Online Low Cost Estate Agents - Do they really save you money?

This is part of a much much larger piece that I've been planning on discussing for some time, but some recent news events have once again spurred me on to share this with local folk who are thinking of 'saving thousands' by using a cheap alternative.

Now before I start, and without mentioning any names, I have worked for an 'Online Agent' and it was eye opening to say the least. I took stock of the situation and learned everything I could about what they were doing and set up on my own with what I believe to be the right focus - offering clients my expertise and the best service I can possibly manage with the resources I have available. That experience gives me a higher than average standpoint and the qualification to make comments on how one of the larger ones was run, and how much of an embarrassment the place was.

The focus of the articles I want to share with you though is one particular online offering in Manchester who claimed to have saved a client in London a substantial sum - so much so in fact that it was published in the most credible news source around.....The Daily Mail. The firm in question claim that they sold the home, worth £24 million, for just £549, saving their client a whopping £30,000 in fees. That sounds brilliant, cue the stampede of vendors looking to cut their selling costs - there's a bargain bin over here and the savings are tremendous!

Here's the original Property Industry Eye article reporting the Daily Mail's Article.

That all sounds great doesn't it?  I mean, who would bother going to a high street agent when you could save that much money on any size home? Well, it does sound great until you find out that it was a load of rubbish.

Today, high end agent Knight Frank have set the record straight and it shows that it was in fact they who sold the property - so maybe the article was just a big publicity stunt, but how many of the other listings are false and how many of the claims made by low price tag firms are fibs to entice you in?

You might be thinking - who cares?  If it can be done for £500 or less - why not just do that? Well, not wishing to be rude but I feel this can only be approached with a blunt instrument.....I'm afraid you're showing your thorough lack of understanding for what this industry actually does for you when you engage any of us to act on your behalf in a Sale or a Let.  Can it be done for less?  For next to nothing?  Yes, of course it can - anything can - to say otherwise would be obtuse and farcical. Almost any product or service can be done on the cheap and mass produced - you can buy a cheap house, a cheap car, cheap food from a cheap supermarket, cheap clothes, a cheap holiday, you can have cheap furniture in your home, a cheap TV, you could even go so far as to live on the cheapest road in the cheapest town in the cheapest country. And you can even get a cheap tattoo while you're at it.......

Getting the picture yet?  Ok, so clearly, nobody does that - it's ridiculous. We all have a priority list for things that we feel should be quality. We might have the home and car we can just about afford, but hey what's wrong with a designer suit or a nice pair of shoes - we're entitled to luxuries, that's part of why you go to work to earn your wages, so you can occasionally have nice things, otherwise why bother?? BUT...what I'd like you to do is take a moment for a little introspection and think about the last time you bought something that you needed to rely on and it failed. Sure, doesn't always happen - I've bought cheap and it's done the job it was meant to do - maybe not perfectly, maybe it's not as luxurious as the higher priced things, but it worked.....for a while......ok once......and it could have worked better I guess, but hey it got the job done.

Ever had that dialogue with yourself or somebody else? Nice bit of post-purchase rationalization going on there! It happens all the time - maybe you took your respectable car that you bought at a bargain price to a local garage to have it fixed, and it came back with something else more serious broken, and you vowed never to use them ever again, the greasy nincompoop spanner monkeys. Maybe you wanted that £100 pair of shoes but settled for the cheap pair from the wall of trainers at the Sports shop for £20 - bargain! They fell apart 6 weeks later didn't they. It could be anything. Think about how you felt that you'd spent money - admittedly less money - but you didn't really get much for it.  Angry? Upset? Annoyed? Foolish? Embarrassed? You rationalise your mistake by making excuses. Why do you feel that way? It's because you've been conned into a low quality low priced product and you didn't actually get what you needed.

Now I want you to consider your home, or your investment property. How much is it worth, to you? I don't mean the market value, but how much effort and time and stress did you put into viewing it, offering on it, securing the mortgage, going to work busting your butt to make the payments, dealing with agents and solicitors and paperwork and banks and oh LORD it's never ending, all of that to get to where you are. The money you've sunk into this asset is immeasurable and it's eaten up a large proportion of your income for years now, and now you need to find a new tenant or you need to sell to move on - and you're telling me you want to deal with a busy call centre of people who are paid so little there's literally no reason for them to care about any of your needs or what you're trying to achieve?  Or a company with a 'local expert' who doesn't need any qualifications or experience to do the job and will be so desperate to do deals they'll put that above your needs? Companies who will charge you upfront and keep your money even if they don't sell your home.

No two house sales are the same - the circumstances of the buyer and the vendor are absolutely unique and need to be considered, and as Property Professionals negotiating sales or lets it is our job to understand them both, otherwise you simply will not get the best price (note I say best, not highest - there's a difference).

Now it's fair to say that we need to be balanced - the other end of the scale is a traditional High Street outfit with huge glassy offices, cars, sharp suits, rolexes and a slimy disposition. These sharks want to keep your business, but are scratching their empty heads as to why people are getting a bit pissed off with being charged 1.5% - 2.0% + VAT and are still getting a teenager who's favourite phrase is "I don't know" on a viewing, and his babysitter negotiating the finer points of a house sale that could potentially lead to your triumph or utter ruin if they cock it up. I completely and wholeheartedly agree with you - with the average house price in the UK sitting at around £300k, most of you will hand over £4,500 plus another £900 in VAT on top of that to somebody who's top skills appears to be holding clipboards, shaking hands, driving too fast and drinking cheap coffee (surely they can afford something better than this base gutrot for their customers?!) - yeah, damn right you should be annoyed. There has to be another way. Right? Right??  Please tell me this isn't our fate!

The thing that everyone seems to miss is what people actually need. If you're selling or letting, you are seeking somebody who is an expert in the local market, who knows the prices, who knows the lay of the land, but also somebody who is capable of reaching a large audience of potential buyers, and can arrange everything for you, do the bits you're unsure of and you're willing to pay a modest fee for that. Sure, if you had the time you'd do it yourself, but you're too busy, so you look for a person who can just get it done, find a buyer and do all the technical bits on your behalf so you can get on with your life. The point is - service and expertise are the things people need, not low prices or smooth talking thick rich kids. The public aren't cheesed off with the price, they're cheesed off with paying that price for not getting what they need.

The fact of the matter is with this cheap fee idea, you have to look at it from the other end. Nobody, even online agents, start a business as an act of altruism - they all need to make money. The staff won't take a job answering phones and dealing with the inevitable stress piled on them from dealing with complicated house sales for less than a certain amount - that, plus offices and computers and heating, lighting, insurances, professional memberships, compliance, tax, accounting, all creates overheads that must be paid from the revenue.  With me so far?  So how do you save revenue? You cut your costs - biggest overhead in a business?  Staff and premises. So you lose the shop front, and you do what with the staff?

That's right, they hire low paid inexperienced unqualified chickens reading from a script to keep gullible customers just happy enough so that they don't ask too many questions, and if they DO ask too many questions, bounce them round and don't call back until they wear themselves out like an angry toddler (not my words, and yes it was said in the office and laughed about - that's what you're buying into folks!). This inevitably erodes the service you get, so the con is that you're actually looking at the wrong thing - the price. You're ignoring the intangible - the things that you get with a product or service at a higher price point that are thoroughly stripped away with cheaper alternatives. Warranties, insurances, after care, and most importantly people taking a vested interest in doing their best for you because you're paying them what they're actually worth to undertake a complex and challenging task on your behalf.

When you try to save money, do you think you're getting the same service? Ask yourself honestly if you moved a fridge for somebody who paid you a tenner, would you care about how you handled it? Would you care more if they paid you £100? Does paying less guarantee you the absolute best price for your asset? Will it be from somebody who is fighting hard on your side because you're actually paying them well for an extremely complex and challenging task, pouring in their years of experience and qualifications to assist you because they're going to do well out of it alongside you?

You know the answer to that.

The evidence is everywhere, everything that is cheap and you pay less for is going to come at a price elsewhere - and in this instance it's service and care. You may save money, and you may be fortunate in taking the epic gamble with the largest financial asset you'll ever own and get through the process completely painlessly. But have got to ask yourself one question - do I feel lucky?

Well......Do ya?



P.S.

I think the bottom line of this sign says it all, frankly.

Footnote:

A real life example I heard from an industry colleague is illustrated quite simply by looking at some figures from a house they were looking to sell but the vendor wanted to go 'online';

The client had their home valued and had two options. An online agent charging £500 upfront, and a local full-service agent charging 1% on completion (nothing upfront).  The property was worth approximately £375,000 and was on the market for £382,000 to allow potential buyers to make offers and give the owner some wiggle room. The client loved the idea of saving £3250 in agency fees (if he sold at market value) and was honest with my colleague about being sucked in by the dulcet tones of the Online offering.

Here's my colleagues response;

A: "So.....let me get this straight......you're telling me that you're considering using an agent who is cheaper by £3250?"

C: "Yes, it's a no brainer - I'll save a fortune!"

A: "OK, so would you use me if I said I can make you at least £6,500 on the sale"

C: "That would be brilliant, but I don't see how you can do that??"

A: "Simple - because you pay me a rate that is not only enough for me to care about the sale to work hard and actually sell at your asking price or above, but also enough for me to give the time and resources required to achieve the price you want - if you paid me £500 upfront, what incentive to I have to bother? When I work with you I'm an expert in my field and the local area and I can sell this property for a price that more than covers my fee, and put more money in your pocket - if you go online, it might only cost you £500 upfront, but you could potentially stand to lose £6,500 on the sale of the house"

C: "............"

The client signed up and they sold the house within a week for more than the asking price. Not a tactic I've personally used, and certainly not true in every case as all businesses are different and have different methods, but to me it just demonstrates that paying somebody what they're worth is how you get results, cutting corners might get to the end of the race but it's going to fall way short of where you could have been had you paid the right money for a professional in the first place.