A long-standing traditional agent says the real success of online agencies is not their share of the market but that they have “re-written the sacred principle upon which traditional agency is based - no sale, no fee.”
Andrew Stanton, who has over 30 years working in traditional agency, says Purplebricks in particular and online agents in general have, in a few years, “disrupted the psyche of the vendors.”
Stanton previously ran his own agency and worked at Sequence and Blackhorse agencies; he now runs a consultancy called Estate Agency Insights and Strategies, which assists agencies grow their business.
He has shared with Estate Agent Today his detailed examination of the business models of online and traditional agencies, and high profile variants of the model like that being introduced by Countrywide.
Stanton says that as recently as five years ago, if an observer had predicted that a core of small agencies could change the UK’s vendors from a position where it was ‘no sale, no fee’ to ‘yes please, let me pay you upfront now’ they would have been laughed at.
“But Purplebricks and others, with massive advertising campaigns focusing on not paying commission to estate agents on completion and instead paying a transparent fee upfront, have transformed disrupted the psyche of the vendor” he writes.
“[They’ve] reprogrammed them to accept a ‘pay now rather than pay later’ business model. This is absolute brilliance, positive cash flow from each instruction and no pressure to sell, as you already have your fee” he adds.
Stanton’s analysis also looks in detail at the likely profitability - or otherwise - of the individual main online agencies, and gives a snapshot of their inventories as listed on Rightmove in mid-October.
This provides a fascinating ‘state of play’ of the online sector, with Stanton giving each property a notional fee of £900 to the agency concerned.
So, Purplebricks has no fewer than 28,000 properties listed on Rightmove. “At £900 a time that is over £25m of positive cash flow. Remember, It makes little difference if they are sold or not, as each unit has the same value, the upfront fee. Which means over a 12 month period it is likely to generate over £50m of cash flow” suggests Stanton.
EasyProperty has 101 properties listed. “At £900 a time, that is £90,900 cash flow for six months, £181,000 for the year” he says.
He continues: “YOPA has 2,700 properties listed, at £900 a time, that is £2.43m cash flow for six months, £4.86m for the year.
“Tepilo has 1,700 properties listed, at £900 a time, that is £1.53m of cash flow for six months, £3.06m for the year.
“eMoov has over 1,800 properties listed at, £900 a time, that is £1.6m of cash flow for six months, £3.2M for the year.
“HouseSimple has 3,000 properties listed at £900 a time, that is £2.7m of cash flow for six months, £5.4m for the year.
“Hatched has 1,000 properties listed at £900 a time, that is £900,000 of cash flow for six months, £1.8m for the year.”
Stanton concludes: “Remember, the figures above are only cash flow figures, not profit figures; the running cost of each venture has to be deducted from each of the totals, which I do not have access to. But given that Purplebricks made a loss last year of £6m, yet had a positive cash flow of over £47m in that time and dwarves the cash flow of its opponents, it becomes obvious that none of their competitors are likely to be making a profit in 2017.”