The housing market needs urgent reform in order to avoid the boom and bust cycles that have plagued it for the last 40 years.
The call, about as familiar as cuckoos in spring, has this time come from the respected Joseph Rowntree Foundation.
Its new report, Housing Market Taskforce, calls for housing supply to be boosted, in order to limit volatility; caps to be placed on mortgage lending; reforms to stamp duty; council tax to be replaced by a national property tax; and developing other alternatives to home ownership.
The report warns that action is needed now, in order to stop another boom/bust cycle taking hold.
Among its most controversial suggestions is a further clampdown on lending, with the provision of an ‘effective’ safety net. It suggests that this could be a ‘partnership insurance’ where borrowers, lenders and the Government all chip in the premiums.
The report admits that curtailing mortgage credit would be controversial, but says that credit controls such as restricting maximum loan to value ratios would have an effective direct impact on the housing market and reduce volatility.
It also calls for a reform of stamp duty, so that higher rates are only applied once thresholds have been passed on the ‘extra’, and not on the entire value of the property.
It suggests that council tax should be replaced by a new national property tax, where the Treasury’s take would rise and fall with property values. It admits that such a reform would be controversial.
The report also criticises what it sees as shortfalls in the private rented sector, saying it does not offer enough security for many families.
The report discusses the idea of rent controls, but admits that these would deter landlords from entering or staying in the sector. The report concludes that low-cost (ie, subsidised) home ownership and social rented housing are both viable solutions.
The report warns repeatedly of the need for prompt action: “Over the coming year, there is likely to be an increased focus on the depressed nature of the housing market, while unemployment may further expose the weaknesses in the current home-owner safety net.
“Yet it would be a profound mistake to leave the underlying volatility of the housing market unaddressed. We know from past experience that, without fundamental reform, the cycle of boom and bust will reassert itself.”
Comments
PbroAgent: I guess I get a little workr=ed up at times, so sorry on my part for giving you a rough ride. I'm so used to picking up on every wrong word Mr Hendry writes it is hard to get out of the habit! ;o)
Okay - so you're clearly one of the good eggs - in what seems to be a large basket. Here's what i would like to know, and unless I missed it I don't think it was in your posts so far. Of the 30-odd Agents, how many are good eggs that are forced to play this ridiculous numbers game? A dozen? Half, maybe? Could you not set up an Association of Professional Peterborough Estate Agents? I see it was done in Leeds - maybe speaking to them would give you an idea as to whether it is worth the bother?
You may wonder why I care. Simple, really - as an ex-Agent, it pains me to see the industry in turmoil; and as an outsider looking in I can recognise that the public want more - and I believe would be prepared to PAY more - than what is currently offered. You note that I am not trying to sound like Mr Hendry here - but it is fact that in many ways the current model is in need of attention. The saddest part of this is that those who have all the answers in their hands - the Principles, Directors and Owners, seem to be the least ready to accept and address. (note to self - prepare for backlash...)
When groups like JRF shout for housing reforms that would, in many ways, make the lives of Agents easier, yet the NAEA and RICS remain silent, it speaks volumes as far as I am concerned...
Anyway - enough of all that. I'm clearly getting soft in my old age!
Enjoy your weekend, folks! ;o)
Right, where to start? PeeBee you are right, what I said is not what I meant, of course we all need to make money, I shall choose my words more carefully henceforth.
I don't know about other towns because I've not worked in them, but I do now about the set up of Agents in Peterborough and shall endeavor to explain our setup a little better.
As I said before we have over 30 agents in just the city and more in the surrounding townships. We have the usual array of corporates and independents but we have one unusual animal that dominates the agency landscape (Chris may want to add his views here). They are a local agent, who I worked for for a long time and who over the last ten years have a) gone all corporate and lost some of their personal touch and b) have opened a network of small offices in the better parts of the city.
This has been copied by Connells and WHB to the point where if you live in one of the areas where this company and connells/WHB have offices, I would estimate that there is a 70-80% chance that a vendor will use one of them. Further there is a large independent, Haarts and the usual CW offerings who take a big chunk of the market leaving scraps for the rest of us to fight over.
When I worked for the big boy as lister and manager it was great - we used the brand, reputation, local offices and market presence to dominate the competition. I only listed high fee properties, if you wanted a cheap fee, you could go elsewhere I wasn't bothered. We sold loads and made huge profits.
The problem is now that I am on the outside, fighting with 20 other agents for the business I used to not want (I will say here that I enjoy it more now than working at the other place). Yes we will win the odd listing against them but on many occasions we don't even get called out. Once I calculated that I had been invited to value 70% of the properties that were on the market at the time in my part of town and in the area we covered had 50% of the available houses on the market. Now I perhaps get called out to 5% of the houses on the market.
This is why much of our competition price high and quote low fees, and why it is rare to see a vendor who hasn't been affected by the overpricing. Of course we also fight intensely for the same business.
I've had more than one occasion recently when we have had a low offer (but nevertheless a good one that the vendor should have accepted) where the vendor has asked another agent their opinion of the offer, and the agent has told him they would get him more, causing me to be disinstructed and the vendor to stay on the market at the same sky high price we've been fighting against.
It's a multi-agency town and a dog-eat-dog gloves off town, if you do list it sole-agency and don't sell it quick, you can guarantee that the vendor will be bombarded with countless mail, door knockings and false promises from other agents (apparently one of my colleagues once worked in Cambridge and said that touting was absolutely frowned upon by all agents there - not sure whether to believe that or not). We have a high street location and simply can't survive on two completions a month like Chris. We can't afford to cherry pick as he does, we have to list list list and sell sell sell, but so too do 90% of our competition which with a finite supply is why our conversion rate is so low, and is why we don't beat ourselves up over it. Unfortunately and as much as we would like to change it, it is a fact of life.
I could pack it all in and go work for the other place but I am determined to build this business up and need the boards. So yes while I know you still won't agree, I will still tell a vendor what I honestly believe, but if he wants to list it for 50k more, I won't say no. Yes it bites into our profits, yes we spend a few more quid on phone calls and window cards and fuel and details and stamps and envelopes and a board, but that's it - the other major overheads are already covered and if these extra listings that you would have me turn down, produce even one more sale per quarter (and they do), then they've more than covered their costs. It's a model the boss has chosen, we may be less efficient because we sell a lower percentage of the properties we list, but we do sell more units and make more money, so the two don't go hand in hand. If we go the other way and lose what market share we have, the enquiries will cease, the company will go to the wall quickly and I'll soon be phoning Chris up to see if he's saved up enough money yet for that "trainee".
Chris. Well worded argument. Keep going and you'll convince yourself one day... ;o)
I profusely apologise for making you feel uncomfortable with the thought of making more money out of the same volume of work, mate! I would normally say I won't do it again - but you know that's not the case, and I ain't gonna lie to you!
On the subject of your USPs, differentiation - whatever new and clever buzz-words someone would like to throw into the mix - you know darn well that you have what it takes by the bucketful. Only thing holding you back is yourself...
How's about this, then? You make an extra ten grand a year (by my reckonings that's only an extra ninety quid a property - doesn't even touch the sides and the vendors certainly won't notice it...). Of that, you contribute 50% of it to a local charity of your choice, 50% to a charity chosen by a local dignitary or celebrity (and of course EAT will run the story - WON'T you, Rosalind...? ;o) ).
Result? You get mucho publicity; mucho kudos from the public - and you don't get to feel guilty!
Win:win:win!
(You might even get some more business - but let's hope not. I'd have PbroAgent shouting at me... ;o) )
Peebee,
You say we are underselling ourselves! While we could charge more, we are already making very high profits as it is and I feel uncomfortable charging more, just because I can. The reason our business model works is because customers get a good deal in terms of fees and service, so they recommend us.
Charging the same as the others tilts this away from offering a good deal and then it's just down to the quality of the service they remember. 0.25% to 0.5% less than the other agents is not giving ourselves away, but don't forget, we have lower overheads and can afford it anyway.
Then you convert most of your stock to sales and your laughing all the way to the bank. The vendors are happy because they save a bit, the buyers are sometimes happy because the vendor could afford to knock off an extra £500 or so (Because our fees are cheaper) and it's a win, win, win for all concerned, except the other agents in the area of course, who watch us sell properties that they couldn't sell.
We actually need all the other agents to stick to their business model, so that we can exploit a gap in the market. If they all operated like us, where is our unique selling point? Unfortunately, one day most of the agents will operate our business model or something similar and it could become harder for us, but right now things are good. :-)
Chris - we both preach from the almost identical hymn book, I would say. I would, however, like to revisit your first paragraph or so...
You say "PboroAgent uses the standard business model that has existed for decades. It's what most agents do and the model works, but has high wastage and this is factored into the fee structure. They charge more, because they need to." The 'standard' business model you refer to is really a product of corporatism. No Sale No Fee; Stack shelves to bursting point; play the 'Numbers Game' - it's all good for business (in the eyes of some...) - but TERRIBLE for the fee-payer! And you know it - and no doubt avoid it for exactly that reason.
You say the model works - but does it? Many EA branches were kept afloat for YEARS on FS income alone. A good FA meant the difference between profit and loss. What now I wonder? The biggies simply use spoiling tactics (your 'world domination' analogy...) for the rest. WHY has to be the question (as it would sometimes be cheaper, as I have said before, to write the vendor a cheque and ask them to take their business elsewhere...) - the answer of course depends on who the corporate is and its' core business.
This type of Suicide Marketing is still wrecking the industry and has been from the 80's. Fee levels are in the main a joke. I know you say you can manage on 2 a month but average 10 - that is superb, mate and I hope it continues. What worries me slightly is that the undertone of what you say is that your fee structure is lower than these stack and rack merchants. Why - when your success rate is so much better? Sorry for sticking my nose where it might be unwelcome (The Yorkshire Agent and I have had this one a few times...) but I would say you are underselling yourself - and that is a true shame. Look - enough about that. It's your business - I'm just an outsider who has an opinion that might just make you a few more quid (to invest in that Trainee I think you deserve, remember? ;o) )
"Oh and you have to remember that you are playing with other people's money, often hard earned and not given away lightly." HALLELUJA!!! You have NO idea how long it is since I heard words like those - and how infrequently they are voiced. Welcome to the Caring Club, Chris. I'm not saying that others don't THINK them - but they very rarely utter them! In this business, if you don't shout it, you aren't seen to be doing it.
If I were a BDC I'd love to sit down with you and have a chinwag, as I reckon you and I would put more than the world to rights. Same goes for many of the good 'uns that post on here frequently. REAL Agents who actively make a difference.
(And PbroAgent - I reckon you could quite easily fall in that category - but I need convincing. Not your fault that who you work for has, to use the words of Mr Spock, 'illogical' business sense)
Beam me up, Scotty... ;o)
@Peebee,
PboroAgent uses the standard business model that has existed for decades. It's what most agents do and the model works, but has high wastage and this is factored into the fee structure. They charge more, because they need to.
Our business model allows us to operate on only two completed sales per month, yet our average sales result is around ten, except in December when this can fall away to only two or three!!!
The only way PboroAgent can get ahead using the standard model is to impress customers somehow so that they will receive customer recommendations. It is easy getting a property onto the market for the right price when the vendor has made the decision to already use you. No one recommends estate agents generally, which is why most agents need boards up on over priced properties to advertise the fact that they are there, open for business. When customers start recommending an estate agency to friends & family, then it becomes much easier. It took us three hard years to build up our reputation and now things just skip along nicely.
By getting property onto the market at sensible prices, they sell quicker and if they sell quicker, the public notices this and they also want to deal with you. Sometime we list houses without a for-sale board, because we know that this property will be a magnet for all the other agents to tout, but when we sell it, we almost always push for a sold board. That's the message we want to shout. For-sale boards only sell a few properties each year, but good customer management (Looking after vendors & buyers) gets houses sold. The definition of good customer service is: To meet and exeed the needs and expectations of the customer at all times. Buyers or sellers.
With over 50 agents in the area, it is difficult to set a standard that is different from your competitors and it is quality valuers that win the business and can turn things around. Sure it all has to be right, but the valuer/ lister is the first person a vendor meets and this experience needs to be a good one.
My advantage is that I have had 17-years of experience and still go out valuing. Most of the agents in this area that have been doing it as long as me manage offices now and work out the monthly stats, do staff one to one's and sit in meetings all day with area managers, while the 20-year old does the valuations. I don't know about you, but I don't want to be told by a 20-year old kid how much my house is worth. I want the manager to visit me or the company director and I expect him to be a little grey yet enthusiastic about my chances of selling, yet honest and realistic at the same time.
People give estate agents a hard time, but it is a very hard job to do right. Tons of multi-talented skills are required. Communication, time management, advertising, negotiation, patience, proactive, pragmatic, realistic, enthusiastic and motivated, compassionate etc. etc. Oh and you have to remember that you are playing with other people's money, often hard earned and not given away lightly. Sure there are cowboys in any industry and this industry has had it's fair share, but I honestly feel that most of the cowboys have gone to the wall now and the higher quality agents have survived the hardest recession to hit the UK, EVER.
PbroAgent: No - with all respect, that was EXACTLY what you said. Your other comment - "Chris (if he is who I think he is) operates a very different business model and offers a very different proposal to vendors than a traditional high street agent." was separated by a full stop from the sentence I quoted, which followed the above.
You may not have MEANT it that way - but that is how you wrote it - and obviously how I took it to mean.
I acknowledge your response that this was obviously not the case. I would have been SERIOUSLY worried (...was, obviously...) had you meant what you wrote!
Now to the next bit... in a previous comment you state "I doubt that we are less profitable because of our business model, although we are undoubtedly "less statistically efficient"..." Sorry - but one runs hand in hand with the other, mate. You CANNOT be statistically inefficient and enjoy maximum profitability. EVERY property you do not sell (or charge a withdrawal fee commensurate to the actual cost of its' marketing) costs you money - which then has to be made up out of the proceeds of the next sale. Surely you must see that is a fact? IF you work on the "three for one" basis that you intimated - "...the decision has been made that we would rather service 300 listings a year and look to sell a third rather than list 100 and sell 60%." - then you are a million miles from where you think you are in terms of profitable. Sorry - I see black and white here - and I predict you are now looking for a million shades of grey to throw back at me. Trust me - VERY FEW of them will stick.
Reading what you have said - and some stuff you haven't, you ain't a happy bunny about the situation. You are probably paid on results (which is the ONLY way an Agent should be paid - based upon profitability not board count...), and therefore realise that your potential is not being reached. EVEN those 'bonus' properties you refer to when you stated "Perhaps it is negative of us to think this way, but do we get enquiries even for over priced properties, which we then convert into more valuations, listings, viewings on other properties and sales which we might not have got without the original overpriced listing." are costing you money on the same scale as above.
I don't know your company or its heirarchy - but surely if you went to them with a proposition based upon improving percentage profit, they would snap your hand off?
Mine did - and that was a Corporate!
Thanks Peebee,
Initially, we weren't sure how it would go down with the public, but when we sold properties time and time again against the agents on the city centre high street and they stopped slagging us off because we were "Small & nowhere near the centre of the city", the public got behind the idea and 100% of our new business was through referrals from happy customers, who probably saved some money too. I do accept that this model isn't something that will work anywhere and with every experienced agent. Our village setup allows this to work as it doesn't have rows of shops and we can get away with it, but I know that we are losing some business to people wanting the stereo type agency in the city centre.
That's fine, I can live with that, but this setup does remove the need to list every available property and with this, we can value correctly and effectively cherry pick.
I still think that agents should be willing to walk away from properties rather than waste their money servicing bad instructions, but I do understand why they do it.
To get back on topic though before this thread gets burried among the old threads, those people wanting house price falls should not blame the agents, but the banks who control the supply & demand to the largest extent. We just control the asking prices and the buyers decide the sale price depending on what they can borrow.
Chris: GO BOY! ;o)
You have what is needed - in bucketloads! Whilst I stand 100% by my original comments, I now see that they are not relevant to your operation in the slightest. I hope you realise that no malice or insult was intended - I simply abhor the attitude that 40%+ FAILURE rate is "acceptable" with many Agents. Of course I acknowledge that some of these could be sales by others on multi-listings - but nevertheless it is money out of the coffers and, of course, eventually someone else pays for it!
I have to say that I have never seen anything like your setup. Certainly nothing I have come across here 'oop North' matches it. Yes, there are a few 'Estate-Agent-in-a-Bedroom' types who come (and mainly go - quickly!) - but no-one comes close to what you have achieved.
Keep it up, mate! ;o)
Typo: I was charged with turning WHB around in 1996. It was losing 1 million pounds a year
Should have said 1/2 a million pounds per year loss!!!
PboroAgent said: but what you don't know is that Chris doesn't have a traditional shopfront, choosing to work from a remote location instead.
Sort of true, but a luxury of the village in which we opperate. The village has no shopping street, but a collection of homes that have been converted into businesses. The post office was originally a house, so was the hairdressers and the village shop uses part of the old petrol station. Our property too was converted by us into an estate agency with two dedicated 20 foot offices, a carpark is situated out front and a big company sign exists out front. During normal office hours, our doors are unlocked and people pop in to pick up brochures, keys etc. We even have window cards up, but yes, at the end of the day, we switch everything off, lock the office doors and cross the hall to our living accomodation. We are not an internet estate agency, because we operate in exactly the same way my old city centre branch of WHB does in the town centre. One advantage of staying away from the city centre is that our office fees are very tiny, except for business rates of course. These lower overheads allow us to run on lower fees too, making us quite competetive, which helps, but we don't charge give away fees and very often we find our fees are similar to the mid size agents in the city centre!
Put it this way, there are some agents only charging 0.5% +VAT and PboroAgent will know who this is. They are significantly less than us, but then this guy really does run from a laptop in a bedroom and doesn't do anything to sell property except take 3-photos and puts them on RM. I can't remember the last time I have seen one of his sold boards actually.
Keeping running costs to a minimum in terms of accommodation costs, allow us to maintain an advertising presence in the newspaper and some magazines, plus all the usual intenet locations. It also means that we can survive on very few completed sales and this is why we are able to cherry pick. There is little pressure to list for the sake of listing. Often vendors are impressed with a level of honesty and an attitude of "Mr vendor, you actually need us, more than we need you" without actually saying that of course. Basically, these are our fees, this is what we will do for you, this is what I believe your asking price should be, here's my card, please call me when you are ready to go on the market with us. The relaxed, honest, non-pushy approach works very well and more often than not, we are instructed.
Last week I picked up a listing over a city centre agent after valuing this 3-bed detached property for £152k when they valued it at £175k. he even agreed to match our fees. The vendor could smell his desperation and knew his valuation was b@ll@x, so instructed us instead. Well they paid £170k for it in 2007, so he can't have done any homework before seeing them!!!
Okay round this up now. I value based on pre-valuation homework and 17-years of experience. If I don't think a property will sell, I won't list it, period. If they want to put it on for more money, choose another agent, I really don't need every property out there and want to pick the quality instructions.
Rant, Banks were losing a million pounds on every 4-pubs that sold, so mothballing them made sense. They will have done the maths, though it's a gamble. Who knows when they might sell at 2007 prices again! It certainly stops the market going into freefall will thousands of cheap repos hitting the market. Remember that line I keep using "Supply & Demand".
Peebee, no branch needs to fail. The staff probably needed retraining, motivating or sacking.
I was charged with turning WHB around in 1996. It was losing 1 million pounds a year. Some changes were made and in 1998, we were voted office of the year out of 422 branches around the country! Look at your competion and do things better, smarter and be more organised. Motivate & train the staff and bin off anyone that doesn't pull their weight. I could expand, but I am done managing 12-people and I love the freedom of being a small independent.
I have managed 5-other branches before we started up our own business and not one of them has been unsuccesful, but you need to passionate about succeeding.
"You sound like you'll knacker yourself out, mate! ;o)"
There have been days, but the salary keeps me going and I just clear the diary for a day or two and take a break.
Here are a few pics of our setup. As you can see, if I wanted to rent a shop in the city, I could afford to do so!
http://www.ukimagehost.com/view/57724b72a168316f.jpg
http://www.ukimagehost.com/view/57724b72a1e420ca.jpg
http://www.ukimagehost.com/view/57724b72a231fbb0.jpg
http://www.ukimagehost.com/view/57724b72a2653f27.jpg
@Peebee that's not what I said. I said that Chris's low cost business model works for him and I admire his tenacity with many of the bigger agents in this town gunning for the likes of him and going for "world domination" - not a phrase I've ever heard used in agency but I like it. I'm not prepared to completely examine a competitor's strategy on here, but what you don't know is that Chris doesn't have a traditional shopfront, choosing to work from a remote location instead. it clearly works well for him but it is this that I wouldn't choose for myself as I've been educated by working for a corporate in very localised suburban and very profitable offices where the location and the shopfront meant everything to the branch.
@Rant, we have considered that very option, but with no newspaper advertising, the only place we could offer "premium listing" status is on rightmove who can't offer us any data whatsoever, that it improves enquiries (I know, I've asked), and whilst it would bring in an additional income stream from suckers, it wouldn't be ethical and we don't want to be seen as yet another cowboy outfit in this town.
Pee Bee (and others) - is there not the potential to make money from vendors' unrealistic price aspirations? One scenario "Well, Mrs. Smith, it might not be easy to find a buyer at the price you are suggesting, but we could offer to make your property one of our premium listings, for a small fee of course..."
Apologies for seeming to hog the board this morning...
Chris: You reply to rant "As Peebee has already said, the vendor sets the asking price, not the EA. The EA simply does what he can to survive the up's & down's by adjusting his fees accordingly in order to stay in profit. Slow market, higher fees and so on."
Yes - and no. Indulge me a moment, please...
The vendor instructs the Agent at an Asking Price - accepted. HOWEVER, the vendor has taken, in many instances, the advice of several Agents with regard to pricing and marketing. It is highly unlikely that all Agents will appraise a property at an identical figure - and the spread CAN be tens of thousands of pounds even on a relatively cheap property. THAT, I have to give to Mr Hendry as fact - as I see and hear it daily. A lady I am currently assisting is in a bit of a fix with the property she owns which is now being sold. Matrimonial; arrears; possible repo proceedings... the whole shebang. ANYWAY, she had four Agents appraise it. One asked her how much she wanted for it; the other three came up with figures rising in ten grand increments of each other. Three 'valuations' (their words...) - twenty grand difference between top and bottom. Number four simply said they would beat any other quote with regard to fee - and market at the highest figure.
GUESS WHAT happened... yup - despite ALL the above weight pressing on the need for a speedy sale, they went on at the highest price -EVEN THOUGH they don't believe the house is worth what they are asking themselves! Agents DO act on the vendors' instructions - but many vendors act on the Agent's recommendations, which by responses in THIS thread alone are clearly often questionable! (and you don't know how much it pains me to say that...)
On to Fees. In an ideal world, what you say would be true. However, you know it to actually work the opposite way in many instances. Certain Agents will always compete simply by being the cheapest. That, often combined with having supplied the highest 'valuation', secures them a proportion of the cake.
When some Agents wake up to the fact that income MUST outweigh expenditure; that expenditure is proportionate to the number of instructions you take on but income is ONLY proportionate to the number of sales that emanate from those instructions, then and only then will we see the industry offering universal quality and value - and charging their customers accordingly!
I know from experience on BOTH sides of the fence, that people DO want it; DO value it; and WILL pay for it.
Agents fail when they lose sight of their purpose. I am pleased, Chris, that from what I read here, that is NOT the case with you. Rock on!
PbroAgent: "He runs his business well, clearly does a good job, sells the majority of his listings and it works for him, but it is not how I would choose to run an agency. "
WHAT??????????????????????????????????
So - let me get this right. Would you NOT want to run a business well; NOT want to do a good job; NOT want to sell the majority of your listings; or NOT want your business to work for you?
Or ALL of the above...?
I think we need clarification here.
Good morning folks!
Chris: You said "My point... was that size and efficiency are not linked. We are tiny compared to most, yet we are hugely efficient turning our backs on the world domination strategy and going after quality, not quantity. We are more efficient because we cherry pick and can then sell them as fast as we can list them."
Okay - here's my take on that. Firstly, You remember that I originally said that the first thing that Agents do in tough times is to cut to the bone with staff - and that is false economy. I still stand by what I said - more in a minute. YOU, however, have apparently not done that, judging by what you say. You run what you know to be a tight ship working smart. HAD YOU downsized from six to three, then this would have been a different conversation. Remember, your initial comments were that you apparently 'lost' 43% of your business down the plughole - which I then suggested COULD be improved if you invested in another member of staff. I ran two brances of a corporate for several years 'oop north'. In that time, I closed one - and took the other to the top 10 in the country in terms of increased income percentage YoY. Both had minimal staff. Both had semi-monopoly positions, although in each case a dozen or more Agents were within breathing distance and all wanted a slice, of course...
We worked smart. Damn smart. And it paid dividends in one branch - but the other was doomed to failure. Had never made a profit in almost 30 years and three owners before I took it over. Same business model - but may as well have been on different worlds although only 5 miles separated them.
I hope you see how much your statement above contradicts your original words: "...we cherry pick and can then sell them as fast as we list them" - a DIFFERENT WORLD from "...we have a conversion rate of 57% sales from listings..."
The history books are full of proof that attempts to secure world domination always end in retreat and humiliation. Stick to what you do best, Chris. But have a think about taking on a trainee. You sound like you'll knacker yourself out, mate! ;o)
Lots of wisdom in that post Chris...
The idea of banks slowly releasing repo property on to the market would indeed hold prices up well if they all collaborated. Is there not an incentive in a market showing minor falls though for a bank to try and release more of their repos and thus get more money back than they might next year. This would then put them at an advantage to their competitors.
@PboroAgent
I'm pretty sure you have worked out who we are and it sounds like your business model is similar to most in the area. One where boards breed boards and world domination is the name of the game.
My point to PeeBee was that size and efficiency are not linked. We are tiny compared to most, yet we are hugely efficient turning our backs on the world domination strategy and going after quality, not quantity. We are more efficient because we cherry pick and can then sell them as fast as we can list them. Our reputation is now so good, that we haven't touted for property in over 5-years and yet I have been out of the office all day until gone 7pm tonight listing properties, with another 2 or 3 take-on's to do tomorrow! Absolutely knackered actually if I'm honest.
I used to play the world domination game when I managed WHB back in the late 90's and actually believed that this was the answer to business success, but I was wrong, I know that now. We have considered scaling up our business and moving to the city centre, but when we calculated our possible earnings, they would actually fall and the risks in this market of becoming financially exposed, would mean that we would be forced into the world domination model again. There really aren't enough quality properties out there to cherry pick to maintain a larger agency in Cowgate.
Any good business man in any other industry would not waste time on goods or services that were unlikely to net a profit, yet agents in this area do it all the time! When I am running low of stock and start thinking about putting properties on for above value money, I always value correctly so that the vendor's know what I really think the property is worth, but agree to higher asking price for a little while. This makes it easier for me to get them to accept an offer at the true value. "I did warn you Mr Jones that your property might only fetch that kind of money when we first met".
@Rant
As Peebee has already said, the vendor sets the asking price, not the EA. The EA simply does what he can to survive the up's & down's by adjusting his fees accordingly in order to stay in profit. Slow market, higher fees and so on.
The banks play a major part on the buyer demand aspect. They lower the lending critera, more buyers buy and property prices can begin to rise. They realise this now, but in the last big crash of the 80's, they had no idea. They kept repossessing people and then gave their houses away for pennies. This forced house prices to spiral lower and lower as everyone was competing for the same few buyers.
They have learned their lessons to a large extent! We were asked to sell around a dozen repossessed commercial properties in 2009/ early 2010. Mainly pubs' nightclubs and a few shops & guest houses. We managed to shif a fair number of them, but £220k for a big detached pub with apartment above is nothing when it was worth half a million during the peak. The pub industry has been hit the hardest over the last few years.
Anyway, last year, we got a call to stop marketing the last few pubs & shops! They were going to be mothballed until prices rise again. Every week, I pass one of these pubs and sure enough, it is all boarded up with no other agent marketing it. Basically the banks have learned not to flood the market with cheap properties as this will drive prices even lower. Add them at a more gently rate and they will do better in the long run.
To a large extent, the banks control the game. They create the buyer numbers with their lending criteria and they control the supply of repossessions. I can't see them doing anything to allow property prices to fall quickly as they have the real ownership of the assests (The first charge on every mortgage) and I don't see the government doing much to change where we currently are either.
PeeBee. I understand your side of the arguement and agree that having killer stats can help win listings, but alas I am not the principle of the business, and the decision has been made that we would rather service 300 listings a year and look to sell a third rather than list 100 and sell 60%.
Chris (if he is who I think he is) operates a very different business model and offers a very different proposal to vendors than a traditional high street agent. He runs his business well, clearly does a good job, sells the majority of his listings and it works for him, but it is not how I would choose to run an agency.
As I have previously said, I tell a vendor what I honestly think and back up with comparables, but I leave myself room to take on a listing at a higher price if necessary in order to"work the vendor" (I hate that phrase) later for a price reduction. Perhaps it is negative of us to think this way, but do we get enquiries even for over priced properties, which we then convert into more valuations, listings, viewings on other properties and sales which we might not have got without the original overpriced listing.
"I want the best price I can get; I want it as quickly as possible...As far as I am concerned, mine is the only property on your books that matters" - unfortunately in this town that is all too true, everyone has the biggest plot on the street, everyone has the best aspect, everyone has the best view and no-ones house is comperable to theirs and their property is always so special that no matter the overall effects of the current market, theirs is apparently exempt. Vendors MUST realise that they won't get 2007 prices and that theirs isn't the only property on the market, their house is not special and can ALWAYS be compared to other properties - even if they are different. If they over price their house and don't listen IT WON'T SELL, simples.
I doubt that we are less profitable because of our business model, although we are undoubtedly "less statistically efficient", although in truth we run a pretty streamlined and well oiled business, bringing in respectable fees for the properties we sell. My figures weren't wrong, I double checked them yesterday, although interestingly we have a much improved sales rate on my 2011 listings than on my 2010 listings (perhaps I am becoming more sub-conciously selective in my approach without realising it :o/ ).
Pee Bee - there are precious few posters here who are going to say I'm ever right about anything : )
This thread will be off the front page tomorrow so it might not attract many answers. It's a good question though.
rant: didn't miss a point mate - I should really leave the answer of THAT little pearl to the men and ladies on the ground. After all - if you are right, it is THEM who are putting the SSTC slips on the boards way too early in my opinion...
Over to the Agents. Is rant right - are buyers dropping out like flies because they can't get funding AFTER you have tied up sales?
We're seeing eye-to-eye here Pee Bee. The scenario you describe points to a self-perpetuating downward spiral in prices and lending. Is it therefore not better to have a rapid correction than a drawn out one if it is happening anyway? The slower scenario to me suggests more jobs in the industry being lost and that's something nobody can desire.
The point I thought you'd come back with but didn't (unlike you to miss an opportunity!) is the definition of a potential buyer. If someone likes a property and thinks it meets their family needs, how much of a potential buyer are they? The difference between potential and proceedable is key here. Given how many properties (well, round my area) keep going SSTC and then reappearing on the market suggests many people consider themselves to be potential buyers and then have a rude awakening from the bank!
rantnrave: no argument from me there either. In response - WHEN does the bank's wilingness to lend kick in? A property price can theoretically drop to zero - but at what point does a lender see it as suitable security for a loan?
Or NOT, more like...
If prices drop, aren't lenders going to simply wait longer to see what happens? Surveyors are already shafting vals left, right and centre in order to protect
a) their PII
b) the lender for negative exposure
c) - should be the borrower - like THAT matters when the other two have first and second grips on their cojones...?
Back to you, mon ami... ;o)
Well-thought through post Pee Bee. One comment in response - where does the bank's willingness to lend come in? An EA can work 24/7 to sell a property in this environment to little avail if a potential buyer can't get the loan together. Bit of a simple explanation, but I hope you get my point.
rantnrave: So now I have to cross swords with your goodself instead of my faithful opponent, Sibley's... ;o)
You state "At the moment, it seems EAs in much of the country need lower prices to realise more volumes..." I suppose that could be correct. Cheaper properties MIGHT lead to more sales. Probably would, in fact. HOWEVER, the Agents don't have control over vendors - as PbroAgent has demonstrated admirably. An Agent can walk away from an instruction, however someone will always take it. Those properties are on the market in spirit only - not to be confused with genuine properties FOR SALE.
Now then - back to the volumes. Chicken or egg. No instructions : no sales. So - it is reasonable to expect that EVERY Agent lists a proportion of lame ducks. VOLUME is no good without QUALITY. Quality listings, priced correctly, will sell - end of. VENDORS don't give a rat's a$$ about the Agent's volume, as I said in my last post. They want THEIR property sold ASAP and for as much moolah as possible. And for this service, they pay a price. They also want this price to be as little as possible. This is where Agent fall down. IF they are experiencing reduced transactions, then they need to get tough and charge commensurately. Less volume at higher fees means a sustainable business.
Although transaction levels are low, they are not non-existent, as we have debated often. If buyers are less prevalent, then Agents by virtue have to work harder to court them to buy their property. A sensible vendor should accept this as a symptom of the current market. To quote another old 'rule': If something seems too cheap - it probably is!" I would argue that MANY Agents reading this are currently earning brass washers off every sale they make. Some will actually be selling properties at a loss - less Fee income than actual cost.! (trust me - it IS happening...)
What incentive do they have to actually work - it would be cheaper in certain instances to pay the vendor to take their property elsewhere!! And what does the Vendor gain?
You want prices down - I will never change you on that. I don't blame you - and in many ways YOUR wish would be a benefit to me and my family also. However, I do not agree that 'your way' is the best way for the market, as you know. It simply promotes the next cycle kicking off, which is, after all, what we are all supposedly trying to avoid happening again - is it not?
PbroAgent; Chris, etc. Seems I've ruffled a feather or two. Good!
Think of me as a vendor. A committed one. Come walk in my moccasins for a minute, will you, please?
When I put my property on the market, what do I want? I want the best price I can get; I want it as quickly as possible; and I want you to be at my beck and call. As far as I am concerned, mine is the only property on your books that matters. I don't want to know how any other property is fairing in the market; I don't want to know that you have a hundred similar properties on your books (but I would LOVE to hear that you have SOLD a hundred similar and can't wait for MINE to be number 101...); and - most importantly - I CERTAINLY don't want to know that you have statistically less than a 6 in 10 chance of selling my property for me! (Chris - don't blow a fuse - read on...)
Now... things may well have changed somewhat since I was 'on the tools' - but considering I was up to my doodahs right in the middle of the LAST 'crash' with many of you, I speak from a bit of experience. Similarly, I rode out the property storms during the 80's, although hadn't then ventured into Agency. And I'm still here today - still deeply immersed in the industry, although not in Agency once again, but feeling your pain daily. The figures you now deal with have changed dramatically from the early '90s - the circumstances haven't changed much at all. Neither have my 'unwritten rules' (the same as everybody else's rules - but we all believe we made them up ourselves, don't we...?) that make the business happen - and the one I will regurgitate here is that "For every property on the market there is a potential buyer for it". When, and how much, it sells for, are the variables - would you agree?
Chris - I am DELIGHTED to see that you have realised your conversion method was inaccurate. 87.84% is truly admirable. I would expect 70% - as I have said on here before relating to Henry Pryor's outlandish claims that only 43% 'sell'. But Henry's figures, like yours, included among other things the previous years' quoted unsold stock - which was woefully inaccurate when scrutinised.
I hope that as a result of my input you did a double-take, as what I said was absolutely correct. 40%+ of the hard work you do was pparently wasted effort, going off your own quoted figues. Not a problem if you charge a Marketing/Withdrawal Fee to cover the tangible expenses - but on the darned NSNF model, it is simply food on your table that is being denied.
Pbro - have another look at your own figures. You may well be surprised (I sincerly hope you are!). If you are not - then may I respectfully offer some advice. You said "I can patiently explain to the vendor why they are wrong, but at the end of the day I can't force them to market their house for a particular price." No - you can't. However, you CAN make a business decision as to whether to accept the instruction with little or no possibility of earning from it, or simply walking away and leaving it to the others who obviously quote these Starship figures in the first place. Let THEM have the cr@ppy stats! Get YOURS to 70%+ then hit vendors with that factoid! No-one else will be able to touch you (except Chris, of course... ;o) ) and you will enjoy a more profitable business to boot.
Been there - got the TeeShirt...
Chris. Does the name of your company begin with B?
Chris - HPCers aren't pushing for anything to be done, in fact, quite the opposite. Since prices need to come down to levels that the average Joe can actually afford, it would be good if the govt did nothing (ie, stopped using your and my taxpayer money) to prop up the collapsing pyramid.
So why do we bother posting on this site? Mostly to raise awareness, so the dots as to why transaction levels in the housing market are falling can be joined etc. The idea that house prices can't fall is actually a recent one, peculiar to this particular boom only. Anything that has a cost can go up or down in price!
I'm sure you're asking HPCers for their ideas so you can joyfully rip them apart. Fine. Let me attempt to turn this round though - why are you personally so opposed to the idea of prices coming down? Was the tripling of prices in a decade not enough for you? At the moment, it seems EAs in much of the country need lower prices to realise more volumes - as someone who works in the business, why are you against this? Can I also suggest that you seem to be in denial that other EAs on this very site (not all) are agreeing with the point of view that prices need to come down, are already doing so and will continue to.
Cheers PboroAgent,
I'm glad someone round here knows what good looks like. I am affraid to say that we are one of those agents in the villages around P'boro, but without saying who we are, we have quite a lot of sold boards on main roads around the city, which becomes obvious by our size or should I say lack of it, so you can probably work it out from that. A further hint is that we have just Sold Trudy Webber's parents house in competition with her own agency in Cowgate!
You are quite right though. Agents in P'boro over-value like crazy. The size of our operation and the fact that we are in one of the villages means that our costs are low, so we are not dependant on too many sales and can cherry pick. I basically list within 5% of the true value and then have a reasonable chance of selling them. They don't like my valuation, then I tell them to go somewhere else and only spend my time dealing with properties that stand a chance. Alas it is not an exact science and occasionally I get it wrong or perhaps agree to try it for more because I get on with the vendor and they promise to drop the price later, but then they never do.
59.92% also includes all the stuff we took on several years ago when we first started. You know all those over priced multi's that no one could sell, but we simply needed some stock. I'm sure if I calculate the last 12-months it will look much better. In fact, just done it. A conversion rate of 87.84% over the last 12-months and that includes 5-listings that got loaded over the last 3-days and have just started working on. I am being totally honest here too. If you have worked out who we are yet, you won't have ever sold any of our properties and touting our unsold stock is usually a waste of time because vendors seldom leave us to go on with other agents, they realise that the market will not support what they need and they come off all together.
Getting back on topic, the HPC brigade have still not come up with a solution, because there isn't one. Basically they are like Jahovah Witnesses that go about trying to convert people into agreeing with them and in there case, the housing market/ house prices are all wrong, but then offer no solution to fixing the problem.
Their mission is just to suceed in making people say "Your right". Maybe we should just humour them and tell them they are right so that they leave us alone.
On a serious note, I would love to find away for local agents to communicate so that we can drive some of these cowboy solicitors into closing down. A few of them keep costing me fall through's, time and time again. It's about time agents black listed some of them refusing to manage sales with them involved. Maybe then buyers/ vendors will ditch them early on and use someone better.
The problem is mentioning their names publically for fear of a legal reprisal.
Hello all HPC's, your not normally slow to respond and I've given you the option to tell us agents how it should be done. Well I and my friends are still waiting for an answer.
Or is it a case you have no answers either?
No PeeBee I knew exactly what the post meant, 60% listing to sales rate is very respectable IMO and my strike rate is much lower. In Peterborough sales prices are back to 2003/4 levels whilst many vendors want their houses listed at or close to peak 2007 prices.
I can patiently explain to the vendor why they are wrong, but at the end of the day I can't force them to market their house for a particular price. Buyers today are very switched on and won't over pay for a property - when they do, the surveyors around here are hot on downvaluing. This means that many vendors are withdrawing their houses after 6-8 months disillusioned that the "market is slow" or switching to other agents because they are fed up with our constant vendor checks asking for price reductions.
The truth of the matter is that the market isn't slow - yes there are fewer buyers but whenever a vendor listens and takes my advice we typically sell it in less than 8 weeks.
Yes I could get on my high horse and turn down listings as other agents here suggest, but they are going to list it at that price with someone and currently we are trying to build the business and want board presence - if this means that we may list properties that I will have to work on and that might never sell, then so be it for now. When we are in a position of strength then I will certainly start to turn down overpriced listings.
I'm sure market dynamics vary considerably between different areas, but in Peterborough we have 36 agent offices covering the city and that's before you add at least 20 more in the small towns within 10 miles of Peterborough. There simply isn't the stock to adequately service the number of agents. We have a niche in which to pitch our services but many agents here list on price and fee. Yes our conversion rate is poor, but little of that comes down to our efficiency and more to vendor reluctance, ignorance or inability to reduce due to negative equity.
PbroAgent: I have NO problem with you backing Chris up - however I feel you have missed the point here. You seem to be takling appraisals to instructions. Chris is talking INSTRUCTIONS TO SALES.
Is 59.92% so acceptable for THIS KPA?
It wasn't when I was in Residential Agency. Not to my company - CERTAINLY not to me...
Look, from what I see, Chris is a passionate guy. He is nobviously proud of his company - and I respect him for that. He runs on a shoestring - and no doubt makes a fair living. With three people (one who is out all day, every day appraising, no doubt...) he manages this turnover. What I am saying, is that by investing in another member of staff, then his conversion rate might just rise commensurately. He is currently 'losing' four out of ten properties after being instructed on them. He says he has NEVER lost a sale to another Agent. If he could retain HALF of what he loses, and sell the same percentage, simply by having more people to manage the vendors, then he would make more money.
My guess is that his rate would go up as well!
Over to you Agents...
OK I hear the non-estate agents about property prices, presumably past vendors and buyers.
So please can you give me and all my fellow estate agents guidance on the formuale for valuing a property that every vendor and buyer will agree to?
Talking about something needs to be fixed is fine but actually "HOW" it is to be done, is the question?
@ Peter Hendry
It makes no difference if EA's accept that change needs to happen or not. In the same way that you have an opinion that things should change, other people out there have an opinion that is different to yours. It's just an opinion that's all. If anyone having these opinions cound change anything, then this conversations are worth having, but neither I (The Estate Agent) or you (The non-Estate Agent) can change anything so what's the point in banging on about it.
If I value correctly, the property should sell for the right price and if I value incorrectly (Too high) it won't sell until it is cheaper, but what's the problem with that? It doesn't effect you, any other buyers or the market. If I can't sell it, I will not make any money and my business will collapse, so as far as your concerned, good riddance to another rubbish EA. If however I value high and the property does sell, it wasn't high after all was it?
@Rant
I don't think anyone is saying that high house prices are good for this country. EA's are simply saying that our job is to sell properties for the highest price possible. That is what we are paid to do. If EA's start telling vendors that we need to sell their properties at a lower level as it will help some buyers out, do you think they will employ us? No of course not.
PeeBee I have to back Chris up on this. Nearly 60% conversion is awesome. Our current conversion figures are much much less, because unfortunately many vendors are just not listening to reason and there are too many agents overpricing in Peterborough.
A prime example is a property I valued last month for 140-150 which has just appeared on RM for 220k with another agent - filed to call in 6 months!
PeeBee I have to back Chris up on this. Nearly 60% conversion is awesome. Our current conversion figures are much much less, because unfortunately many vendors are just not listening to reason and there are too many agents overpricing in Peterborough.
A prime example is a property I valued last month for 140-150 which has just appeared on RM for 220k with another agent - filed to call in 6 months!
Chris - you've misread my post. I'm saying EAs don't challenge comments from one another on this site about the housing market. Even if someone's post says current transaction levels are irrelevant or there is a shortage of stock out there.
I have no axe to grind against EAs - after my Dad walked out on us kids, the first job my Mum could get was as an EA. She kept that for a decade and it put food on our family table at a time of great uncertainty. I also have absolutely no issues with yourself as an EA. You seem very knowledgeable and passionate about your work, which tells me you are probably very good at your job.
My concern is with those who think high house prices have been beneficial to this country and that it would be a 'good thing' if the banks would start lending at levels to see them increase rapidly again. There is another side to this argument and I blame this country's media for doing a poor job in putting that across. I also get somewhat annoyed when myths or incorrect data about the housing market is posted as fact here.
When will someone amongst you actually consider that change is necessary in estate agency, when the current process is obviously broken?
Change is positive, staying the same is negative.
When will most agents see that getting the 'best deal' for a vendor, has never been a matter of just trying to achieve the highest possible sale price, no matter how long it takes to achieve that.
This research needs very careful consideration. Merely throwing dozens of side-swipes at it, in the hope that it will go away, serves no purpose.
"Pitching the initial asking price correctly, is everything."
Not doing that skilfully, should be what disqualifies an agent from getting to play. Currently, that does not happen. Therefore, reform IS needed.
It's only a question of what reforms are best.
However, time is running against success here.
Time really is of the essence now, if change is to be effective and failure is to be avoided.
Does anyone read me?
Rant, You said "Do other EAs challenge this, or post that actually, transactions are slow on the ground where they are. Nope"
Why would EA's challenge transaction numbers or house prices? Challenge who exactly?
The agents that have survived the downturn have done so because they know how to adapt their business model in order to generate a profit and stay in business. Some have reduced overheads and become more efficient, others have raised their prices, many are valuing more realistically, but my point is challenge who?
Does a wild animal challenge a colder winter or a hotter summer or does it adapt to survive?
You seem to think that EA's are either to blame or actually have some sort of say, we don't. AE's do not control selling prices or the transaction levels, so why don't you simply stop going on about it. Okay, assuming you are correct, exactly what would you like EA's to do?
Tell us what you would like us to do differently? Please share it with us! You can't because there is nothing.
EA's meet property owners, agree a selling price and marketing strategy and then its down to the buyers if they feel like doing business with the vendor. If not, the agent may suggest lowering the price and very often the vendor says sod off! The EA is merely a marketing/ advertising professional. Why are you not talking to Rightmove, Zoopla, or the newspapers about house prices or or transaction levels as they have the same amount of input as EA's have.
It seems to me that you are frustrated by prices and the lack of opportunity people have of obtaining a mortgage and buying a property and somehow feel that EA's hold the key, which we don't. It is the banks that hold the key to the largest extent. If they throw money at buyers again, demand will incrrease, transaction levels will increase and quite possibly, house prices will increase.
Unfortunately the gene is out of the bottle and too many people have worked out that owning your own home is a better long term plan than renting a house! Because of this, demand is high even if it is only pent up demand right now. Unless enough people decide that buying is not the answer and demand including pent up demand reduces, then prices will be sticky up and a whole generation of adults will be forced to rent. Eventually the current generation will die and millions of probates will take place allowing the supply of available properties to increase ahead of demand, prices will fall away and the next generation will have the opportunity to buy at sensible prices. Until then, we all have to adapt to lower transaction levels and higher selling fees. In some parts of the world our average 1.75% selling fees are seen as ridiculously cheap and for EA's to survive, this would have to double or triple, but hey, in some parts of the UK, it takes nearly a year to sell a property so why shouldn't the vendor's pay for all that extra advertising?
I go back to my earlier point though Rant, what do you think EA's can do to support your mission to lower prices, increase transaction levels and get more folk onto the ladder? I can't wait to hear it.
Chris - that's exactly the point. EAs aren't discussing these issues. Indeed, much of the UK has their fingers in their ears on this subject even though more facts re the possibility of a HPC are coming to light all the time.
Take this thread as a point in case. An EA says it matters little that transactions volumes are plummeting. Well there is the small issue of transactions being central to the EA business model! Do any EAs challenge or even debate with this poster. Nope - the HPC lot have to point out the implications of what is being suggested.
Another EA posts that sales are going crazy in their area and there is a mass shortage of stock. Although an anecdotal comment, it flies in the face of data out this week. Do other EAs challenge this, or post that actually, transactions are slow on the ground where they are. Nope. Not until a HPC comes along and asks the questions.
What is the purpose of having a forum for EAs to discuss issues related to the housing market when others have to come along and actually start that discussion? As can be seen, the threads where HPCers post attract far more comments and thought than other topics here. As clearly shown below, those discussions are not a simple case of EAs dismissing HPCers, but agreeing or disagreeing to certain extents.
Finally, re the link I posted - glad you read it - does actually mention the report that this thread is about. So, it's not off-topic at all.
@Rant
Sorry old bean, but you have a one-track message. Your off-topic link refers to something you mention in every thread, the difficulty young people have getting onto the ladder and why you think house prices should come down. It really is becoming boring now my friend.
How many more times are you going to post the same thing this month?
Thank you for sharing your thoughts with the rest of us, but it is starting to sound like you are on some sort of mission spending all of your time here going on and on about it. EA's are here to discuss our industry, yet you seem to be here to try and change the housing market, to which EA's can do nothing about, so could I respectfully ask you the change the record.
@Peebee
You said "As for your stats - 43% withdrawal rate? Nearly one sale for the cost of sevicing of TWO... That's an AWFUL lot of lost opportunities, mon ami. "
I am concerned that you are actually an estate agent if you think this is bad! Either that or your in the London area!
We have a greater than 50% chance of selling each property we list and compared to most of the agents in the area, this is two or three times better and the highest I know of. Having worked for quite a few agents over the years, most are operating at 18% to 22%.
William H Brown required five-houses to sell just one, (That's 20% by my calculations) which is why they needed such high selling fees!
Maybe the East Midlands is different from London, but here properties can take many, many months to sell.
Next time your in front of your system, count up the number of properties your company has listed from the very start and then the number it has actually sold and then tell me that 57% is bad. Try to be honest with yourself instead of the usual rubbish you might tell vendors during a valuation!
Actually, I have just worked it out exactly and it comes to 59.92%. I'm very pleased with this if I'm honest.
Chris: You state "Our business only has 3-people in it, yet we have a conversion rate of 57% sales from listings and outsell many agents that have 2 or 3 times our staff numbers. Sure we are busy, but we are motivated and driven and get results. In fact since we started in 2004, no agent has ever sold one of our properties, yet we have sold hundreds of multi agency properties. Efficiency has nothing to do with size and everything to do with working smart."
I agree with the last sentence. However, there is a fine balance - and MANY Agents have crossed the line in recent years, adopting the 'one man and his dog' approach which does NO-ONE any favours.
As for your stats - 43% withdrawal rate? Nearly one sale for the cost of sevicing of TWO... That's an AWFUL lot of lost opportunities, mon ami.
But - as long as you're happy...
Can any of you EAs help me? I am looking for a one bedroom appartment somewhere not too close to my home in Manchester. Don't worry about the kitchen and bathroom - just one bedroom will do me. Cash in advance not a prob.
Re: Stamp duty.
I'd personally like to see the liabilty for paying stamp duty switched to the vendor of properties. It means that the govt can scrap allowances given to FTBs - bringing more income to the treasury, would stop all the messing over F&Fs around stamp duty boundaries, and would mean that those flippers who dodge CGT would at least pay some tax.
"An end to boom and bust"
Genius! Why has this not been done sooner?
If only someone with an eye (just one) for finance had thought about doing this 13 years ago, we wouldn't be in the mess we are today...
Interesting article here for those who might think HPC theories are 'the lunatic fringe'. As shown by this piece from the Guardian, they are becoming more mainstream.
http://www.guardian.co.uk/money/blog/2011/may/21/protecting-housing-market-lost-generation-buyers
(apologies to those who think this is off-topic. It is relevant to discussions that have been taking place across numerous threads recently, none of which have begun by addressing these exact points!)
Clampdown - might as well shut up shop and retire now.
Stamp duty - good idea as this is the punitive duty and should be banded as all other taxes are.
Council Tax - looks like poll tax to me and we have had 2 riots over this, one from Jack Straw with the peasants revolt and the last one from Mags Thatcher and that tax lasted about 10 minutes.
Rent control in the private sector - no chance.
Nothing else in here of any use so I will sign off with:
Mr J R Foundation should not dable in anything but chocolate!
Chris - I think you'll find it was another poster, presumably an EA, who first mentions lending to salary multiples as a good idea... In the past, the practice seemed to provide a certain stability in the market in the ways that 125% mortgages and liar loans have not in recent years.
I think we can both agree (although you didn't state this) that any loans at the moment should also be subject to an analysis at whether they can be paid back at interest rates exceeding 5%.
"did you know that in 2008 there were 10% too many EAs?"
Of course, the cheap reply would be 'you missed-out a zero at the end'.
My response was and is predicated on the assumption that you're an EA.
The fact that you're so blind to the implications of transactions being less than half their pre-2008 levels is worrying.
Hey, it makes no difference to me but if my livelihood depended on selling property i'd be rather concerned about this state of affairs.
My citing the 10% closure of EA branches is simply symptomatic of this.
@Peebee
You said " Or cuts have to be made. Cuts, however, are false economy in my opinion. First to go is manpower. Less people running the shop = a less efficient outlet - leading to reduction in instructions"
Don't you mean less people running the shop = a greater efficency! Less people to do something means greater efficiency in my book, not the other way around.
Our business only has 3-people in it, yet we have a conversion rate of 57% sales from listings and outsell many agents that have 2 or 3 times our staff numbers. Sure we are busy, but we are motivated and driven and get results. In fact since we started in 2004, no agent has ever sold one of our properties, yet we have sold hundreds of multi agency properties. Efficiency has nothing to do with size and everything to do with working smart.
@Rant & Si1
Please stop talking about income multiples for borrowing. This method of calculating the size of a loan is long since dead as it does not take into account affordibility. If someone earns £50k a year, should they be allowed to borrow between £150k to £200k just because they earn it, when they have loaded up their credit cards to the max and shelling out on an expensive car every month? No of course not. How about the fact that goods are 500% cheaper in 2011 than they were in 1986 in real terms. Look at the price of a TV for example. £400 for an 18" Sony Trinitron was more than a months wages in 1987. Now a decent LCD will cost you less, yet in those days a £9k salary was considered excellent!
Banks simply need to do some maths to calculate if people have sufficient money after living costs are deducted to establish what a comfortable repayment amount should be. From this they can calculate the size of a loan. Using the 3 times your salary calculation in 2011 shows a lack of appreciation about what goes on and why.
How many EAs knew that in 2008 Jimmy? Is there a similar figure available for 2011?
@Sibley's B'stard Child
did you know that in 2008 there were 10% too many EAs?
Really.. what is your point?
Why do people bang on about average wages and income multiples vs average house prices???
3x 30k + 1x 20 k say would give the average couple a £110,000 mortgage
More than enough to buy a modest house to get started with a 5% 0r 10% deposit - indeed a semi detached or good terrace in many parts of the north
Who says you should be able to buy a better house than that on sensible lending - you have to start somewhere !!!!
Statistics!
Statistically, 6 out of 7 dwarves are not Happy.
'Fraid not Pee Bee, the wife is down Costa-del-Butlins so i'm looking after the bairn indoors.
I do all I can to keep 'er away from Rightmove in case she gets any funny ideas...
Wardy
I could have guessed where you are - very different above Watford I am afraid
Pee Bee - any trip SBS is taking to Spain is no doubt an excuse to scout out how much prices have fallen over there with an eye to emigrating...
Sibley's... ('decent face' and all... ;o) )
HOLIDAY?? YOU'RE MEANT TO BE SAVING FOR A HOUSE!!
I bet the convo with Mrs Sibley's... went something like this:
"Hmmm - it's decision time. Buy a house, our own roof over our heads at last - or two weeks in Majorca?"
"Oh, Sibley's..., you know there is only one answer to that question. Go on - ring the Agent, sweetie-pie love-bucket. Make me a happy woman"
"Okay, my dearest, darling angel of wonderfulness - I'm dialling the number of our local Agent now. I can't wait to make a purchase. We've been registered with them for soooo long, they will be delighted that they can finally sell us something
Hello - is that Thomas Cook?"
;op
@rant,
west essex.
You know I take everything RM say with a pinch of salt.
By the way, cheers for the thumbs-up PeeBee, i've always maintained you're a good egg.
For an ex-EA :P
Cripes, can't believe i've missed all this fun - last time I take a holiday...
Jimmy, you said so what if transactions are less than five years ago. Did you know that between 2008-2010 10% of all EA branches closed-up?
If this so-called market carries on for much longer I cam only hazard a guess as to what 2011/2012 will bring.
As for this Rowntree Foundation (as I posted over at HPC) they may well espouse common sense though i'm concerned with some of their recommendations (PFI funded social house building and advocating further shared-ownership schemes, to name two of them).
may I respectfully suggest that the Bertie Bassett foundation go back under the stone they have just crept out of.
Correction - highest ever figure for a May (their data strangely enough covers three weeks of one month and the first week of the next).
Wardy - experience direct from the horse's mouth goes a long way in any discussion, no doubt about that. Can I ask which part of the country you are in though?
Rightmove's data out this week (seems a while back now!) said stocks on EAs' books reached their highest ever in May. That seems to be saying something totally different from your experience, does it not?
Everybody and I mean everybody in EA I speak to, be it friends who have set up their own indies or people still working for corporates are saying the same thing. 'We can’t get enough stock'
Here we are literally scrapping for them. Yet again I walked away from a high end flat because three others are doing it for £2000 multi! (currently praying they don’t sell it) This is the paradox PeeBee is talking about.
From an EA's point of view I cant see a crash. I will admit that the gap between asking and selling is widening slightly and savvy agents will need to adjust vals but a crash? Why speculate on what will happen to the market when its already happening right under our nose's. A year on year adjustment. Sorry HPCers but it aint happening nor are there any signs of it happening.
Maybe I’ll get a reply saying 40% this, 20% that. Doesn’t matter, talk to the people that are living and breathing the market every day.
@si1
Speculators usually don't exit the market at a loss; people hold until they are in a position to sell, or go bust which is what all the current measures are trying to prevent and generally succeeding. Market interference of this nature will affect your demand curve i believe.
In the south the rental market is supporting existing prices and rents are rising. While people cannot buy more are renting... yes everyone need to live somewhere its not optional! I appreciate when interest rates rise this will help to correct the market, but i just cannot see prices falling by 40%+; my ignorance maybe but the whole economy has too much to lose if we wipe 40% of value of the balance books?
@rantnrave
Of course supply of credit effects the price levels; but I do not believe the banks will continue to reign in their lending as they have done - we are already seeing an increase in FTBs and 95% loans. Banks are doing what they have been told, in the long term they will slowly release more funds to keep a check on the bust (obviously they would lose out too) but at the end of the day they make money by lending money.
My opinion; we are all intitled to one!
@ PeeBee.....Let me give you my slant on it........
@Anonymous Coward........ALL "supply and demand" open markets are subject to boom and bust cycles........
Two very sensible posts!
ALL "supply and demand" open markets are subject to boom and bust cycles.
ALL of them.
WITHOUT EXCEPTION and BY DEFINITION.
Otherwise it is not an Open Market.
Open markets are subject to irrational behaviour by the people occupying the marketplace.
Not only that, the "herd mentality" is entirely rational until about 5 minutes after the peak of the market where it becomes stupid, but then becomes rational again to try and minimise your losses.
What do we do about it?
Sensible lending criteria and proven cash deposit levels are probably the easiest to implement and will make sure that the majority of buyers are protected.
Consider, if the market falls by 10% and you have a 20% deposit, you are not wiped out.
But this is then a control on the banking industry who will be restricted in the ways they can compete for business and although they have lost money this time round have been bailed out so don't care and will complain bitterly.
rant - I'm back again! You refer to Jimmy's post relating to transaction levels and Agent numbers.
Let me give you my slant on it. At 1,000,000 transactions, say, and 10,000 Estate Agent offices or thereabouts, then each office should average 100 sales each. If their average Fee is £500, then they are in deep doo-doo; if their average Fee is £5000 - then happy bunnies they will be. IF the transaction figures slip, then the Fee levels must increase to compensate. Or cuts have to be made. Cuts, however, are false economy in my opinion. First to go is manpower. Less people running the shop = a less efficient outlet - leading to reduction in instructions (both existing and new) as word gets round. It is fallacy that less sales means less work. Stock still needs to be serviced. In a poor market, Agents should be MORE in touch with their vendors and buyers than in the runaway days. If they aren't, then one smart kid in town could clean up simply by ringing or writing to these people! Wouldn't have to say much to beat the nothing coming from the other Agent - and the impression is that they care more.
What is stopping this happening? Fear. Fear of asking for more money; fear that A N Other won't follow suit and nab all the instructions through cheaper fees - both of these are major factors, plus another couple of secondary reasons for good measure that I won't bore you with.
Quite often, Agents are referred to on here as dinosaurs. Not a bad comparison:
* dinosaurs adapted to suit the conditions over the millenia
*dinosaurs were the original proof of 'survival of the fittest'
*some learned to fly; some crawled; some swam; some ran - but they all had a share of the terrain that they fiercely defended.
The only thing that virtually eradicated them (even then, not completely...) was a comet, allegedly. A REAL, planet-killing crash!
Not a soft landing or two... ;o)
Just read your last post with a different pair of specs - you weren't actually quoting an old post of mine - oops!
Anyway, sources mentioning 70-80K of mortgage approvals suggesting a 'healthy housing market' (which also highlight that current numbers are half that figure)
http://www.thinkmoney.com/mortgage/news/mortgage-approvals-at-8-month-high-in-march-0-4421.htm
http://www.telegraph.co.uk/finance/economics/houseprices/8491585/House-prices-drift-down-in-April.html
http://www.investmentsense.co.uk/average-home-loses-0-2-of-value-in-april/
Where did you dig that old comment from Pee Bee?
Here's a list of mortgage approvals going back to 1993: http://www.housepricecrash.co.uk/graphs-mortgage-approvals.php
I'm sure data for further back can be found. And yes, I am aware that mortgage approvals doesn't equal transactions. They are closely related though.
I'm looking up sources that say 80,000 such approvals is considered a normal healthy housing market. Bear with me...
I am afraid that the only one really making any sense at all in this discussion is Si1. However, unfortunately it is doubtful whether statutory restriction of availability of mortgage funds and limitation of LTV ratio will ever be possible whilst we are members of the EU, because elsewhere in Europe there is a free market in mortgage funds and they can always be obtained from over there. That is the reason that Roy Jenkins had to free up traditional restrictions all those years ago and ever since then we have the uncontrolled boom and bust associated with unregulated availability of credit.
rantnrave: Dunno whether my last post was deleted or it simply disappeared into the ether - but you would have liked it. I complimented you and Sibley's for being the decent 'faces' of the HPC movement who frequent this site.
Doesn't mean we agree, of course... ;o)
Now then - you state " With transactions currently running at half their historical level, this wouldn't suggest the housing market is in a great state of health." Define "historic levels", please. As far as I can see, you are referring to the 1996-2007 rates that the whole world and his dog quotes. IF you can point me in the direction of figures pre-1996, then I will use YOU as my search engine in future, as Google and the others simply scratch their heads at that one!
And I seem to remember we had transactions during 1995, 1994, 1993, the list goes on...
I'd be REALLY interested to see how many, in order that we can assess the TRUE "historical level"...!
(we can even 'seasonally adjust' if you like, r'n'r ;op )
Jimmy - I'm just waiting for all the other EAs to agree with you that it really doesn't matter if transactions are much lower today than just five years ago. They'll be along soon, I'm sure.
The market turnover is lower than it was five years ago. So what? The high street is still full of estate agents. Plenty of them post on here. If turnover was twenty five times what it is now, would you say there was a ridiculous and unsustainable increase. I doubt it. There would probably be more estate gents.
Comparing turnover today to a snapshot in time is simply a comparison. It reflects the freedom of movement of society amongst other things and shows the effect of taxation (government interference) into the market. To say the market is not functioning indicates a buyers inability to purchase. Show me a credit worthy buyer that cannot buy a property. I don't know any. I know plenty who don't want to, mainly because they don't need to. They are not homeless.
Jimmy - please give us your definition of a functioning market. With transactions currently running at half their historical level, this wouldn't suggest the housing market is in a great state of health. The term market also implies there is little or no government interference, which given SMI, pressure on lenders not to repo those behind with payments, the lenders needing taxpayer bailouts etc hardly points to the laws of supply and demand being allowed to function at the moment either.
Si1:
Who says we don't have a functioning market now. This report is about boom and bust cycles not the current state of the housing market. The turnover of property is affected mainly by taxation. Families are never homeless, only individuals, and then only temporarily. Prices are affected by economics. Not just of property, but of everything. The damage of bust in a cycle is the the transference of paper debt to real debt upon the forced sale whilst in negative equity That applies only to owners moving into the rental sector.
If builders are not building at the moment, it is because the demand simply isn't there. If demand is influenced by the disability to obtain a greater level of debt, so what? Don't be a builder.
and this...
"Indeed if we see prices drop by 40% then I am sure prices will only gallop back up over a two year period afterwards and who will that benefit???? "
'considering the abject state of the economy - how on earth'... defies the whole principle of a market cycle anyway.
Jennifer - Please tell us your thoughts on how the supply of credit impacts house prices too.
James said: "You cannot effectively meddle in a free market"
Correct, but the land market is about as far from a free market as you can get, it is a series of local monopolies or cartels, where the profits or losses you make bear little relation to your own personal efforts and is down to political manipulation and luck.
For sure, there is a free-ish market in buying and selling houses themselves, but the playing field is completely skewed, and what you are buying is in effect merely a small share in the local cartel.
Si1 said: "interesting - stats suggest the property cycle has been evident for hundreds of years at least, since credit was first available"
Yup, I recently stumbled across a newspaper article (or speech) from the late 19th century that pointed out these 18 year boom-bust cycles, and recommended restricting banks and having a "national property tax", and it warned of a boom-bust due to happen around 1907, which if course duly happened.
Whoever wrote it was right then and would still be right now.
@Jimmy
to be fair, it would be nice if there was an easy way out, but there isn't one that will not make things worse further down the line; in the end, tho', we will get a fiunctioning market again, in some years, but we will endure pain before this, unfortunately
@Jennifer:
"New build does only make for a small amount of the sales market, but with a growing population/demand in housing and a reduction in new properties can someone explain to me how prices will fall by 40%+? Supply and demand theory anyone? "
because it is over-priced by 40% owing to irrational demand from a bubble (supply and demand theory - don't make me laugh at this naive statement - this is economics 101, merely understanding the straight-line market-clearing price curve is laughable - what about when the demand curve is effectively inverted due to endogenous effect of speculation - did ya think of that? laughable!)
"If they do, alot of people will be in negative equity, they will not be able to afford to move = less suitable housing; the need to live somewhere, the burden on social housing grows, but yes, with less building there are less affordable housing units being built.....social problems grow... "
yes, this is awful, but also now unavoidable in this cycle, saying something is bad will not stop it happening I am afraid, and the govt is too skint to help...
@Si1:
Seems to me, with all your fancy economics, you are merely advocating the bust part of the cycle.
Fact: The cost of building is now huge thanks to so much (for the good generally) regulation & legislation. Many builders currently cannot viably build and sell for a profit based on land purchase prices even in the south, so they don't.
If re-sale prices fall as you would like, it will further dis-courage new building. It should mean land prices falling but in reality this will not happen. Most land is land-banked by large companies and local authorities who do not sell when prices are low.... (basic economics, land is a limited resource and thy are not making any more).
New build does only make for a small amount of the sales market, but with a growing population/demand in housing and a reduction in new properties can someone explain to me how prices will fall by 40%+? Supply and demand theory anyone?
If they do, alot of people will be in negative equity, they will not be able to afford to move = less suitable housing; the need to live somewhere, the burden on social housing grows, but yes, with less building there are less affordable housing units being built.....social problems grow...
The people wishing for large falls in prices need to look at the BIGGER picture.
@James ("Voice of Reason"??)
"A 40% drop in prices will only benefit one sector of society unless the lenders come back into the market, and that is the developer community not FTB's."
what? how?
"Indeed if we see prices drop by 40% then I am sure prices will only gallop back up over a two year period afterwards and who will that benefit???? "
considering the abject state of the economy - how on earth?
"A steady return to traditional not irational lending is needed in my view"
well yes - which would maintain house prices at levels roughly 40% lower than currently
James - if the average salary in the UK is circa 25K and the average house price is circa 160K, then going by your calculations, house prices have a long way to fall before reaching a level supported by mortgages of 3 to 4 times salary. Should the scenario you are advocating happen, then I fail to see how house prices will then gallop back up?
My own view is that 3x the principle salary plus 1 of the lesser was always sensible in the past.
My point about builders was more to do with the impact of a return of more normal sensible lending to FTB's and the impact on transaction levels
A 40% drop in prices will only benefit one sector of society unless the lenders come back into the market, and that is the developer community not FTB's.
Indeed if we see prices drop by 40% then I am sure prices will only gallop back up over a two year period afterwards and who will that benefit????
A steady return to traditional not irational lending is needed in my view
@Voice of Sanity
let me take your points one by one:
40% real terms falls - yes, based on arbitrage against other assets' yields; it is again extremely basic economics to argue that property yields (OK admittedly requiring some risk-adjustment) should adjust to the yields of other assets over the long term; exactly how they adjust is of course the tricky question, but this is a 1000 year principle supported by empricism and theory. The figures do point to, broadly, 40% real terms falls; this is very very basic
Germany have some of the most affordable houses in europe (looking a decent investment by some measures), having seen over a decade of real terms house price falls - what are you on about?
"Increasing supply will not work" - are you crazy? - the population is only going up at 0.3 to 0.4% a year, granted it's a little high compared to the historical trend, but not much, this is easily kept up with, with sensible planning laws, admittedly these haven't been so hot these last few decades!?!
Are you trying to tell me you don't even know what the long term population trend is? Well it's about 0.1-0.3%, please keep up at the back
when did I ever mention the word 'ideal world' - this is a straw man of epic proportions, i think you're just confusing yourself
----------------------
next set of posts from "voice of sanity":
"Also for those who beleive/want house prices to drop by a further 40% it would be worth noting the amount of the debt burden on the banks would rupture already fragile balance sheets, the Governments could not help because of the mass homeless now on benefits with no social housing avilable to put them in."
indeed, which is why we have high inflation, to make the value of those homes (and associated debts) disappear with inflation and limit nominal falls and associated direct pain; in real terms of course that wealth would dissipate, but that's life. A £100,000 house isn't worth so much if a pint costs £20 and an hourly wage is £40. People will catch on to this too late, but that's folks for you.
And there wouldn't be mass homeless - this is a pretty stupid point - as all the houses would still be there - doh!. When a landlord goes bankrupt the house is merely sold on to someone with a better business plan, it is still available to live in, simple finance, again, do keep up
"Further to this there is the issue of many families life savings being lost therefore again a social burden on the state so we would have a hugely increased burden on the state in a time of increasing and ageing population. Add in the reduced tax credits and it would make Greece look like a well run economy."
they wouldn't be a burden on the state they would just be poor, this is not the same thing, don't forget their debts would also be reduced by inflation
"Be careful of what you wish for!"
I didn't wish for this, you, apparently did, by championing stupid economics in the first place; what is happening is the inevitable conclusion of an unsustainable debt bubble, it cannot be stopped
Also for those who beleive/want house prices to drop by a further 40% it would be worth noting the amount of the debt burden on the banks would rupture already fragile balance sheets, the Governments could not help because of the mass homeless now on benefits with no social housing avilable to put them in.
Further to this there is the issue of many families life savings being lost therefore again a social burden on the state so we would have a hugely increased burden on the state in a time of increasing and ageing population. Add in the reduced tax credits and it would make Greece look like a well run economy.
Be careful of what you wish for!
Si1
40% nationally? National guesswork committee figures or is there a basis to this.
You cant quote economics and ignore them in the next arguement. If demand is there and affordability is correct then there should be no issues. The problems come from periods of boom and increased credit - Germany increased the mortgage terms to 100 years and thus now ownership in one persons lifetime is unusual.
The point being again try and buck the simple supply and demand curves and you create problems. Houses, or indeed any product, will only have its price supported if the demand and affordability is there to do so (total cost inclusive of taxes).
Increased supply will NOT work in the long term because we are increasing the population too fast to supply the required housing, and more importantly we have a finate amount of space to build on.
It would be sensible for people not to make plans based on an 'ideal world' because we dont live in one!
@James - the free market is already meddled in, unavoidably, as some taxes are necessary; this is just a call to replace one tax (well two, which seem to be pro-cyclical) with one that seems to be anti-cyclical. I, as most people are, am all for the free market, but the very existence of taxes AT ALL means that it will always be affected, it is the legislators' job to try to make the effects as benign as possible, this is the intention of the report.
As to builders not building until 95% mortgages return - I don't see this, people will start buying houses again once they drop the 40%+ (in real terms) the market still has to fall nationally, then transactions will pick up and supply will resume. The builders seem to have got most of their ducks in a row to stay solvent during this adjustment, so it seems a passable position. In the meantime the government are improving the planning laws which will help builders looking ahead.
James - what would you call a sensible cap on income multiples? I'm not certain that 95% LTV at ten times salary is going to bring about much stability! I'm sure you weren't thinking that high, but hopefully you get my point.
When will these people ever learn
You cannot effectively meddle in a free market
Gordon Brown and Co were as near to communists as we have had for a long time, did this lot come out of his school.
All the market really needs is sensible LTV rates of 95% with sensible caps on income multiples for mortgages, this would protect buyers and the banks from the mistakes of the past.
New build needs to be bolstered but many builders have land that they cannot afford to build on at present, and until 95% mortgages return, and bring FTB's back into the market then the flow of transactions will not be enough to inspire builders to build.
"The housing market needs urgent reform in order to avoid the boom and bust cycles that have plagued it for the last 40 years."
interesting - stats suggest the property cycle has been evident for hundreds of years at least, since credit was first available
"housing supply to be boosted, in order to limit volatility? "
err, yes - increased supply reduces chances for speculation based on a tight market, as supply can adapt to transient demand in the place of price. This is very simple pricing economics, any EA that does not understand this needs to go back to school.
Although this would not help EAs in the short term, as it would hasten the ongoing property market falls and make the coming years very hard, in the long term it would give them steadier business, and give the country a steadier housing market, which would be a good thing all round.
housing supply to be boosted, in order to limit volatility?
what a load of crap!
"respected"? By who?