It’s the latest chapter in a turbulent few months for the online estate agency sector, which has seen other well-known brands suffer significant difficulties or, in some cases cease trading altogether. With big names such as PurpleBricks seeing their share price fall significantly from their peak in 2017 in recent months, and previous online rival Emoov going into administration in December last year, the online agency space seems to be proving far tougher than many had previously anticipated. In fact, according to latest figures from Statista, sales via online estate agents in the UK still only account for less than 10 per cent of all residential property transactions, despite the first property sales website launching in the UK in 2000. That’s right, it’s been possible to sell your home online, one way or the other, for nearly two decades.
Yet the overwhelming majority of vendors in this country still prefer to use a traditional estate agent. For the moment, at least.
The latest move by Housesimple is the result of a pilot across Yorkshire and the North West that was launched earlier this year. As a result of the success of the trial, the ‘fee free’ charging model will be adopted permanently going forwards, with roll-out across the rest of the UK planned to start in the second half of 2019.
Based on the average property price in the UK of £226,798, and an average estate agency fee of one per cent plus VAT, sellers could save themselves nearly £2,800 on an average transaction by using the Housesimple service.
Instead of paying commission on the sold price achieved, vendors are offered a range of services, including mortgage advice, conveyancing and utilities switching, from which Housesimple make referral fees.
However, sellers who list their properties with Housesimple and buyers who purchase properties marketed by the online agent are under no obligation to use these services, and there are no ‘tie in’ penalties.
Online agent Housesimple have ditched commission charges on sales made via their website
Like most estate agents, we are generating revenue from ancillary services, but as we don’t have expensive branches and we use technology to make us more efficient, we can pass on these savings to our customers by not charging fees to sellers or buyers
Sam Mitchell, CEO of Housesimple maintains that the service is as effective as using a traditional estate agency. He claims that the valuation, marketing and sales progression services once a sale is agreed are as one would expect to be offered from a traditional ‘bricks and mortar’ agent, with professional photos and floorplans included as standard.
Properties which are marketed via Housesimple are listed on the main property search portals, including Rightmove and Zoopla.
Sam maintains that the only significant difference to the traditional agency model is that sellers are charged should they decide they would prefer an agent to manage the viewing process instead of showing prospective purchasers around their home themselves. Housesimple charge each accompanied viewing at £35, plus a one off £50 fee for ‘key holding arrangements’.
He explained: “Like most estate agents, we are generating revenue from ancillary services, but as we don’t have expensive branches and we use technology to make us more efficient, we can pass on these savings to our customers by not charging fees to sellers or buyers.”
At the time of writing no official figures were available from Housesimple in terms of how many properties were actually sold during the zero-commission pilot scheme, either in terms of sales exchanged or completed transactions.
House for sale: The overwhelming majority of vendors still prefer to use a traditional estate agent
However, Sam confirmed that: “We became the largest agent in Yorkshire by new listing numbers and now have over 1300 properties on the market in Yorkshire. Sell-through rates are in-line with expectations of industry norms.”
This being the case, with the industry estate agency average of completed sales at 35 to 40 per cent of stock listed over a twelve-month period, that would suggest Housesimple possibly sold over 450 properties as a result of the zero-commission pilot scheme since its launch.
However, with no official data to corroborate this either way, it’s hard to quantify the success of the pilot until such times as concrete figures are available.
In some respects, it could be argued that the model Housesimple has adopted of not charging the consumer directly but instead making their revenue from referral fees is very similar to that of a mortgage or insurance broker.
Fees charged for services provided by companies in the financial services sectors are far lower than the average estate agency commission, if indeed they are charged at all. Instead, income is generated from fees paid by mortgage lenders or insurance providers to the broker or adviser on completion of a successful deal.
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Others in the traditional sector of the estate agency industry, however, suggest this latest move by an online agent signals the continued ‘race to the bottom.’
Martyn Baum, past President of NAEA PropertyMark commented: “The existing estate agency commission-based charging model provides the vendor with the peace of mind that the agent is incentivised to achieve the best possible price for the property, and that the transaction actually completes. As a results-based service, if they don’t deliver, they don’t get paid.”
Martin asked: “Whilst on the face of it, no commission might sound like a good deal for someone selling their property, how would an agent who doesn’t charge or receive a fee directly from their client be motivated to act in their clients’ best interests?”
But as Housesimple don’t even charge joint sole agency fees, it perhaps provides homeowners who are contemplating selling with the opportunity to instruct both a traditional agency and an online player, with no initial financial outlay and minimal risk.
As Sam Mitchell concluded: “We want people to list their properties with us because they choose to do so and believe we have a better model. Not because they know that they will have to pay a penalty clause if they decide to dis-instruct us or lose any fee they’ve paid up front to market their property in the first place, as is perhaps the case with other online agencies.”
Ultimately, one might suggest that, in offering a commission-free service, Housesimple are providing the consumer with a cost-effective alternative to other models, and therefore more choice in terms of the way they can sell their home. Conversely, one may be tempted to refer to the oft quoted proverb, “Good. Fast. Cheap. Pick two.”
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