Why the shine has come off online estate agencies

16/05/2019 12:08:41

A senior property sales industry figure has cast doubt on the future of online estate agencies like Purplebricks, suggesting their fixed-fee structure doesn’t appeal to most sellers.

James Max, a chartered surveyor and property investor who presents the weekday Business Breakfast programme on TalkRADIO, said Purplebricks' expansion into the US and Australia before proving its sustainability in the UK, could hasten its demise.

Writing in The Spectator magazine, Max said the recent departure of the firm’s founder and a drop in its share price signalled underlying problems with the company and the sector in which it operates.

Describing Purplebricks’ business model as being “full of holes” and its marketing budget as “too flamboyant”, he suggested its founders had underestimated the value of human involvement in the property sales process.

He said: “You can only get the right price for a property if you know your market and can create competitive tension. That, ultimately, is what a good estate agent will do.

“And a good estate agent has a reputation, track record and bundles of primary data of deals they have done to push the market. And with a percentage fee is motivated to sell at the best price possible.”

Max said estate agents were “the oldest form of search engine” picking up information from potential buyers to benefit sellers. He added: “A keen agent will spot who’s hot to trot, will forever be qualifying the data, gauging your response, working out your ability to pay, your financial position and therefore whether you’re a prospect, or simply a time waster.”

The radio presenter, who has been on the board of a traditional estate agency as well investing in a  “disruptor”, online service with a fixed fee offer, concluded that online agents will never achieve the same results of their high street counterparts because they are not incentivised to achieve the best possible price for their clients.

“For most estate agents, it’s no sale, no fee. Online agents have a fee regardless of success,” he said. “They aren’t as motivated to sell. Then there’s the issue of getting the best price. If an agent isn’t motivated why would they push?”.

He added: “The simple answer is that online vendors are unlikely to achieve as good a result as a top estate agent. In a fast-moving market where everyone knows all the deals going on there’s an argument for saving a few pounds. When markets get tricky? That’s when an agent earns their fees.”

“A good estate agent will tell you things you may not want to hear; that some of your internal decor is tacky; that your home looks like a total mess and needs to be cleared up or that your taste in wall art is putting off buyers; or that a market has fallen away.

"That personal touch is what you need. A good estate agent has real life data on who’s offering, who’s in the market and what kind of deal is going gangbusters.”

For advice on buying or selling a property call your local Scottish property Centre branch or visit www.scottishpropertycentre.net

 

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