Yesterday, I went to an excellent property market seminar with leading experts in the industry. They touched on price predictions, the mortgage market, impact of current economic landscape on buyer affordability and the intersections of politics, elections, and property prices.
As well as these political and geopolitical factors, I think we should be talking about the sea change that is about to happen in the estate agency world.
Everyone in the industry knows its coming, older experienced estate agents have had enough. The shortage of property and changing face of the high street has made it virtually impossible to continue thinking of estate agency as a career for life but that’s about to change.
One vendor in Fulham described her experience of agency as hellish. My previous updates have been how hard it is to buy in this landscape. I am now turning my attention to how hard it is to be a vendor.
The internet changed everything, and it has made it very difficult for vendors to differentiate, trust and instruct the right agent. Why?
High street agents have become homogenous
Vendors don’t know who to instruct and at what price. Technology should make our lives easier – shouldn’t it? Dare I say it, looking at the horizon scandal in the post office – not always! It certainly hasn’t made choosing the right agent to sell your home any easier.
When I started agency in the late 1990’s, the internet was in its infancy. Agency was a face-to-face affair. Good agents worked their personal contacts brilliantly – they had to. You kept your ear to the ground and valuations relied on local knowledge. There was no other way of doing it, no centralised data base of sold prices. Everything was face to face, buyers came into the office when they wanted to buy. It was an old-fashioned business, based on personal relationships, forged on reputation – you couldn’t go too far afield. Agents had ‘patches’ usually around the area your office was located. Or agents had a specialism – you had your specialist flat agents, your mid-market agent and your top end agent. The internet changed all that.
Unfortunately, agents have become homogenous. All the agents have the same access to the same tools 365 days a year, meaning any agent can sell any flat from anywhere. Agents no longer have to rely on the old ways of doing things – you don’t have to have patches or specialisms anymore. Agents have tried to use the same model for a completely different environment and everyone, everywhere is finding it confusing.
Vendors get the agents they deserve
Unfortunately, shortage of property and competition have stopped many agents from valuing honestly. Valuations as I mentioned in previous updates are not an exact science. They are often vendor led. If a vendor is not that motivated, they may request a higher price than if they need to sell quickly.
There is such a shortage of good property stock, and a massive increase of agents fighting over this limited stock, that agents are giving in to vendors for fear of losing instructions. In previous years local agents would turn down houses or flats with vendors with unrealistic price expectations for reputational reasons.
The anonymity offered by the nameless, faceless internet and desperation for stock has made agents, particularly younger less experienced ones, scared to value truthfully for fear of losing the instruction. This lack of transparency has had a negative impact where houses have failed to sell. I can think of one of my neighbours who has been on the market for two years. They’ve already switched agents three times and considering a fourth switch. This is a super difficult and depressing way to sell; hard for them and hard for all three agents who have had to market the house for months on end for no money. No wonder agents are feeling demoralised.
All the old boundary lines have been moved. The age of good old-fashioned agency has been thrown out with the bath water. We are free! Unfortunately, vendors are now having to choose their agents through their use of technology, branding, and social media platforms. Out went the excellent local knowledge of just selling property on your patch and in came the new breed of homogonous agent selling anything from anywhere.
The rising cost of building materials and the cost-of-living crisis has made the market polarise. It is much easier to sell property at the top end or at the bottom end – but the middle section of the market has stagnated, and vendors don’t have the relationships they used to have with their friendly local agent.
Agents are shipping out as they can no longer afford to look at estate agency as a career for life.
What is the solution?
Agents need to stop looking at this like rabbits in headlights and embrace the change that is coming. There will be winners and there will be losers but doing the same thing repeatedly and expecting a different result is just burying our heads in the sand.
Agents need to be different and distinctive
The winners will be those agents that embrace this change and do something completely different.
Cast your minds back to the 1990’s and the success of the Foxtons brand. The billionaire John Hunt became an industry disrupter prior to the growth of search portals. With his fleet of colourful Foxtons minis and aggressive marketing. Foxtons ripped up the image of the traditional slightly dim, posh toff of an agent. A new breed of agent entered the market, hungry for commission they opened later, valued higher and charged more than the rest of us. It was sold for an estimated £390m to a private equity firm. I’m not advocating this type of agency, but I admire their tenacity and ability to look at the market differently.
Those daring to be different in this age of opportunity include:
Mark Wells (ex-Savills) has set up a search engine called ‘Invisible Homes’ an off-market website for those vendors who don’t want to be visible on the usual search portals. Agents are now using this as a great tool to list property in quieter times without making homes look stale.
There is a place for specialists. Richard Bartlett set up Unmod London about 20 years ago. He has forged a reputation for being the go-to person for unmodernised property. As a result, he has a unique understanding of this portion of the market and can offer trusted and knowledgeable advice to buyers and sellers.
The emergence of property franchises is long over-due. Tedworth, Agents and Homes, Harding and Green. There seems to have been a mass exodus from high street agents post covid. With a surprising proportion of these agents being older, more experienced and from the traditionally upper end of the market. They currently still represent a relatively small percentage of the market share but I believe this is on the verge of growing exponentially.
I predict there will an increase in branches of those estate agents with deep enough pockets to buy up failing high street businesses. Dexters, for example, have been on a spending spree and now more than 150 offices. The reality is this model of agency will likely rely on one experienced manager per office, with a young, motivated work force and high staff turnover – the jury is out as to whether this will benefit vendors in the long run.
My hope is that there will be a couple of bespoke, renowned agents by the side of them with experienced, honest, and established work force – maybe charging a higher commission rate and probably having long-established links to an area to open there, but not necessarily with a physical office. Tom de Winton (ex Savills and John D Wood) has been extremely successful in Fulham after many years working for a high street office. He has set up on his own without a physical office and now has a large share of the house market in Fulham– selling many of the premier houses. He has a firm threshold of prices and will not take on any property below a certain level.
There must be a case for a drop in commission for vendors who want it. Purple Bricks had a pioneering model, but it was badly executed. There is a case to be made for vendors to pay for upfront costs, a sort of non-refundable deposit in return for lower commission rates.
The internet has opened the market for the agents, creating new and exciting ways to promote and sell property. We are standing on the precipice of great change. Agents need to embrace it.
Maybe the American system of residential sales where you hire your own property broker to sell your house and deal with all aspects of the sale, including all negotiating and communication with lawyers, will work. A one stop shop – possibly. The start point should be a desire to do a fantastic job for our vendors and then work backwards from there.
Let’s get back to good old-fashioned agency whilst using the technology at our fingertips.
Article by Sophia Wade – Inpired-spaces.uk