Where are all the disruptors in the UK estate agency industry?
Whilst the new breed of ‘online’, ‘modern’ or ‘hybrid’ estate agents are slapping themselves on the back with the growth there has been in their sector share of the estate agency market over the past few years this is in reality little to do with offering a truly disruptive service that is delivering on the promise of a better way.
It is rather more about the huge marketing spends made possible by round after round of investment from those who have correctly identified there is a problem in this industry to fix — and the huge prize for whoever cracks it.
The financial backing of these many new entrants along with the pace of growth in the sector does however indicate a general feeling of dissatisfaction from consumers with the status quo and the strong desire for change in the kind of service offered by traditional estate agents.
The most successful of this cohort by some distance, Purplebricks who have raced ahead to establish a 5% market share of all property listings nationwide, really offer little more in terms of disruption through their model than a reapportioning of the risk taken by seller and agent in each transaction. This allows them to offer their customers a lower cost flat fee and a service that is otherwise business as usual (albeit one which must be paid whether they are successful in completing a sale or not). That said with a market capitalisation in excess of £1.2bn and 20,000+ online reviews, with an average Trustpilot rating of 9.5, they have obviously done something right.
So, aside from their considerable marketing arsenal and effective messaging on price, what has Purplebricks really done so much more effectively than their competition to capitalise on this desire for a different kind of estate agency service from homeowners? It really all comes down to the fact that they have correctly identified that good estate agency (as well as needing effective marketing, established local networks and sound administration which we all take as givens) is an advisory service; homeowners recognise the real value of having somebody who knows what they are doing in their corner when it comes to transacting on the most valuable thing(s) they will likely ever own.
While other online agents have focused on thrashing the potential savings of their service to that of a traditional bricks and mortar agent to death, attracting a slim section of the market made up predominantly of pseudo-pros and price-seekers, Purplebricks effectively distill this crucial advisory element of their service in to their ‘local’ message. While others in this sector have made efforts to position themselves in a similar way they have in reality really only been paying lip service to the same idea, and it is all too easy to see through for the vast majority of their potential customers. Purplebricks on the other hand put their money where their mouth is with their network of ‘local property experts’, and have convinced the market for the time being that they can have the best of both worlds — price and service.
Whilst many of the other main players in this space attempt to present themselves as technology leaders in their approach to improving the painful and expensive process of moving house the reality is that nobody has, as yet, really made adequate use of the possibilities that the newest technologies or big data have to offer. This is where we should really be looking for efficiencies and cost savings that speak to a different solution than a race to the bottom on price, otherwise carrying on as normal, that online agents believe is the answer.
Estate agency does not unfortunately command the respect and prestige those in the profession may like — unless you have actually been blessed with the overblown self confidence that ridiculous quiff suggests, you will know all too well that shuddering feeling of being asked at a party what you do. Whilst there are likely myriad reasons for this it is in part no doubt due to the perception that estate agency fees are hugely excessive, and the lack of awareness of the significant cost there is in successfully marketing and selling a property; property portal advertising costs, local media, and the significant man hours required to handle enquiries, host viewings and conduct the sales progression complete with hours of fruitless phone calls chasing solicitors up and down the chain to successfully bring a sale to completion.
While moving house is frequently identified as one of the most stressful life events, the source of this stress is more often than not the result of a fragmented, antiquated and fundamentally broken system of conveyancing. A good agent will intervene, chase and advise to try and mitigate the shortcomings of this part of the process as far as possible but in reality they are at the mercy of the conveyancers acting for either side — yet will still have to bear the brunt of the discontent from their clients for the frustration they have to endure in achieving their goal of actually moving house.
There is so much in the current conveyancing process that adds little value to anybody involved in the transaction, which could be dealt with much more simply (and quickly) or in some cases just left out completely. In addition to the fact that the majority of conveyancing transactions are dealt with according to a standard format — the Law Society Standard Conditions of Sale — the arguments for fundamentally reimagining and automating this process are overwhelming.
The disruption that the UK estate agency market really needs has to consider the whole of the transaction, including conveyancing. This is a model that we can see operating in other countries to good effect such as the United States where realtors must not only market a property, but also act for their clients in the legal transfer of title once a sale has been agreed. There is no need for a separate conveyancer in addition. But what has prevented the roll out of such a service to incumbent agents in the UK market is that conveyancing in the UK includes some reserved legal activities; indeed realtors in the US require a license for the same reason.
By creating a system of automated conveyancing, where the risk and compliance responsibilities are not held by each individual agency, and providing this ‘as a service’ to estate agents we can power their operation as realtors, without needing to take any additional risk or structural costs. The benefits to both agent and client are significant — not least in the experience of having a single point of contact for the client and an agent who owns each of their clients for the entire home moving journey. In addition there will be significant cost, time and efficiency savings for both parties as well as opening up a number of value added services and new revenue opportunities that can be offered to clients as part of a homogenised home moving service.
Whilst many predict the inexorable growth of the online sector over the coming years, I have yet to see anybody predict the total demise of traditional estate agency at any point in the future. In reality we all know why this is. For all the benefits that new technologies and bold thinking can undoubtedly bring to the process of selling, buying and moving house the lesson that the success of Purplebricks teaches us is that, whilst there is a genuine and growing desire for a different kind of estate agency, consumers want and need an advisory service delivered by a real person with the kind of knowledge and insight that, for the time being, will not be convincingly delivered by a machine.
Many, many online agents have come and gone over the past decade. This is largely due to the ultra-competitive and big-money fuelled race for market share that has killed off those who lack any serious financial backing. It is also however because the online approach by and large has not focused sufficiently on delivering the kind of service that people really want.
New technologies are going to be a major part of the solution to the problems that we can all see need to be addressed in the industry, but we have to recognise that nobody so far has really capitalised on the possibilities that such technology has to offer. Online estate agents have correctly spotted there is a desire for change, but failed to identify what the good parts of traditional estate agency involve that they should have been endeavouring to keep; nor have they been bold enough to look at how the process should be working for consumers and the implications that this has for thinking outside of any of the traditional or current models of estate agency. The answer is not unfortunately as simple as offering a budget service and a shiny website with a few bells and whistles layered on top of the existing process, but rather in using the most powerful new technologies and innovative process design to power efficient end-to-end service delivery by the people who understand their local markets, that clients know and trust. Be a #realestateagent.
