Traditional High Street Estate Agency is doomed over the next decade to slowly slip into a blackhole that is Purple-Yopa-bricks-world …. that is unless Traditional High Street Estate Agency change the way it portrays itself, markets itself and adds value to the home selling process.
Imagine a desert island, inhabited by people with humble needs and plenty of resources. You won't find a hustling economy there, because you need two things in order to have an economy: people who want things, and a scarcity of things they want. Without scarcity, there's no basis for an economy.
When there's too much of any product or service, the value of that product or service drops like a stone. As we are estate and letting agents, if our service can be produced at will and costs little or nothing to create, it's not likely to be scarce, either. Think before you dismiss that statement .. what does it need to put an additional property on the market today? As along as you are on Zoopla/Rightmove, apart from your time taking the pic, measuring up and typing the brochure – the only external cost to an agent is the petrol to the listing, the ink in your pen, a few sheets of A4 and a board erection.
That's the situation with estate and letting agency today. Estate Agency is becoming abundant and cheap.
Number of Houses sold per Estate dropped by 73.2% in 10 years
In 2004, there were 7,570 estate and letting agent offices in the UK, BUT by 2014 that number had risen to 19,304.
Problem is, in 2004, those 7,570 offices sold between them 1.78m properties meaning in 2004, the average number of sales per estate agency branch per year was 235.13 per year.
However, in 2014, only 1.219m properties sold between 19,304 agents, meaning the average number of sales per estate agency branch now only stands at 63.14 properties a year .. a drop of 73.2% .. and it will only get worse.
Estate Agency Fees
When I was an estate agent back in the 1990’s, I worked for one of the largest National estate agency brands, and the average fee was around 1.8% to 1.9% + advertising and withdrawal fee. According to the conveyancing firm MyHomeMove, the average high-street estate agent fee is 1.3% today. I would say in many places they would be lucky to get 1% at the moment.
There are many online / hybrid / kitchen table / call centre estate agents, but the most notorious and well known of them all, the Pantomime villain agent is Purplebricks.
Personally, I like Purplebricks. I know a few of their senior management and as a national hybrid estate agent .. I think the model is the best ‘hybrid’ or ‘online’ model out there.
Purplebricks are offering to sell a persons house not for 1.3% (ie £3,800) or 1% (£3,000) … based UK average house price of £298k. Purplebricks are ever so slowly, virus like, inch by inch, step by step, like Japanese knotweed, slowly creeping up and taking lots of little steps in each of your markets, week by week , month by month taking more of a market share.
Their offering of a sales fee of 0.26%, (based on their fee of £798 and the UK average house price of £298k) starts to look from the perspective of the house seller – very attractive.
Estate Agents have created this problem themselves
There are too many estate agents and normal supply and demand rules mean price has to come down.
As resources go, estate agency services is not scarce.
Twenty years ago, there were just as many insurance brokers on the High Street as Estate Agents .. where are they now? Gone – because of the internet.
Twenty years ago, every third shop was a travel agents on the High Street – not many now. All online.
Twenty years ago, Video rental shops were opening faster than a fast thing … Blockbuster had over 250 shops – not anymore – its all online.
Estate Agency is not immune from these pressures – wake up before its too late. With the internet and the beast we have created, that beast being called … Rightmove. This beast has created a level playing field for all agents.
Any kitchen table estate agent (posh word for online agent) with £1,300 a month can get membership to a club (called Rightmove) and play on an equal footing with established, multi officed, multi award winning, highly trained, long established agents who have been around since 2BC. You agents even had the chance to kill the Rightmove monster with Agents Mutual, but most of you sat on the fence waiting for other agents to jump in first, so you could follow .. problem is, everyone was waiting for everyone else to jump first – so nobody jumped.
Now you don’t need the resources of a High Street office and a wage bill that would make South American 1970’s Dictator wince … just a kitchen table, £1,300 a month, a car, a printer, a few for sale boards and a laptop and you can call yourself an estate agent. Look at all the City investors pouring millions into every online agent offering.
So we are all doomed to Purplebricks then? Err No .. not if you don’t want to be.
For the answer .. I will publish that in Part 2 tomorrow