Online estate agents have hit some hard times.
First, one of the longest running online agents, Hatched, closed its doors for good.
While all this was happening, market leaders, Purplebricks, were watching their share price fall from highs of 500p down to below 200p.
It’s brought joy to the faces of many traditional estate agents who didn’t hold back in hiding their glee of Emoov’s demise…
The problem is, that’s exactly this kind of attitude that has made estate agents one of the most hated professions in the country.
That attitude of ‘we are right, everyone else is wrong’ is exactly where there IS an opportunity for someone to succeed by doing something different.
It’s ironic that the venom spouted by many traditional agents towards their online counterparts is part of the reason online estate agents ARE here to stay.
Homeowners are fed up with the arrogance of high street estate agents.
Yet, show us a traditional estate agent who is shouting from the rooftops about how online agents will fail, and we’ll show you someone who is secretly terrified by what online agents are doing to the industry.
Online Estate Agents Aren’t Perfect… Yet.
Do online estate agents have the perfect offering? Far from it. The recent demise of Hatched is an excellent example of that.
Do traditional estate agents have the perfect offering? Absolutely not.
The very fact that online agent, Purplebricks, is already one of the largest estate agents in the country isn’t purely because of their mega advertising budget. You can advertise as much as you like, but unless you’re offering a product people actually want, you’ll never come to dominate an industry.
Still not convinced? We’ve published several articles that explain why the traditional estate agency model is broken:
- This video shows the problem with traditional estate agents
- Why are estate agents so expensive?
- Only 9% of house hunters start their search at a high street estate agent
- Statistics that show why people are turning to online estate agents
And so, when traditional estate agents start trying to claim that there’s no market for the ‘fixed-fee’ online estate agency model, we find it hard to ignore.
Like ostriches burying their heads in the sand, traditional agents are doomed to fail if they don’t sit up and take notice of WHY online agents have grown in popularity.
5 Reasons Why Fixed-Fee Online Estate Agents Are Here To Stay
So drawing from our own experience, let’s take a look at some of the major reasons why fixed-fee estate agents are not going away any time soon.
1) There’s A Demand For Paying A Fixed Upfront Fee
Our own ‘Find An Online Estate Agent‘ quiz has generated some interesting insights on what vendors are looking for.
Of those who have completed our survey to help find the right agent for them, 28% stated they would prefer to pay a fixed upfront fee.
Sure, the results are a little skewed as the quiz is aimed at those already considering an online agent (and therefore potentially already attracted by the lower upfront prices). But, there’s clearly a demand for the option.
So, the notion that customers don’t want to pay upfront is inaccurate, despite what some traditional agents claim.
And that could be down to an increase in knowledge of the typical homeowner. The lack of value that’s available in a percentage-based no sale, no fee pricing model was discussed in our article ‘3 Things Your Estate Agent Won’t Tell You (But Really Should)‘.
In our experience, knowing from the start what the estate agent fee will be, can be very helpful. Selling a house involves a lot of costs, some of which might be unexpected. Such as repairs that have been brought up in a survey and your buyer wants you to fix.
Especially if you are also buying a new home at the same time, it’s good to know the costs, so you know how much money you will have for your onward purchase.
When we sell a house, we like to list all costs, so we are prepared. You can never know how much your property will sell for. So budgeting for the estate agent costs can be a bit of a challenge.
Upfront fixed fees, on the other hand, make it very easy. That’s why this is one of our preferred option.
2) The Biggest Online Estate Agent ONLY Offers Fixed Upfront Fees
Purplebricks absolutely dominates the online estate agency industry. In fact, they have around 4 times as many properties listed on Zoopla as their next nearest online competitor.
They are also one of the largest single-brand estate agents in the UK (based on number of listings), and that includes traditional high street agents.
Yes, they’ve spent mind-blowing amounts on advertising, but you have to admire what they have achieved since 2012 when they were founded.
Yet, they are one of the few estate agents anywhere to rely exclusively on a fixed upfront fee pricing model. They do not, and never have offered a ‘payment on completion’ option.
You do not become one of the largest estate agents around by offering a pricing model that customers don’t have the appetite for.
Plus, as long as the market leader continues to offer a fixed-fee pricing model, others will follow. Therefore, the combined advertising budget of those who offer fixed fees is helping to drive the demand for lower upfront pricing further forward.
3) Homeowners Don’t Want To Be Punished For Having A More Expensive Property
Property prices have risen dramatically since the 1990’s, yet the percentage fee charged by estate agents has been slow to fall.
Although that’s begun to change (thanks partly to the pressure from online estate agents), it’s easy to see why some homeowners would feel hard done by.
People work hard to buy bigger and better houses. Yet, when it then comes to selling up, having a more expensive property can feel like a punishment.
After all, why should a property that’s worth £400,000 cost DOUBLE the amount to sell than a £200,000 property?
It’s a question we asked someone in the industry on Twitter a while back when he questioned the logic of fixed-fee pricing:
(Note: He has since closed his business, so we have blurred his name and photo to protect his privacy)
Sure, we are not doubting that more expensive properties can sometimes involve more work to sell than cheaper properties.
But does a property at double the price of another require double the amount of work? Almost certainly not, so why do estate agents think percentage fees are fair?
It’s something we covered in more detail when we looked at why estate agent fees are so expensive.
Having sold properties with higher values, we firmly believe that charging more for those isn’t fair. Not one high street agent offered us anything different from when we sold homes with lower values.
As a result, we prefer to use agents that offer fixed fees that are based on the services offered, rather than on the value of the house. It just makes more sense to us.
4) Estate Agents Have Stopped ‘Trying’ To Earn Their Fee
When was the last time you viewed a property and had it properly ‘sold’ to you by an estate agent?
Far too many estate agents now simply show people around a property and point out the obvious. Very few will actually show people the benefits of what a property offers.
It’s something we discussed in detail when we analysed this video.
We’ve heard all kinds of excuses from estate agents for this, from “properties sell themselves” through to “not all viewers are bright enough to work it out on their own”.
It’s nonsense. There’s not a single industry on the planet where sales and marketing do not have an effect.
Many estate agents still do great work on sales progression, but unfortunately, most have now lost the art of selling. And that makes it hard to justify commision-based pricing.
We now always do our own viewings when selling a home. And the reason is simple: we know we will do a much better job!
Our experience has told us that viewings undertaken by agents are mostly wasted viewings. And we would recommend any sellers conduct their own viewings.
But of course, if such a big part of the house selling process isn’t done by the agent, then a commission-based price is not acceptable. Therefore, a fixed fee is the only fair option.
5) Properties Are Being Overvalued
There’s another problem when estate agents don’t offer fixed-fee pricing. They tend to overprice properties they list on the market.
Think about it: you run a business that relies on earning a percentage of the price you sell things for. You’ll want to sell things at the highest price you can, right?
While this may sound great for the vendor, it actually isn’t. What ends up happening is that the price goes on the market and fails to attract sufficient interest.
The price then drops and drops until a fair price is reached. Finally, a buyer bites and the sale goes ahead.
That process can last weeks, it can last months. It all depends on how ‘greedy’ the estate agent is.
We have experience with agents overvaluing our house. Whenever we sold a house, we had one agent that valued our home at quite a high price. And you guessed it: none of them offered fixed-fee prices
To guard against this, it’s vital that you ask several estate agents to value your home. We get a minimum of three valuations done every time.
Of course, only going for agents that offer fixed prices can help too.
Fixed-Fee Estate Agents Are Here To Stay
So, say what you like about fixed-fee estate agents, they aren’t going away any time soon.
And while this article has treated most fixed-fee estate agents as online agents, there are some savvy traditional estate agents also adopting the model.
Put simply, the commission-based pricing model now feels a little dated. There’s a growing demand for other pricing models, and fixed-fee is one of the most obvious alternatives.
Those who refuse to accept that fact could face some tricky times ahead.