5Live Investigates: high street agents vs online agents

publication date: Feb 5, 2018
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author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Kate on 5Live Investigates

I was on 5Live investigates this weekend, as they were looking into online-only estate agents and whether their “cut price, up-front fees really do offer value for money”. The online business is booming but this is a cause of concern to traditional high street agents.

As such, the show was investigating whether online sales are exaggerated and advertising is misleading, in an attempt to uncover whether using an online/hybrid agent really is a good idea or simply a ‘coin toss’

Key points:

  • Traditionally, high street agents charge a commission of 1-2% once a house sale goes through

  • Online/hybrid agents list your home on portals like Zoopla and Rightmove, charging you a fixed fee, usually payable up front

  • The up-front fee is usually lower than a high street commission, but is payable whether the property sells or not.

  • The programme examined a research note from investment bank Jefferies, which suggests that 51% of customers who use Purple Bricks could be throwing money away.

Stockbrokers Jefferies examined Purple Bricks’ listings for November 2016. They checked 10 months later to see which of them had been sold, according to official land registry figures. Their data suggests that the figure was just 51.6% - significantly lower than the company’s claim of 88%, made on the BBC’s Moneybox programme.

Purple Bricks later revised the figure to 78% sales conversions, which it said "more accurately reflects its sales performance”.

Lee Wainwright of Purple Bricks responded by questioning the legitimacy of the Jeffries research, claiming it was unfair. He then went on to say that Purple Bricks was offering customers a better way of doing things than traditional agents.

He reiterated that the 78% figure related to properties ‘sold subject to contract’, which doesn’t necessarily mean the sale completed. This means people could be paying a fee up front for a ‘sale’ that is never actually achieved.

Stream or download 5Live Investigates here

Case study 1: Jamie & Robin – Purple Bricks
Jamie and Robin initially liked what Purple Bricks offered, but it ended up taking 12 months to move.

They liked the first agent they dealt with and paid a flat fee of £849, but unfortunately that agent then left the company and things started to go downhill.

The new agent didn't introduce themselves, nor did they respond to calls, so the couple complained to the company. They were told the new agent would be replaced but no replacement ever materialised.

By this point, Jamie and Robin were tied into their contract with Purple Bricks, who didn’t seem to be doing anything to sell their home, and they felt stuck. The only thing they did like was the app that came with the service – a very expensive app at £849!

There were also problems with the legal company they were forced to use in return for delaying payment for 10 months. They switched because of the poor service and were then charged a penalty for doing so.

Verdict: Jamie and Robin felt the customer service was shocking.

What have I paid for? An app, possibly some communication with the buyers, but we had to do all the work ourselves.

Purple Bricks response
Mr Wainwright apologised for the issues faced by the couple but stated that Purple Bricks had 97% positive feedback on Trust Pilot from 36,000 reviews.

A happy customer!
The BBC did have feedback via social media from people who were satisfied with the service they received from Purple Bricks. One happy customer, Louis, rang in to say the Purple Bricks agent was a local person with good knowledge of the area and he was convinced he had saved thousands by using them instead of a traditional agent.

Case Study 2: Matthew – YOPA
Matthew used YOPA because he thought it would save him some money and they seemed to offer a decent deal. He admitted he was a little concerned that YOPA got the fee of around £1,000 after six months, whether or not the property had sold, but felt it was worth the risk.

Of the six viewings they arranged, three didn't turn up. Matthew said he was chasing YOPA constantly but felt they were less responsive once the money had been paid and that there was a lack of support.

YOPA said they had communicated with Matthew and that he had received an offer for 95% of the asking price. Matthew disputes this figure.

He went back to a traditional agent and had five viewings within two months, all of whom turned up. He usually receives feedback from the agent within 48 hours and says he is much happier with the service.

Stream or download 5Live Investigates here

Kate’s take
From my perspective, online agents have been good news for consumers. They have challenged the traditional agents’ business models and customer service levels and they, in return, have responded by improving their customer service.

For example, Noel from Halifax in West Yorkshire - the agent featured towards the end of the show - now does all the initial valuations himself, rather than employing someone else to do this for him. The online agents have also kept traditional agents’ pricing highly competitive.

However, it’s clear from the case studies that the honeymoon period is over for online and hybrid agent disrupters. Much as the downsides of Uber and Airbnb are now well known, it’s the same for estate agents.

The reality is, consumers have to accept that cheaper isn’t always better.

Be careful of the ‘saving’ comparisons…

ASA warn consumers after taking Purple Bricks and House Simple to task
The Advertising Standards Complaints noted that the number of complaints upheld against all agents went up by 45% in 2017. It found that agents aren't being clear about fees and aren't comparing like-for-like services in advertisements. Examples of this include:

  • Not adding VAT to prices

  • Not being clear about fees

  • Not having local agents, despite saying they do.


Complaints upheld:
A complaint was upheld against online agent House Simple’s TV advert, which claimed sellers could save £5,000 by using their services.

The ASA found that they had compared House Simple's basic fee with the full service offered by other agents, which includes things like accompanying buyers to viewings, and the distinction between the services was not made clear.

Purple Bricks were also reproached for not clearly explaining their fees in a TV advert.

The ASA is going to keep a close eye on all agent advertising and, in December, the Committee of Advertising Practice (CAP), which writes the rules on advertising, warned that agents could face criminal prosecution in the future.

Kate’s take: Make sure you compare like with like and do the sums!
On the Purple Bricks site, there is a ‘dial’ that shows you how much – in theory – you can save.

However, it isn’t comparing like with like.

For example, here are some of the claims Purple Bricks make:

  • They claim the average price is £280,000, but this is based on asking price, not what properties actually sell for.

  • They use 1.5% as a traditional agent’s commission, when most agents now, charge 1.2%, including VAT.

  • In addition, all traditional agents offer viewings within their fee; with Purple Bricks it’s an added extra.

The reality:
Taking the latest sold property price data from UK HPI, the average house price is not £280,000, it’s actually £240,860, so the Purple Bricks ‘calculator’ is suggesting a higher saving than can actually be achieved.

In their example, taking the lower valuation of £240,000 and using a 1.2% agent commission, instead of 1.5%, then accounting for the additional cost of viewings, although there are still savings, they are much reduced:

Current claims of savings when selling a £280,000 property:

  • Estate agent commission: £3,351 (£280,000 x 1.5%)
  • Purple Bricks price of £849
  • That’s a saving of £2,502.

Taking the real average of £240,000:

  • Estate agent commission: £2,880 (£240,000 x 1.2%)
  • Purple Bricks price of £849 + £300 for viewings = £1,149

The real saving of £1,731 is 30% less than Purple Bricks are suggesting (outside of London and surrounding areas)

Taking Purple Bricks’ fee for properties within London & the surrounding areas – which is £1,199, plus the £300 viewing fee the saving is £1,381 - 45% less than the £2,502 Purple Bricks is suggesting.

It’s also worth realising that if your property sells for less than £100,000 - and many properties in Wales, Scotland, N.Ireland, the Midlands and the North do – you won’t save any money at all using Purple Bricks if the other agent is charging 1.2% or less.

As we heard from Paul, the agent in Halifax, he also has the capacity to negotiate and traditional agents may match or reduce their fee, so it’s worth asking.

Stream or download 5Live Investigates here

You still pay if don’t sell
This is the REALLY big difference between online and high street. Even based on Purple Bricks’ own ‘sold subject to completion’ stats, if you are one of the 20% of vendors who don’t sell, you will lose money because you will still have to pay them, whereas traditional agents operate on a ‘no sale, no fee’ basis.

That being said, we don’t actually have any data on how many of Purple Bricks customers end up not selling and having to pay anyway. This is still being disputed, however, in the wider industry, the statistics are typically 4 out of 10.

This means that, depending on whether vendors use Purple Bricks or another internet agent to sell their property, between 20% and 40% end up out of pocket.

Unfortunately, as the agents aren’t being transparent about this figure - nor do they seem to be able to find a way to defend it – it remains to some extent a ‘coin toss’ as to whether you actually save money with an online agent!

Don’t panic, this is all good news for the future of estate agency and buying and selling!
No-one should worry too much about these issues, mainly because - as with any disruption - the market will eventually sort itself out.

My thoughts are that the business models of traditional and online agents will merge, so this is simply a short-term issue. I think there will end up being three levels of service:

  1. Marketing your property for sale – you do the rest. You will pay a fixed up-front fee or a higher price for ‘on sale’ with a limited time to market.

  2. Marketing and getting to offer stage, including viewings and negotiations – you then take the offer to completion. That would be priced as above or on a commission vs fixed-fee deal.

  3. Full service, as traditional agents offer today. This is likely to be a commission versus fixed-fee deal, with the choice to pay up front or delay, but if you delay there will be a price to pay.

Secondly, there is so much going on in the industry technology wise that consumers will be much better looked after. For example I’m working with View My Chain, which allows the industry (who pays) and the consumer (who can access the service for free) to see exactly how their purchase/sale is progressing, informing buyers and sellers when searches are ordered and received, mortgages have been applied for and giving estimates of when you’ll complete, based on average timings.

And finally, the 5Live investigation SHOULD be the final call for the government to regulate agents. This, as with lettings and property management, should mean that all agents are trained to a level that ensures they deliver a good minimum level of service, be they online, hybrid or traditional.

With the above changes - changes the government is already looking at with their current call for evidence - I firmly believe in the next 5 years, the home buying and selling process will see a substantial improvement.

How to sell a house - Property Checklists Quick guide to buying and selling legals - SLC 15 ways to speed up buying and selling legals - SLC

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