In a move that will come as a major surprise to many in the industry, the Government has officially said it wants to encourage online-only estate agents.
It is to launch a consultation in the New Year.
In a new Treasury paper on boosting market competition, there is a section headed “Injecting innovation into the process of home buying”.
It says: “The Government wants to inject innovation into the process of home buying, ensuring it is modernised and provides consumers with different – and potentially quicker, simpler and cheaper – ways to buy and sell a home.
“Encouraging new business models (for example, online only estate agents) is key to enhancing price competition in the real sector, but these have yet to penetrate the market.”
The paper continues: “In addition, emerging findings from government research suggest that consumers incur costs of around £270m each year when their transactions fall through and they have already spent money on legal fees and surveys, and many more sales are subject to costly delays . . .
“The government wants to consider and address the way the real estate and conveyancing markets have developed around the existing regulatory frameworks, encourage greater innovation in the conveyancing sector and make the legal process more transparent and efficient.
“The government will therefore publish a call for evidence in the New Year on home buying, exploring options to deliver better value and make the experience of buying a home more consumer-friendly.”
The paper, A Better Deal: Boosting competition to bring down bills for families and firms, is presented by Chancellor George Osborne and Business Secretary Sajid Javid.
The paper also says that it is concerned about the cost of legal services. It plans a consultation by next spring on encouraging competition, specifically making it “easier to businesses such as supermarkets and estate agents” to offer services such as conveyancing, probate and litigation.
The paper is here
The section referring to agents is on page 14.
Comments (66)
OPEN LETTER TO THE RT HONOURABLE GEORGE OSBOURNE MP
Sir.
You don’t know me. You don’t need to. I am just a minute tooth on a teensy cog, which is whirring frantically away inside a mahoosive machine best known as the property industry – the same property industry you appear to want to meddle with and FUBAR under the poncey heading of “Injecting innovation”.
But I bet you DO know a certain chap by the name of Kevin Hollinrake, MP. He is now a colleague of yours. You’ve got a good man there – he was once a colleague of ours – AND I WOULD SUGGEST HE HAS FORGOTTEN MORE ABOUT THE PROPERTY INDUSTRY AND WHAT IT STANDS FOR THAN ALL OF YOUR ADVISERS AND HOUSING MINISTERS WILL EVER BE ABLE TO LEARN.
Take it from this teensy weensy cog – he’s your man to advise you on what your terminology “quicker… and cheaper” will REALLY spell out for homeowners…
…aka voters.
Of course it’s your call – but at the end of the day it will be your name that is remembered by every undersold vendor and every penny they feel they’ve lost will be down to YOUR “innovation”.
Speak to Kev. He’ll keep you right.
It seemed to me that the government thinks we are all the same, and so cheap is best. Little do they understand that the cheap agents often (but not always) give the worst service and are likely to miss-sell or under-sell the clients properties. Cheap is not always a good deal. People should be encouraged to choose agents based on service and value. Not just fee.
I’m sure the NAEA will stand up for their members.
Wish he’d just spend time sorting out the antiquated process of house buying in England ….. Gazumping/Gazundering is the most horrendous thing ever. English home buying procedures aid the general public in seeing EA’s as despicable people….
What a joke this is. Apart from the point that conveyancing needs innovation, which of course it desperately does. But what about the agents who justify their fees by achieving £15k more than what a £500 inc VAT onliner would achieve? Is this really doing the right thing by the vendor and ‘SAVING’ them money? The answer is simple. The industry needs to be regulated and licensed and has done for years and years. So only actual professional property agents who have earned their licenses and qualifications can provide a service to the paying public. That way it WILL NOT matter if they are online or high street, because if an online agent can do the job right and fulfill the property’s selling potential and the vendors ambitions to the very best standard, all for £500, then they deserve to be backed by the government and have all the success in the world.
Bit random, but has he considered how much the local councils will lose out on for business rates if we all shut our offices? I’m seeing so many empty units around my area, so the high street itself needs us to keep paying taxes!
Robert Maysaid:
December 1, 2015 at 11:01 am
The fundamental difference is that you have a register of buyers COAR don’t, they are wholly reliant on the vagaries of applicants looking at the portals.
Really? So NONE of them have ANY register of buyers?
This black and white statement of ‘fact’ is of course nonsense and based on your biased opinion and nothing else.
And, to belittle the portals with this statement “wholly reliant on the vagaries of applicants looking at the portals” shows that you fail to appreciate (or more likely don’t want to appreciate) how many serious buyers (to coin an OTM phrase) are among those ‘vagaries’ and how important they are not only to OA’s but also traditional agents.
Portals aren’t the be all and end all of estate agency but they are a massive help and trying to deny that or belittle those who use them is just plain silly.
Are you able to explain the correlation between portal traffic and completions? What about time on site and viewings? Until there is a link between the 1.37 billion internet traffic each year and the 900,000 completions the internet is vague.
In respect of COAR agents having no registers with 3500 activity centres to cover nationally with about 250 active applicants per centre it isn’t possible to run a meaningful applicant register.
I am no belittling anyone. that isn’t my style, I am simply pointing out the nonsense claimed to support an un-viable business models.
The Government seems to think selling a property is the same as selling a can of baked beans,and I fear yet again want to interfere in things they have little if any understanding. If they really what to improve the house buying process hears a few possible dos and don’ts
Dos
Get rid of nonsense EPCs, they are inaccurate at best and treat people like idiots. Do they really think we don’t know that we can save energy costs by insulating our houses!
Make sales legally binding at an earlier stage and hence make parties who mess others around liable for the other person’s costs. This is likely to reduce fall through rates dramatically
If the government really what to reduce the cost of buying a house maybe they would like to reduce or remove stamp duty, rather than expecting the rest of us to work for peanuts
Don’ts
Don’t think cheap conveyancing is the way forward. Good agent know this can lead to enormous problems for the clients involved. Conveyancing has become the poor man of the legal profession, resulting in a conveyancing by numbers approach to the process which is then carried out by junior / inexperienced staff. A recipe for trouble if their ever was one
Internet agents may be the answer for some. But a good local agent who understands and cares about his clients needs, still has its place. Many of us often become part social work part general adviser during the sales process we don’t just sell peoples houses. This sort of service and dedication doesn’t come “cheap” and you wouldn’t get this level of service with an internet company. So please don’t try and kill us all off
Don’t assume big is always beautiful. Many large well known companies have never made a real profit and rely on accountants to keep them credible/solvent. These days every Tom Dick and Harry thinks the can be an estate agent. Many of which think the model has to be big. Huge investment is been pump into these ventures many like the Prudential and others of the past I think are likely to lose their shirts
In the meantime please Mr Cameron don’t force me into becoming a baked bean salesman!
“emerging findings from government research suggest that consumers incur costs of around £270m each year when their transactions fall through and they have already spent money on legal fees and surveys, and many more sales are subject to costly delays . . .”
And what about the poor estate agent who has spent six months trying to hold a deal together, only to be let down by incompetent legal practices? Incompetent solicitor gets paid. Agent? Sod all! I’d say our loss on average is far greater than that of the would be purchaser. If they want to bring in real innovation, start by overhauling the stupidly ridiculous conveyancing processes.
Anyone ever heard of Optihome ?
They thought they could crack the UK market with a hybrid online. they sensibly pulled out when they realised they couldn’t make it work,
I’ve not seen a single online or hybrid version that comes close to the basic estate agency model.
The Estate agency business is similar to a dentists in that it serves a local community. Online marketing or newspaper, TV or radio helps to support the marketing but it isn’t the be all and end all.
For example I now regularly market a property for a week or two directly to my database of registered buyers before I let it go live on the internet as this gives the registered buyers a benefit for taking the time to register with me in the first place. This also gives me good reason to keep talking to my buyers, because guess what, it’s how I get referrals for new instructions.
I recommend all agents hold their stock for 10 days before submitting live to the internet. Do what on line agents cant and wont do, pick up the phone and sell !
The fundamental difference is that you have a register of buyers COAR don’t, they are wholly reliant on the vagaries of applicants looking at the portals.
The problem with this debate is the government is focused on price, when the focus should be on customer service.
If customers get an enhanced service, then the price is not regarded as excessive, because the service has a higher value to them.
The problem with many online offerings that have failed or failing (eg making massive losses and are being propped up by seed/crowd funding) is they put price over service.
To that end, it’s a race to the bottom. Someone will always do it cheaper, and there is no money at the bottom.
Our model deliberately charges the same as traditional high street agents – with a mix of home and high street. We’ll win or lose on our ability to stand toe to toe with local agents based on service. That’s how it should be.
“The problem with this debate is the government is focused on price, when the focus should be on customer service.”
I completely agree!
bring the costs down so they can increase the tax.. starting to not trust this govt. been nothing but trouble to my business since they came in to power again. And I voted for them!!! doh.
Quite frankly after nearly 50 years in the profession I have yet to find any government that really understands the role of a proper ‘professional’ estate agent. If it were not for the true estate agent nurturing the sale through then there would be very many more fall thorughs. Using an on-line ‘house seller’ is no guarantee that the sale will go though. In the last two or three years we have found that we have been doing far more of the ‘legal’ work, sorting out boundaries, drawing proper plans for conveyances etc, etc, all work that should have been done or organised by solicitors but who just throw their hands up at any slight impediment, let the sale fall through and then still charge their client an abortive fee. Government would also do well to look to the lending sources who are still changing the goal posts, after issuing mortgage in principle certificates.
If Government persue the line of promoting online agency only then the Vendor will loose out even more than now as they will be paying a fee up front, still with no guarantee of a scale, whereas we as agents don’t get paid until we sell. Not only that we invest our own money in promoting someone else’s property, again with no guarantee of recouping that figure. If Government really wanted to bring the costs down then they should allow agents to have a minimum listing fee that everyone had to pay regardless and do away with the ‘no sale no fee’ syndrome. That way our basic costs would be covered and we could reduce our sale commission fee considerably we would not be having to cover off abortive marketing and sales cost through the sales that do go through.
Perhaps now is the time for the RICS and NAEA to wake up, educate Government and fight their members cause properly.
Rant over – time to earn some fees.
very well said. I agree whole heartedly
easternagent
*what you say is VERY true
With respect the bit you miss is that from OFT through to the BIS/Treasury document, the Gov want (as I understand) hasn’t just been about changing the traditional Hg St agent to an online only future.
What Gov has always indicated is that the web should allow innovation to allow new models to happen. This could be new hybrids OR new tech that agents could use to facilitate consumers.
Even RM and Z were new at some time. Changing the way data and in particular #bigdata can function is like replacing a petrol or diesel engine with a new electrical motor to drive function.
There does need to be changes, for example lenders can (and do) withdraw mortgage offers between exchange and completion.
The legal process often takes far too long with leasehold properties, often the agent can not even tell me what the service charges are when I view a property – HIP done right would have helped a lot with this.
Searches can take far too long.
There is no effective competition on charges between agents.
Sellers tent to go with the agent that say their property is worth the most – there should be a requirement for agents to tell vendors a) how the resulting selling price relates to the valuation they gave on past sales. b) how long past sales took.
ringi time and time again you astound me!
1. Mortgage offers withdrawn between exchange and completion – please give me one documented evidence of this ever happening that does not involve mortgage fraud. I have been in the property industry 20 year and NEVER had a mortgage offer withdrawn between exchange and completion.
2.Legal process takes too long – Yes agreed but as for agents not being able to tell you a service charge, i just think you are looking at a poor agents most agents list the charge and the lease term, HOWEVER some are resistant as if they do not put a well worded disclaimer and their figures are out, no doubt buyers like you will look to sue them.
3. Searches are not that problematical if you have an organised solicitor who take money asap and applies for them. Its not he search time its the poor quality conveyancer holding it up.
4. No effective competition on charges between agents?! – Err think you will find fees use to be 2.5% in the past and now very easily you can get a fee sub 1% its a fee battle going on out there!
5. Figures are available for selling price vs valuation price, if sellers want to find these figures and do the research they can. They can also see how long sales took.
I don’t think the UK property market is ready for online agency the way it thinks it is.
Homeowners need best advice and best practice from a knowledgeable professional. So far on line agencies are chasing their tales trying to generate instructions but failing to deliver on absolutely anything else.
I have come across one or two individuals who have successfully sold their property online and they did it by asking local experts (estate agents) for their take on the price, then because they were both working in advertising & marketing has a fair idea how to present the property and followed through with a sale.
That’s 2 in the last ten years.
I am sure online agency will one day take over, but not the present business model. There is a very good reason why agents work on no sale no fee and why on line cant.
Can you work it out?
The document reads:
It is the government’s responsibility to help foster the right conditions for competition and
investment across the UK. This means removing barriers
Bad news for portals that place trade cartel like restraints on agents then like AM/OTM.
Maybe AM/OTM should remove silly restraints and cartel like ways before government that want a level playing field make them. A caution too for agents who join such restraining models that operate in an anti-competitive way.
For goodness sake Trevor, give it a rest……..people on this forum might start to think that you actually do believe in the am/otm cartel nonsense!
Ignore him, he’s a buffoon.
Why can’t GOVT just naff off out of our industry? It’s been shown time and again that any interference from the politicos in pinstripes just queers the pitch. By all means introduce proper laws and regulations to keep the bad boys in check (or better get them out) – but interfere with the workings of the market??!! Why don’t they concentrate on getting the likes of on-line get-what-you-want-cheaper-and-now Amazon who seem hell-bent on wiping out large swathes of the high streets of this country – to pay their fair share of taxes ?
If G.O is going to do anything, change the house buying and selling process it’s far to antiquated and has nothing to do with an owner selling via a high street estate agent or online estae agent
David, agents dont need to suffer high portal costs and lack of listings. If only agents came together they’d fix their own industry and achieve better fees.
What a ridiculous reply Trevor……I suspect that David was referring to the legal system of sale.
They may wish to read this story
http://www.propertyindustryeye.com/poundland-founder-takes-1-5m-off-asking-price-of-property-listed-with-online-agent/
I’m not bothered either way what happens. We do what we need to do and more to sell and let properties, but if the vendor or landlord are unreasonable in their expectations it can become almost impossible.
Thankfully we manage those expectations from the start and we do alright, hence we have no stock(AGAIN!)
Have a good day everyone
Excellent idea for the government to get involved with some bright ideas on how to get the property market modernised and make the whole process quicker, simpler and cheaper. JUST LIKE THEY DID WITH HIPS!!!!!!!! Lets face it Estate Agents may be low on peoples list of trust but at least they are still higher than politicians.
@jmeapps
Agency is made up of three key parts. Government make the rules/legislation. They can say who can trade and how they trade.
Consultations give industry a platform to voice innovation and suggest restraints on rogue trade.
Before the OFT passed powers to the CMA and NTSEAT they indicated a want for new innovative and online models.
Definately takes the AM/OTM ethos in an anti-competitive cartel like stance.
the trouble is you will be very hard pressed to find one of these innovative models that is actually earning any money. I appreciate Blair and Brown ran the economy with a credit card but economic growth isn’t created by spending lots of cash that isn’t being earned. No profit = no growth!
I can show you several Robert. The common factor is UK MLS which gives them more outlets via B2B and also access to others listings they wouldnt have had on.
Name a COAR agency that is making money Trevor
OPTION HOMES
Robert. These guys are continually excelling. Last week thay paid another INEA agent a sales comm. Their pitch is instruct us as your main agent and get many agents to increase exposure.
They are doing traditional fees in sales and in lettings now achieving 15% management fees.
Near 20 years joint experience of partners and theyve dropped main portals
They aren’t COAR Trevor and Endole which is only up to date to 2013 suggests they are not making money ( that might have changed)
Robert. Come to London Dec 17th and I’ll introduce you to them. The guys are operating today a good model for tomorrows hybrid agents.
I’ll also have the CIO officer there from the biggest MLS in the USA (3-4 times bigger than RM) other agents coming too to understand where MLS could take the UK.
I apprenticed into Agency with a firm that was running MLS, Devon Team so I understand how MLS works and why it doesn’t on a large scale. It works for small cooperatives where there is genuinely no cross over of patch but beyond that the question of commission inevitably becomes an issue.
Then you don’t fully understand it Robert. MLS opens up more local listings to agents who may otherwise be restarined by instructed agents using sole selling agreements.
It works if pitched right to give client’s properties FS/TL greater exposure
It works when data isn’t retrained by interoperability blocks, in particular the sole directional RM schema.
Great Trevor, it isn’t me who needs to understand the benefits of MLS it is agents and it is your job to convince them.
Putting an exclamation mark doesn’t mean it’s correct. The line no profit = no growth is utterly ridiculous. Making a loss in early years is a widely accepted practice – It’s called revenue investment. Uber – has never made a profit. Twitter has never made a profit. AirBnB made a loss for the first four years. Have none of these grown? The entire point of scalable businesses is that they make profit at scale not at start out.
The discussion was about what? Uber, AirBNB or Estate Agency where people able to sell move every not very often. Uber and Air both solve micro problems, multiple times the growth will come from small margins at low volumes. Agency isn’t like that there won’t suddenly be 3,000,000 sales because of onliners don’t offer a service but do it cheap.
This scalable business model started last century and really got going with Zoopla providing valuation data to any inexperienced no-one. What is actually happening? 2% market share has rocketed to what? under 3%.
Revenue investment? how much revenue is can be invested if the fixed costs are not being covered?
Innovation is definitely the way forward in the Estate Agent sector however, the “Hybrid Model” provides greater choice, value for money and consumer confidence for vendors and buyers alike.
That comment Movein is simply a number of meaningless words strung together. I would love for you to prove absolutely any one of them!
* Value for (consumers) money doesnt have to mean cheaper either. It can mean better service based still on traditional fee structures.
Ahhh – another comment from this (MoveInMove)Outfit about how the ‘Hybrid Model’ is the new Hovis.
So – I ask them again:
REALLY?
Then why does your entire register of properties For Sale AND To Let appear to total THREE?
And why are you displaying the OnTheMarket logo when you do not advertise on the site?
Same goes for Zoopla, for that matter?
Is this deception what you describe above as “innovation”?
What “consumer confidence” are you expecting to muster if you make false and misleading inferences on your own website as to the service you are able to provide?
Simply using the term “consumer” proves to me that you haven’t merely lost sight of the rabbit…
…you never even knew what the chuffin bunny looked like in the first place.
Great news for onliners and innovation in general. Yet another headwind for the incumbents
Go an have a look at Estatedirects trading figures since 2011 to see how a successful retail entrepreneur is really shaking it up with his online Estate Agency, What with being £150k down on the unsuccesful sale of his property and having burnt about £800k more than he’s earned in 2 years is the real innovative future in streamlined liquidations and administration?
What’s your point Robert? Would you like to quote some of the profit figures of that other hugely unsuccessful online retailers business, Amazon?
The point is Estate Agency is service industry reliant on a duty of care towards a client who sells now on average once every 18 years. The disruptive strategies of online retail do not cross over into Estate Agency.
Mr Smith who has been very successful in retail has been trying to disrupt Agency since 2011 and has only succeeded in burning cash and not selling his own home. A shining example of benchmarking? Nah!
Robert, agreed, some can spend money on stack it high, sell it cheap.
But there are some oustanding hybrids coming through who dont do all portals and dont have Hg St offices. One in particular is Options Homes run by Tony and Martin, both experienced agents, who have found B2B to be more valuable than being on main portals.
Traditional Agents without traditional premises (hybrids) rely on exactly the same qualities and officed agencies, they spend as much on replacing subliminal awareness of an office on other things.
You speak as if you know a lot about Hybrid agents, don’t tell me you have made the jump?
If I may, the only real difference is not paying for a shop window. Perhaps where your Hybrid agency is based you still get a lot of walk ins. In my area walk ins account for approx 7% of all applicants and 11% of clients at a high street location. I won’t go into detail, in short the figures don’t stack up with applicant enquiries from RM & Z and other forms of marketing for clients against expenditure for that window.
What works for well established agencies does not work so well for new businesses trying to find a niche. Lets face it, we all have to start somewhere just like no doubt you did.
I read the Eye every day and I do not fully understand this high street vs online agency thing. It’s happened, it is happening, who knows where it will go, we are all alive, we all have jobs, we are all earning money for our families. New business fail and succeed every day whether they have a high street address or not. Move on!
I don’t need to be one to understand them, read their financials or be aware of the evolving competition of agency.
The difference is measured ITZA, staff have to work somewhere whether in primary, secondary or a tertiary location the value of the window can be measured.
I have watched an agent transition from plush secondary offices to pure online, she sold £17,000,000 of property last year at above area average commissions, the transition is only possible by spending the same if not more than the cost of her offices on press advertorials, better web site better SEO etc
Local agents without window displays can be as strong if not stronger than window display agencies but anyone starting off pure online faces a far bigger challenge to become know and accepted in an area.
So just let her get on with it.
I do and cite her as a beacon of best practice. An example of how things can evolved and in what circumstances.
There is a world of difference between what she does and the area reps who don’t know the area, have no local knowledge, look their advice on value up on Zoopla and then simply list on the portals.
And you can assure me that 100% of high street agents are as good as your firm and her firm? As well as 100% of online agents provide a slack service with a lazy approach to valuation?
I think if you apply tar with a brush you will be 100% correct.
I think it is far easier to know you are better than some/most online/offline agents and just get on with your life.
That isn’t enough, until unqualified passive intermediaries stop calling themselves Estate Agents and claiming to be local, qualified, experts or specialists and until regulators like the ASA cease their bias towards such claims people like me have a right to a say.
Well rogue agents have been around some time.
it is about time they stopped being around and allowed the honest, decent, likeable people enjoy the benefits of their profession.
I totally agree on the basis we are drawing a line to mark the difference between ‘high street/hybrid/online’ and ‘rogue’ agents
I have a very clear demarcation between honest and dishonest, I don’t care how a business operates as long as they operate ethically, honestly and in the best interests of the industry and their clients.
We got there in the end 😉
Online models based purely on price will not work, but I’d be careful not to write off Hybrid models yet, when any income figures you can access Robert are 1 if not 2 years out of date (companies house accounts). Making assumptions based on 2013 is dangerous. Consumer habits have moved on dramatically since then.
Who is writing off hybrid agents? I mentioned the 2013 date because the 2014 results are overdue and haven’t been posted.
Consumer habits of purchasers might have moved on, but what about the habits of vendors?