Getting his sales board stuck in the lift doors was not the best start for online agent Tom Harrington as he entered the Dragons’ Den.
Indeed, the sticky beginning proved an ominous sign, with the Dragons not liking the fact that he charged up-front but had – in their view – a low success rate.
Harrington, 24, was pitching for £75,000 in return for a 20% stake in his pay-per-view online agent WeSold.co.uk
He told the five dragons that his business, which is based in Beckenham, Kent, was launched in January 2013 and that he aimed for it to be the UK’s fastest growing online estate agent.
He said it was unique as the country’s first pay-per viewing agent, charging £99 as an initial up-front fee, and then £35 per viewing for 12 viewings, after which viewings were free.
He said that he had taken on 195 customers and turned over £80,000 in the last 12 months, making a £5,000 profit.
Asked how many homes he had actually sold, he said just over 70.
Dragon Peter Jones said he was concerned about the success rate: “Seventy sales out of 195 means that one out of every three customers are happy, and two out of every three are not.”
Pressed for more information, Harrington said that in the last three months he had taken on 60 new instructions and sold about half.
Jones told him: “You are charging customers up-front for a service, and your hit rate is just 50%.
“All you are incentivising is tyre-kickers.”
Kelly Hoppen agreed. She said that it was easy enough to send viewers through the door. The difficult part, she said, was later on in negotiating and closing the deal.
Jones said: “This business is destined for failure. It is all about results when you want to sell a house.”
Deborah Meaden was also unimpressed, saying the question she asked as a seller was: “Who is going to get me the highest price for my house?
“But you make your money whether you sell it or not.”
Duncan Ballantyne was the only Dragon who seemed impressed with Harrington, but even he was out, saying: “Too many people are coming into the [estate agency] market at the moment, and it’s cut-throat.”
Harrington left empty-handed in every sense.
He left his board in the Den and did not try to take it back down with him in the lift.
After the programme was screened, Harrington issued a press release claiming that his company “shines on Dragons’ Den”.
He said: “Our Dragons’ Den pitch was the first in a series of investment projects we have planned for the forthcoming months.”
He suggested that as a result of the programme, he is expecting a large increase in instructions.
The programme, which went out on Sunday night, can be viewed on the link below. Harrington (and his sales board) is the first into the Den.
http://www.bbc.co.uk/iplayer/episode/b04d4nbc/dragons-den-series-12-episode-3
Comments (19)
I thought most of their objections were based on the fact that the customer has to pay up front regardless of whether they get a sale as opposed to a traditional high street agent who only gets paid (admittedly a lot more) only if they are successful.
I think their rationale was that customers will be annoyed if a traditional agent doesn't find them a buyer but furious if the online agent doesn't get them one after paying out to market and for viewings. I've spoken to three 'local' online agents about selling my house; not one would accept payment on successful completion which leads me to conclude that they are not estate agents in any shape or form but merely advertising portals who tell me when someone wants to look at the house; they've not re-engineered estate agency they've just added another level to advertising
Firstly, has anyone actually seen any evidence to support all these sales Mr Harrington claims to have sold? I'm not saying he's a liar; but I am saying I would love to see his accounts. Presumably if he's a Ltd Co these will be available. Secondly, nobody has asked the obvious question "Who fixes the price?". The obvious answer is "The owner" but how does the owner know he's pricing it realistically? I suspect they get "free" market appraisals from traditional agents. So they do need us after all then!
Even the lift tried telling him something.
One thing no one has yet mentioned, is that whilst the ‘dragons’ did not like this particular business model, and I’m in agreement with them on that, there was almost unanimous agreement that the way property is sold will change.
And playing ‘devil’s advocate’ for a moment, it could be argued that Peter Jones was wrong, and that what people are paying WeSold for is marketing, so they are achieving 100% of what their customers are actually paying them for. Presumably no one spends money with WeSold who is not aiming to achieve a sale, but with a huge majority of buyers searching online it could be argued that they have as good a chance of doing that with WeSold as they do with the high street. The big difference is that when they do achieve a sale with WeSold, they are not paying for the marketing of unsold property, as they do if they achieve a sale with a high street agent. Mr Jones did not seem to understand that with the best will in the world and for a huge variety of reasons, not every property that goes on the market actually sells.
I’m still waiting to see some hard evidence that a high street agent will achieve a better price than an online agent.
I wonder what the Dragons would make of someone pitching a business idea where they were saying we’re going to do loads of work for nothing and spend huge amounts of money on marketing costs without any guarentee of success, we’re going to charge half our customers for the ‘free’ work we do for other people, and we’ll charge some of them twice as much for the same service. I suspect they may be telling them that their idea is a nonsense, oh, but hang on a minute, that’s us, isn't it!
If you're only selling half there may be a problem, Hound. I think Peter Jones shared that view.
Agreed, Peter Jones expected every property listed to be sold, and sold immediately (yeh right) . Where this model will win instructions away from High Street agents is where the public perception is that all estate agents are the same and if they are all the same I might as well go for the cheapest option.
Bit of a cheek calling himself an Estate Agent, bit like a tyre shop or exhaust centre calling themselves mechanics.
Taking the long view, Surrey1, in 30 years in the business, I've always been told by those that compile these figures that the industry average is that you list 1/3 of those you value, and sell around 1/2 of what you list. I'm pleased to tell you that I've always achieved a bit better than that, but I'm now in a town where there is one agent for every 1200 head of population, so I'm fairly certain there must be several who are not even coming close to that industry average!
To be fair Hound you did nip off to Dorset when I offered to explain how a hybrid agency can out-perform both an online agency and a traditional agency and how it can most likely achieve a better price for vendors than its rivals. The offer still stands.
There always was and always will be a small percentage of people that think "cheap is best" and will look for alternatives to traditional agency. If there weren't on-liners to relieve them of their cash, they'd find somewhere else. Either way they're not coming to us; not straight away, anyway.
"Either way they're not coming to us; not straight away, anyway." And many are selling their properties for circa £100 all in…..If those that sold this route, having got the asking price from professional high st agents via free market appraisals, and completed at a near or asking price offer do they really care if they had to maybe chase their solicitors a few times during the sale? We always tend to state that people are bound to get a bad result one way or another, but this scenario must have happened many times.
Just watched it on iplayer. Never has there been a better illustration of "you get what you pay for."
He was brain washed..! Whilst being scrutinized by Peter the amount of times he used the term "traditional agent" was hilarious..
So 70 sold at 1.5% or pay per view. Hmmmm. Roll on traditional agency anyday. £5k profit on 70 homes. Id be worried that as a typical budget agent that his low fees are likely to reflect low negotiated offers that have cost his clients 10's of £housands
I agree….but what worries me is the fact that 70 properties have been sold by this company. An average fee of just, say, just £3000 means that another £210,000 has come away from the High St model to this online agent alone. We all rightfully question the "online" model but whatever we say there is now £millions in "high st agency"commission being lost to the online agents every year.
Hold on Wilko, unless I have missed something since when did the High Street model have a right to the £3000? Instead of worrying about the lost £210,000 you ought to be more concerned that probably 200+ traditional firms aren't up to the job of winning instructions away from a bloke who hasn't shaved and who thinks an ill fitting Primark Shirt/Tie combo is sharp enough to be on the telly.
I didn't say anyone had the right to any commission but it would be interesting to see how many instructions in your area have gone to online agents that didn't even call you(or any other high st agent) in for a val. I agree we shouldn't lose to online if we both had a chance to pitch but there must be plenty of vendors and who just go straight online with their credit / debit cards.
And since when has the high street model had a right to dig Primark shirt and tie wearers out?….admitted, they don't wear as well as some of the more expensive alternatives but if this guy's only made £5k in a year! -needs must and all that.
It really comes down to an agent's ability to know and control their patch.
DB came closest to saying what each of them worked out; 6.25% profit margin means the online model, which has to charge naff all to overcome the service objection isn't a profitable one. Investors like that aren't interested in 20% returns. Turn in 40% plus average otherwise it is just too much like work.
"I agree we shouldn't lose to online if we both had a chance to pitch…"
But, wilko – you are then wanting to 'force' a vendor to listen to a pitch that they have decided already they don't want to hear.
What about the new listings that pop up on t'internet with Agent 'X' – and wilco&co haven't been invited through the door… I'm sure that there are dozens of them for every vendor who goes cheap-as-chips – THEY are the ones that boil my water, as I'm sure they do yours.
It's a free market. We WORK in it – we can't DICTATE it.
People have the right to make mistakes.
what is it with Estate Agents under 30 – doesn't anyone shave any more?????