After decades of being accused of having their cake and eating it, the High Street estate agent is under attack.
A small but growing band of homeowners are ditching the High Street middle men and embracing DIY options for homebuying and selling instead.
And in a sign that the online selling market may be gaining some much-needed traction, the DIY sites are attracting big business. Earlier this month, easyProperty raised £16million from institutional investors, while Purplebricks listed on the alternative investment market today.
Purplebricks floated at a hefty valuation of £240m, but the 100p-listed shares closed the day down at 93p.
The end for high street agents? Online agents claim they can beat high street prices
A whole host of online estate agents have emerged in recent years, offering homeowners flat fees and reduced costs for selling their property compared to traditional high street agencies.
Further interest in the sector was stoked last month when online agent Hatched was snapped up by giant estate agency group Connells.
Popular with the crowd
Crowdfunding in particular has become a popular route for online agents wanting to raise money and investors wanting a piece of the action. In September, eMoov raised £2.5million via equity crowdfunding site Crowdcube.
easyProperty, which falls under Stelios’s easyGroup brand, raised £1.3million in a crowdfunding campaign through the same site last year and earlier this week the company announced a £16million financial backing from institutional investors, including London hedge fund Toscafund.
Rob Ellice, chief executive of easyProperty, says the firm is also considering a public listing in the future.
He added: ‘This is not something we would look at for six to 12 months. The funding we have now gives us extra flexibility.’
These new investment opportunities offer an alternative to more established property investment vehicles, such as funds with exposure to big high street estate agency brands such as Countrywide and Foxtons.
Listing: Purplebricks is set to be the first online estate agent to list on the stockmarket
The online estate industry toasted its first-ever public listing on December 17, when Purplebricks joined the alternative investment market.
Purplebricks, describes itself as a hybrid agency as it combines regional property brokers and online listings.
It has major backing from fund manager Neil Woodford through his funds and raised money from other asset managers, including Artemis and Old Mutual.
There is also the prospect of high street firms moving into the online space.
There could be more encouragement for competition in the sector in the New Year as the government is set to launch consultation on encouraging innovation in the home-buying process.
A Treasury report earlier this month said: ‘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 estate sector, but these have yet to penetrate the market.’
What is the difference between an online and high street agent?
High street estate agent fees can vary from 0.75 per cent to 3.5 per cent of the sale price, according to the Homeowners Alliance, which can easily add to the cost of a transaction.
Consumer watchdog Which? claims the national average estate agent charge is 1.8 per cent. Using the national average charge, if an estate agent helped you sell your house for £250,000, you would owe them a fee of £4,500.
It’s highly likely that you will then have to pay the VAT on top of this, as agents often do not bundle this in. This bumps up the cost by another 20 per cent.
Services such as easyProperty, property guru Sarah Beeny’s Tepilo, HouseSimple, Purplebricks, and eMoov are just a few of the online-only firms offering flat fees for those willing to sell their property online.
An online estate agent can provide many of the services a high street agent does such as arranging viewings, taking pictures, creating floor plans and negotiating with buyers.
They charge a fixed fee, sometimes paid upfront or after the transaction, and some will also list your home on the big property portals such as Rightmove, Zoopla or OntheMarket.
For example, HouseSimple provides a service from £395 plus VAT – a huge saving compared to the £4,500-plus high street charge – that includes valuations, viewings and a listing on the RightMove and Zoopla property portals.
However, these fees are charged upfront so if your house fails to sell, you’ll be out of pocket.
And cost is not the only issue for sellers to consider.
Traditional estate agents argue they can add value for their clients by providing local knowledge and a database of ready buyers and can help achieve the best price for your property.
Research by estate agent trade publication Property Industry Eye recently found examples of properties having suffered £100,000 price cuts after long listings online as well as instances of properties being advertised for higher prices with online agents while being available more cheaply with high-street agents.
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