13, 14, 17, 18, 19, 20 (West Cornwall)
All new instructions and ‘sold’ data taken from Jan the 1st 2014 to date
Whilst I am not a qualified or trained statistician, I am aware that the sample above may be regarded as statistically insignificant and, therefore, possibly unsafe to base any firm conclusions on but, given the claims of massively increased market share by some online agents, I believe they are worth publishing to open up debate and give a transparent picture of the reality of online agents in one small part of the UK.
**I have not visited the two properties but have seen their on-line details/ photographs on Zoopla. Both are on the same estate, are two door numbers apart, are both detached 3 bedroom homes and both sold within a few months of each other in a stable price market (low, single digit house price increases over a 12 month period – Data HM Land Registry)
I welcome feedback so please feel free to leave constructive criticisms or ask questions below. If you could also take a second to rate my blog and pass it on to others who you think may find it interesting that would be great. Thanks.
About Chris Wood: Chris is an estate agent with over 25 years of property experience and a leading campaigner against PortalJuggling.
His business, PDQ Estates Ltd is based in Penzance and Helston, West Cornwall. He has worked with all sizes and types of businesses from single office independents to the management team and board of RBS and Tesco. A former President Elect of the NAEA and board member of NFoPP until he resigned in 2009, Chris has always championed the highest professional standards forestate agents in the UK. No stranger to the media, he has appeared on various programs including BBC, News 24, ITV, independent and BBC radio and is a regular contributor to trade journals, local and national Newspapers.
Chris is on KloutLinkedIn Ecademy Facebook and Twitter and lives in his beloved Penzance with his two spaniels. In his spare time; Chris likes to sail and is a former long-standing member of the Territorial Army. In 2010 he mobilised for a tour of duty in Afghanistan with 1 Rifles as part of 3 Commando Brigade.