Online estate agency – cure or virus for property professionals?
Online estate agency is growing by the day and 2010 seems as if it could well be the year of sale by property owner websites. These property portals have been set up for owners to sell their own properties by missing out the estate agent. They are selling their services with claims of 0% commision and 0% fees.
Google have recently entered into the estate agency market place which sent waves throughout the industry. The stockmarket acknowledge a threat to Rightmove property portal from Google by wiping close to 20 % off the share price of Rightmove shares in a short period. Google are, it must be said successful at most avenues they decide to go down and we can not believe that this new real estate on Google’s offering in the UK will be any different. We are generally big Google fans and look forward to their future property related developments.
Google entering the market will undoubtedly send shivers down the spine of some property portals but others will welcome them with open arms. Most have focused on the threat they could bring to the high street estate agent and what affect it will have for them. However, are ‘sale by owner’ websites a more probable threat to the quality and integrity of other related property professionals?
At first glance the natural competition would be with the estate agents and to an extent one would be correct in assuming this. However, other industry professionals related to the home buying and selling process may also be affected by the sale by owner type sites, dependant on their business model. These sites are springing up on an almost daily basis and vary from extremely professional sites to ones which are obviously less grand though to be fair do not perceive to be.
These websites which have a seemingly similar end result for the user I.e. allowing the individual home seller to market their property without a traditional high street estate agent, though can have vastly different business models within them. A couple of examples of these new breed websites:
Tepilo – is the Sarah Beeney backed site which has progressed fairly rapidly and allows users to list their properties for free. The site Tepilo was set up and run without making revenue for several months. Tepilo say they are finalising a sponsorship deal which should enable them to keep the website completely free for the end user.
Tepilo claim there is no advertising on there site though do have a dedicated page for their ‘partners’ who generally have some property related connection which of course Tepilo’s visitors may want to visit, is that not advertising? Tepilo say that they don’t take commission on any other services either and use this to reduce the cost of the services. This is an approach which could have been easily exploited and we commend Tepilo for their stance in this area. This direction and attitude certainly helps foster trust towards ones users and visitors.
Hablib.com – is a new site which is not actually ‘fully’ live for listing as yet and is currently trying to attract professional ‘partners‘ including conveyancers, HIP providers and surveyors. Hablib intend to utilise the obvious strengths of social media to sell or rent clients’ properties. If you take a look at the fees that property professionals must pay for being a supplier and the extra charges they must pay if they get an instruction via the website, it can be quickly be seen how and where Hablib.com will make a large proportion of their money.
A typical high street property conveyancer may charge approx £1000 combined to buy and sell. If this was the case the conveyancer would need to pay Hablib.com £100 (2% on a qualified lead and 8% on completion) of their fee if the instruction was gained via the site as well as the original listing fee. This part of their site and concept seems as if there will be many similarities with price comparison sites for professional services. However, with the fees payable to Hablib, whether the client will get the best deal for ‘required’ professional services, including price and quality is very much debatable.
Profit margins for property professionals have been squeezed throughout the ‘house price crash’; so can conveyancers for example really afford to pay an extra 10% cost without the service/product being negatively affected or raising their fee by 10% to take account of this cost? This is no different in the case of surveyors or HIP providers and it could be argued even more so in their cases.
Property professionals such as HIP providers, surveyors, conveyancers etc must calculate the cost of a ‘job’ no differently to any other industry. Some have undoubtedly made this calculation incorrectly or purposely ignored certain costs in order for them to able to justify lowering their fees to clients to win work. Many have had gone into administration due to this misjudgment often leaving a wake of misery including unpaid bills to suppliers and incomplete instructions which monies have been taken for.
Yet another ‘cheap HIP provider’, mysalepack went into administration this week quoting high overheads as one of the main reasons for this action. An attempt to get further information from their website is unfruitful and all that is present at time of writing is a completely white page.
Price comparison sites work for well for traditional retail products and some financial products, increasing competition and lowering prices. However, on the websites we have seen to date which monetize ‘property professionals price comparison’ the opposite has unfortunately applied for professionals services. We have seen and experienced constant lowering of price to compete with competitors which has often ultimately resulted in providers supplying what we consider to be a sub-standard product and/or service. Some websites actively promote an auction style bidding system with the obvious intention to lower the cost to the client. If this degrades the product or service can they really claim to be a consumer champion?
Unfortunately, the public’s desire for the cheapest of cheap, comparison websites aspirations to be make revenue and the service/product provider’s hope to increase turnover has led to allegations of poor practice. These allegations have included for example (and far from extensive) utilising untrained/inexperienced staff, adding hidden costs to products/services, misrepresentation of actual costs, lower grade product/service a ‘normal’ client would receive to name but a few. This was further supported very recently in the HIP and EPC industry when the Communities and Local Government found ‘EPC reports strewn with errors‘.
Sale by owner websites will undoubtedly be here to stay and can add something to the mix for sure, whether that will be a new ‘extra’ addition or be at the detriment of other areas and property professionals we will watch with interest.
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