The demise of Emoov, Tepilo and lettings platform Urban raises question marks over the long-term viability of online agencies according to some industry observers.
With Emoov and its associated brands now in administration it is possible that these names will rise again in some form, but 2018 has seen major casualties in the online sector - not through consolidation but through failure.
Hatched was closed by Connells in the summer, with the company saying the hybrid model “does not produce a viable economic result”, and Countrywide scrapped its catastrophically-unsuccessful online service in the early part of 2018 after a coup ousting chief executive Alison Platt.
Purplebricks, Doorsteps, HouseSimple, Yopa and some smaller online operators remain, but not all is rosy even with these; combined, they have struggled for market share of more than seven per cent at most.
Now estate agency analyst Andrew Stanton has told Estate Agent Today why in his opinion Emoov could not find a buyer and instead had to go into administration.
Stanton previously ran his own agency and worked at Sequence and Blackhorse agencies before setting up Estate Agency Insights and Strategies, which assists agencies grow their business. His analysis provides food for thought when assessing the long-term prospects of the remaining online and hybrid agencies.
“Why would buying Emoov and Tepilo be a strategic move? For anyone?” asks Stanton.
“All you are buying is a company with lots of vendors on their books, but the cash has already been extracted from them upfront - and has been lost in the company's losses. So you buy Tepilo and Emoov, and you inherit thousands of vendors, and then you have the liability to sell them as you are the new company, but there is no fee as it was paid upfront to the old company.
“If a large traditional agent like Countrywide failed, then inheriting the vendor base would have value as 50 per cent of the potential fee would turn into cashflow, 17 weeks after each of the vendors get a sale.
“But gaining thousands of vendors who need to be listed on Rightmove and Zoopla, and who will take up the time of the [Emoov staff] Local Property Experts for no financial gain - what value is there here?”
Stanton says Tepilo and Emoov amassed £24m of losses in the past two years and have disgruntled vendors and staff “so even obtaining them for a penny would not be a good Christmas present idea, unless you like turkey.”
The concept of a company going into administration will be understood by many agents, especially those who own their own businesses, but for those not certain about what happens next with Emoov, here is the definition from Real Business Rescue, a licensed insolvency practitioner.
“When a company enters administration all company control is passed to an appointed administrator (who must be a licensed insolvency practitioner). The administrator’s primary goal is to leverage the company’s assets and business to repay creditors as quickly and as fully as possible without preference. The administrator is given a period of eight weeks to send out formal administrative proposals to all of the insolvent company’s creditors. These proposals will typically contain a basic plan of action that the administrator will follow to repay debts, information about the current status of the company, and the administrator’s anticipated outcome.
“If the company has consistently predictable cash flow, a healthy amount of assets, and/or a good volume of sales transactions, then there is a possibility that the administrator will be able to raise enough money to pay a significant portion of the debt and/or come to a formal agreement with creditors without having to liquidate/dissolve the business. The administrator may decide to recommend a pre-pack administration sale, in which the assets and business of the old company are sold to a new company. This type of procedure is often referred to as a “pre pack”. However, before a pre-pack sale can be executed the administrator must be able to show that this option is the most beneficial for creditors.
“In the unfortunate situation that the company is unable to recover from its' liabilities it will be put into compulsory liquidation by the Court, during which all of its assets are sold and the company itself is dissolved. The insolvency practitioner should ensure that directors are protected from accusations of wrongful trading by handling the company’s final transactions and closing duties.”