But now a new generation is emerging, to challenge the traditional model. Disruptor services are: smart, personal, use PropTech innovative digital platforms built around the client, far more dedicated, focused on results, with an approach and a mindset that leads to good deals for everyone, not just the agency.
These disruptors have taken a look at the old model and decided to shake things up. They’ve looked at where real estate agencies are going wrong, and why they’re so unpopular, and decided to be different thanks to technology and its many advantages.
They’ve seen that estate agents have had it easy for a long time, and become complacent. For 30 years, property prices have risen continuously, and demand has been strong, both for buying and renting. As a result, agents have had no incentive to sharpen their skills and compete on service.
In some areas, a handful of estate agencies dominate the local market. They all hire from the same pool of agents, charge similar commissions, and promote their stock in the same ways.
Likewise, in some areas, a handful of people or companies own most of the properties, and they often work with the same agencies for many years. The effect of all this is to stifle competition and prevent other owners from getting the service they need.
The high cost of starting a new estate agency keeps would-be competitors out of the market. Aside from hiring agents, you need to rent an office on the high street. You need to pay monthly fees for property portals like Rightmove and Zoopla. You need to do your own marketing or pay a franchise to do it for you, and so on.
In the UK, estate agent commissions are among the lowest in the western world. This forces agencies to focus on the volume of business rather than the quality of service. It also makes it hard for newcomers to get to a sustainable volume of business.
Nor do agents need any qualifications to sell or let property. This is amazing, given the enormous value of some of these properties, which are typically the only major asset UK citizens will own.
Many estate agents are not motivated to work hard and deliver good service. Given the low salaries and commissions, it is tempting to cut corners and even lie at the risk of losing a job they don't like much anyway. In fact, they are more motivated to look for a better job than improve their skills in the one they have now.
Career growth inside agencies is protracted, with few financial benefits for people to become managers and directors, or rise up fast. Internal growth is based on lots of corporate bureaucracy and little meritocracy. Few energetic, honest, and charismatic leaders manage to survive that long in the old-style management and valuation agents’ performance.
Rather than being motivated to foster a culture that benefits the industry by building teams around values, and retaining talent for longer, those who do make it into management are more motivated to maintain the status quo than transform the industry.
These companies and people might not be willing to change, but change is coming. In other sectors, new technologies and innovations have emerged, as enablers of the shared economy. Now we are starting to see the change in estate agency too.
Innovative estate agents have started to circumvent traditional agencies. They are going freelance and serving their clients directly, with benefits for both. As a result, clients are getting much better service from highly motivated professionals. In turn, agents are making much more commission at the expense of the agencies, not the clients.
Once this becomes more widely known, the estate agency profession will finally start to attract the talent it so desperately needs. Property owners will finally have a personal property expert whom they can trust with their most valuable asset.
The agency model is changing. So are the agents. They may not be so unpopular for much longer.
*Edmond Ibrahimi is Director at Propertalis
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The agency model might be changing, but that doesn't always mean the agents are changing. In many cases, it is the same agent with the same mindset and what's worse, the same ethos.
No amount of technology, no matter how amazing, can by itself ignite the shift from good to great. No technology can turn the wrong people into the right people. No technology can instill faith and trust.
In fact, I see the industry becoming even more unpopular as the new wave of recruits, many with little experience and many indoctrinated into the KW culture of easy "money", takes advantage of this technology and lack of accountability.
The industry will only ever lose the "nasty" image when there is more transparency, where character matters more than competence and when agencies realise that, in the words of Peter Thiel, competition is for losers.
This isn't a criticism of the model. Just an observation of its obvious flaws.
This item is completely and utterly wrong.
There are new EA doing things differently.
They DON'T charge fees or commission.
Obviously doing thing differently.
There is NO divine law that states EA must charge commission etc.
Check out free.co.uk who as a new EA have a completely different business model.
Essentially they very much allow the vendor to manage things themselves.
Listing and professional photos are FREE!
Listing is on RM currently.
Other EA will no doubt come up with slightly different business models.
That is competition for you.
The days of EA gouging commission for sales are over.
Vendors may now list for free via EA who DON'T charge commission.
They just aspire to pick up other business via their marketing leads.
No other EA can say this business model is wrong.
There is with technology plenty of scope for development of ways of doing this differently.
There is no wrong or right way but with this new free.co.uk offering many vendors will jump at the chance to sell themselves managing everything while saving tens of thousands of pounds.
The free co.uk offer won't break traditional EA as there are plenty of people who would prefer to use a traditional EA but this latest EA offer certainly is a compelling one with the saving of commission costs.
There are seemingly many new EA coming to market with different offers compared to the traditional EA fee model.
I believe that many vendors will be attracted by the free offer being essentially FREE!
That will attract a lot of potential vendors to try the service.
Not much can really go wrong if it is free.
Of course that does mean the vendor has to do a lot of the donkey work which is fair enough.
But compare a bit of donkeywork with commission costs and many vendors will want to have a go themselves to save a load of money!
But there is certainly space in the marketplace for a variety of EA offers.
I imagine however that quite a few EA won't like it one little bit that now any homeowner can list on RM for free.
Inevitably EA are going to lose business to this new free.co.uk EA and to other EA offers as well.
Competition like this will be good for the consumer.
It will encourage EA to innovate potentially abandoning the traditional commission based business model which so many vendors vociferously object to.
I guess we shall see but complacency is not something that EA should be engaged in
If so they will inevitably watch their business drain away.
Interesting times for the EA world!
I can’t help but think the future is either HIGH fee or NO fee. If you’re paying a lot of money to get mediocre service then why bother at all?
Yep you could well be correct.
A high fee for a full service and nothing if you want to do it yourself
Neither is right or wrong.
It will just be horses for courses.
But it does put the customer in control.
The customer has to decide
Hand holding or no hand holding.
Both options come at a price!
Sellers having access to differing Estate Agency models can only be a good thing, the market ultimately decides what is 'right' or 'wrong' particularly with such limited legislation in place (parking ROPA) for a moment. The emergence of new ways of doing things makes more traditional firms up their game to avoid falling by the wayside. In my view much of the issues start when an offer is made and accepted as the
Conveyancing process is archaic. Harnessing new technology with more collaboration between stakeholders will make the current system quicker, cheaper and less stressful. The current Government is committed to bring about meaningful change in this area. Although it has declined to legislate positively following recent white papers. Transparency is the key to improving the customer experience and speeding up the transaction reducing the possibility of it failing. Moving home Just takes too long, technological improvements will help considerably. Buyers and sellers need to get more legally prepared and agents should help enable it by being more involved.
This isn’t news, did no one see Jerry Maguire 24 years ago? It’s the same in any industry, good people/businesses evolve and strive, average ones struggle, poor ones die.
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