Online agents – Big savings or, paying up-front for failure?
As an agent who has always embraced new technology and working practices, I have no problem with online agents, in fact, I have often looked at diversifying into that area myself on occasions. However; what I do find unsettling, is when agents of any camp (online or high-street), make bold claims about being better than anyone else, or saving the consumer money etc, without giving a full account of the facts. Having had some spirited debates on social -media with one or two online agents and, being a bit of a pedantic statistics nerd, I thought I would take a look at some of their claims and the facts behind them. If you are thinking of selling your home using an online agent*, the results make for interesting reading.
For my research, I’ve used data from ZooplaPro* in the West Cornwall area and the data for one online agent who has the largest market share of online agents in that area. To save blushes (and law-suits if I have got my maths wrong), I have invented a fictitious trading name of ‘EasyPeasy’ estate agents; no inference of any actual estate agent trading with that name is implied or should be inferred. Here are the facts for the area surveyed*
Zoopla shows an area total of 5,105 new instructions since Jan the 1st 2014
Of which, 7 were EasyPeasy instructions– a market share of new-instructions of 0.14%
EasyPeasy currently have a total of 11 properties available for sale with an average time of 22 weeks on the market against an area average of 27 weeks.
Of the 11 properties on with EasyPeasy, 18% have been up for sale for over 40 weeks and 64% have been up for sale for 20 weeks or more
Since January the 1st, EasyPeasy have sold 2 properties (a 29% success rate against their new instructions YTD but a 18% success rate compared to their current total register)
In comparison the average instruction to sold rate in the area is 60%, with PDQ’s average being 79%)
Of the 2 properties that EasyPeasy sold, one sold at £175,000 after a £15,000 drop and 10 months on the market – an almost identical property next door, however, sold at £200,000 3 months previously after 5 months on the market; a potential £25,000 lossfor the sellers of the agents using EasyPeasy?
With a market share of 0.14%, you can see why I don’t spend sleepless nights worrying about online agents (at least, not at the moment). However, as a consumer, what do these figures really tell you?
Almost without exception, online agents say how much they can save sellers and that they are just as effective (or more effective in some cases) at selling as high street agents. Without doubt, if you sell your home with a typical online agent, you will pay less than with a high street agent but that, in itself, is not a real saving.
What do I mean by this?
Firstly, all online agents that I am aware of, charge an up-front fee of several hundred pounds. This is payable whether you sell or not. So if you don’t sell, you haven’t saved. Quite the opposite to most high-street agents where you have a no-sale-no-fee guarantee. If you don’t sell with my firm, we won’t charge you a penny; a saving of around £500 compared to a few online agents.
In the case of EasyPeasy estate agents, they have only sold two properties this year out of seven new instructions and four existing ones that have been up for sale since 2013. Even using the most favourable instruction to sale ratio, this means that (based on 2014 figures) 71% of all of EasyPeasys’ customers in the area we surveyed will pay for a service (selling their home) that they won’t actually receive. For EasyPeasy’s (and other online agents) press claims about saving customers money to be accurate, they should, in my opinion, factor in the amount of customers who do not sell through them but, who have still paid for a service.
But what if they DO sell your home?
Again, to fully check the claim of any real savings, we have to compare the whole price including sale price of any property sold. By that I mean that if you have sold your home at a lower price than you might have with another agent, even if you have paid less for the privilege of doing so, you have not saved.EasyPeasy have only sold two customers homes this year but one of these sold for £25,000 less than a very similar** neighbouring property. No doubt, this seller ‘saved’ on agents fees but, by my calculations, were potentially worse off by around £21,000. The other property sold at the asking price however, it is not possible to compare like for like with that property as other properties in the same road vary in price and style dramatically (by several hundred thousand pounds in two cases we found). To be even-handed, assuming the property actually sold at its full market value (unlike the other EasyPeasy sale), the owner of that property probably saved in the region of £8,526 including VAT. However, viewed as a whole, the other 9 EasyPeasy customers who haven’t/ didn’t sell have lost a total of around £5,400 between them with, of course, the other seller having a potential loss of £21,000
No doubt, this seller ‘saved’ on agents fees but, by my calculations, were potentially worse off by around £21,000.
What are the chances of you actually selling with EasyPeasy?
Not all agents are the same as our monthly property market report for Cornwall clearly shows (link is a PDF download). From the data we have analysed, there appears to be a possible inverse correlation between the size of an agents register (how many homes they have for sale) and the percentage chance they have of actually achieving a sale, I.e. The more properties an agent has up for sale, the less likely it appears are your chances are of actually selling. In the case of EasyPeasy agents, the size of their market share is statistically insignificant in our dataset area but, they may have a larger share nationally. However, what is clear from the data is that if you choose to sell through EasyPeasy, you are more likely NOT to sell, than sell – only 18% – 29% at best, of their customers homes have achieved a sale. Put another way, EasyPeasy have failed to sell between 71% and 82% of every customers’ home they have taken money from this year.
So how does this compare to high street agents?
As you see from the table above, the average agent in the West Cornwall area, has sold 60% of all they have taken on this year with (forgive the plug) my own company, PDQ, selling 79%. Again, these claims need to be looked at in the whole – how much have each of these homes sold for, were they correctly priced etc but, I’m afraid, I simply don’t have the time or resources to analyse over 2,000 housing transactions in the west Cornwall area. Whichever way you look at it, the High Street Agent offers a statistically far greater chance of actually selling than EasyPeasy do in the West Cornwall area.
Put another way, EasyPeasy have failed to sell between 71% and 82% of every customers’ home they have taken money from this year.
How about the speed of selling/ time on the market?
Unfortunately, extrapolating figures for the “speed of selling” is not as easy as finding out the average “time on the market”. Although these two concepts sound the same, they are not. As we have already seen, not all properties sell and many of these are taken off the market or, try another agent. Consequently, the portals tend to show only how long a property was up for sale and not, how long the properties that actually sold were up for sale for. A subtle difference but, an important one. For this comparison, I am using ‘time on the market’.
Using time on the market as a heading, as can be seen in the table above, EasyPeasy agents do quite well against the average of 27 weeks for all agents, with an average of 20 weeks. However, consumers thinking of using EasyPeasy might again, want to view this in the light of three very recent instructions bringing that average down quite dramatically and, the fact that, as I have shown above, 71-82% of all of their customers homes have failed to sell.
On the face of it, using an online agent seems like a bit of a no-brainer; the savings and speed of sale that many boast of sound like a great deal and, no doubt, in some parts of the UK and in certain niche markets, they may well live up to those claims. However, in the sample I have looked at, they fail on every count and, on every claim I have debated with them, at length, on Twitter. Not only do EasyPeasy agents not have a large and growing sector of the market as they claim, they don’t even have a 1% share in the area I looked at. More importantly, their claims to save people money simply do not stack up as the majority of their customers have already paid for a service they are statistically very unlikely to receive, hardly a saving or, in my opinion, a fair and legitimate claim.
As for real ‘savings’, this needs to be seen in the whole and, based on the evidence I have shown; of the two houses they have sold this year in my area one appears, on the face of it, to have been undersold by a significant sum of money and the other is impossible to check accurately. As with all things, you pay your money (up-front in the case of on-line agents) and you takes your choice. My advice. Don’t just look for an agent with the biggest claims, the cheapest fees or, the most for sale boards. Do your research before you choose an agent and always look deeper into agents claims. Challenge your agent to prove why they are worth your business; good agents will be happy to answer your questions.
*The data was taken from West Cornwall only. Success and failure results of online and traditional agents are likely to (and do) vary significantly in other parts of the UK.
*Journalists: On request, I will provide all of my working data and remote screen access to online data used in this post for verification to a panel of independent property journalists for verification and checking.
All data taken from Zoopla Pro
Using postcodes TR3, 11, 12, 13, 14, 17, 18, 19, 20 (West Cornwall)
All new instructions and ‘sold’ data taken from Jan the 1st 2014 to date
Whilst I am not a qualified or trained statistician, I am aware that the sample above may be regarded as statistically insignificant and, therefore, possibly unsafe to base any firm conclusions on but, given the claims of massively increased market share by some online agents, I believe they are worth publishing to open up debate and give a transparent picture of the reality of online agents in one small part of the UK.
**I have not visited the two properties but have seen their on-line details/ photographs on Zoopla. Both are on the same estate, are two door numbers apart, are both detached 3 bedroom homes and both sold within a few months of each other in a stable price market (low, single digit house price increases over a 12 month period – Data HM Land Registry)