An estate agency is pioneering a new business model in which it charges no commission whatsoever to the vendor.
Freeagent247, an online operator with no shopfront premises, instead operates a model under which the buyer effectively pays the agent a one per cent fee plus VAT - called a Purchaser Privilege - which allows the seller to pay nothing at all, even if the property sells.
Daniel Lewis, one of the two partners running the agency, has told Estate Agent Today that he came up with the model after 10 years working for traditional agents in the Worcestershire area.
“In the end it was a fees war. Naturally sellers wanted to pay as little as possible and there was competition between agents - and the only way that was going was towards lower and lower fees. Against some online agents, it was a war that couldn’t be won” says Lewis.
“So we came up with something completely different, which we don’t think has been tried by any other agency anywhere” he continues.
Lewis and his business partner Gerard Smith visit the property of each client, use a professional photographer, prepare conventional online floorpans and even have a home staging expert on call if required.
The agency restricts its stock to properties that can be visited by the two partners, so most are in Worcestershire with a small number in neighbouring counties.
Properties marketed by the firm are advertised online and on Rightmove and enjoy digital marketing via Facebook ads and Google adwords. The two partners also correspond with clients via text, email and WhatsApp.
The agency has been running for just over two months and is about to exchange on its first three properties within the next few days. It has around 30 others on its site.
“We still work on behalf of the seller in the usual way, and we’ve secured legal advice that our business terms are as solid as any agency operating in the traditional way” Lewis told EAT.
At the bottom of property details on its website there is the wording: “A Purchaser's Privilege of 1% + vat of the eventual purchase price is payable by the buyer in addition to the purchase price on completion.”
Lewis says this business model has so far been “really successful” and despite buyers having to pay an additional fee, their offers and attitudes have not been any different to those which the company’s two founders witnessed when working in ‘ordinary’ agencies.
“I cannot see any downsides to this model. Over time, I believe this isn’t just as profitable as the usual seller commission-based but could even be twice as profitable” he adds.
So far there’s been no attempt by rival agencies to emulate Freeagent247’s model but Lewis doesn’t rule it out.
“I think this could be the future. This could be how all agents operate in the future.”
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