A new way of selling and letting properties has hit the streets of the UK. Or the information superhighway to be precise. A number of online estate agents have ventured onto the market to challenge the traditional high street agent. Instead of charging a fixed percentage of the sale price, online agents are charging a fixed fee of typically between £399 and £1,000. In return they advertise properties on the major property websites including Rightmove and Zoopla and provide the basic requirements such as floor plans with optional extras available at a cost. The rest is up to the seller.
One such recent entrant to the market is sellmyhome.co.uk which claims to be part of this "property revolution". Since they launched in December 2013 they have become the fastest growing online agent. They offer a basic package which includes online portal exposure, professional photography, floor plans and an EPC at £499 plus VAT. They also offer sellers the chance to describe their property in their own words - the "from the horse's mouth" service - with the aim of bringing back the human element to conveyancing. The 'human element' is certainly something that sellers and buyers alike are looking to reclaim and The Secret Agent exposé of various agents hasn't helped to improve their image. Sellmyhome conducted a YouGov survey which showed that 55% believe that the sellers themselves would give potential buyers the most thorough viewing of the property compared to only 21% who believe an estate agent would.
Historically estate agents were the only way of marketing a property. Now approximately 90% of buyers start their search on the internet. That's not to say agents have no role to play anymore, but certainly their role has changed. If estate agents are to compete successfully with online agents then they will have to be perceived as offering something in addition to simply marketing the property to the public as this can now be done online for a fraction of the cost. Accurate valuations and skillful negotiations will become paramount. Sellers with little time or unattractive properties may still see the benefit of using an agent, but for the majority with perfectly saleable properties the agents might have to fight a bit harder for their business.
Online agents have the benefit of few overheads and, together with the success of property websites, they can offer a low cost but highly effective service to sellers looking to save money. With the continuing rise in house prices and the knock on effect this has on SDLT, the cost of moving home is becoming increasingly expensive. It is hardly surprising that people are looking to cut costs where they can.
English property transactions are based on the principle of caveat emptor - buyer beware. Essentially this puts the onus on the buyer to ensure that the property has the benefit of all the necessary rights and is not subject to any onerous charges. Whilst the seller clearly cannot misrepresent the property, there is little they need actually do to sell other than prove their ownership. This sits uncomfortably then with the high level of fees charged by an agent on selling a property. In a sellers' market, such as the one we have been experiencing recently, the perception is that there is little that a seller's agent needs to do; properties are often being shown on a single open day with offers going to sealed bids.
In 2013 103,230 properties were sold in the UK according to HMRC. Approximately 5% of these properties were sold using private sales sites and online agents (RICS). If we take the typical value of a London home (£403,792) and a typical % cut which an estate agent will take (2%) this equates to an average fee of £8,075. Compare this to a fixed fee of say £499 and selling a property online begins to look very attractive. It may take some time before online agents become commonplace but in 5 years' time we would be surprised if the percentage of properties that are sold online hasn't increased dramatically.