As debate continues over the merits of upfront fees against post-sale commission for agents and consumers, the fledgling UK ProperTech Association has asked a barrister for an opinion about the duties of online estate agents to their customers.
In the opinion, Ian Rees Phillips of 6 Pump Court explores how the nature of up-front payment for estate agency services may create a conflict of interest between the online agent and property vendors.
A statement from the UKPA says the opinion concludes that online agents owe a fiduciary duty to home seller clients and that there is a “significant danger that breach of fiduciary duty is baked into the online estate agent model.”
“It is extremely important that founders operating new business models, enabled by technology, bear in mind the legislative environment in which they operate. The world of PropTech is no different to any other in this regard” explains UKPA chairman Eddie Holmes.
“This opinion piece by Mr Rees Phillips serves to highlight some fundamental questions about the online agency business model. We urge those businesses operating in this space to consider these questions as a matter of priority and communicate what steps they take to protect their customers – something which should, ultimately, help those businesses create competitive advantage for themselves” Holmes adds.
eMoov founder Russell Quirk - quoted in the same press statement from the association - says that the different models of charging the seller lie at the centre of what he calls the “far better value” offered by online agents.
“A traditional agent will charge an average of 1.3 per cent plus VAT on a typical £317,000 home sale, which works out to £4,945.20. Our fees are therefore more than five times lower” says Quirk.
“The reason for the disparity is that the traditional agent charges the seller for all of the work done on the three in 10 listings that do not sell. That doesn't seem fair to me as it penalises those consumers who do sell their properties by asking them to absorb the cost of the work done on those which don’t sell” he adds.
Quirk adds that not all online and hybrid agents operate in the same way, using different levels of automation and employment status of representatives.