Online Estate Agency vs High Street firms: Pro and Cons
Online estate agents claim they can save you thousands of pounds by charging a flat fee instead of a commission like traditional agents, but is there a catch? We dig deeper into the pros and cons.
What is an online estate agency?
Online agencies don’t have high street shopfronts and operate through a website. They value your home, take photos, produce floor plans and get your home quickly listed on property portals such as Zoopla, Right Move and Prime Location. Their customer services team will arrange the time of viewings and many will negotiate and accept offers on your behalf.
Pros of using an online estate agent:
Online estate agents charge a fixed, one-off fee which can be anywhere between £99 to £1,800, depending on the level of service they offer. In most cases, this means they are a lot cheaper than high street estate agents who typically charge a commission, between one and two per cent of the asking price, on completion of the sale. The more expensive your home is, the bigger the potential savings of a flat fee.
For example, if you sold a property worth £300,000 using a high street agency that charged one per cent commission, you’d pay £3,000 plus VAT. If you’re selling a home for £600,000, the bill would be £6,000 plus VAT.
Purplebricks claims on its website “to provide a full estate agency service at a fraction of the cost because we’ve removed the expensive offices and fleets of cars that you see with traditional agents.”
House Network founder and CEO Mark Readings said his company prides itself on excellent customer service and doesn’t confine people to long-term contracts like traditional estate agents. He said: “Over the past 15 years, our research has shown that the first three weeks are the most important in selling a property. Our one-off fee allows us to maximise the marketing of a house when it matters. If we do not sell it within the first month, then we keep marketing until the sale is achieved, so it is always in our interest to sell your property to the agreed price as quickly as we can.” House Network offers a 20-point customer service promise, which if broken means they will sell your home for free, said Mr Readings.
It’s the same process whether an estate agent is selling a property worth one million pounds or £100,000. Online estate agents say they offer a fairer, low-cost flat fee. “UK homeowners have paid huge fees for too long and it’s not fair each person pays a different amount,” comments Mr Readings on his LinkedIn site.
The internet provides a 24/7 service which means online estate agents can be flexible to suit your schedule. Some companies offer sellers an online dashboard, so they can track progress, update details of their property and confirm viewings. Their call centres can be contacted seven days a week outside of traditional office hours.
An investigation by consumer watchdog Which? suggests that online estate agents sold properties 38 days faster on average than traditional agents (although many high street agents would dispute this). Furthermore, the same study, published in February 2017, found that traditional agents were more likely to make big price cuts in order to sell homes. The research found 19 per cent of properties sold by traditional agents were reduced by five per cent or more compared to 13 per cent for online-only agents. Which? suggests heavy reductions indicate homes were listed with an inflated initial asking price.
Freedom to use multiple agents
Generally, there is no fixed contract period, so you can instruct other agents if you wish albeit at extra cost.
Cons of using an online estate agent
The downside of the cheaper fee is it usually has to be paid up front regardless of whether your property sells or not. It’s non-refundable. Currently, Purplebricks - one of the market’s biggest players- charges a fixed fee of £849 outside London or £1,199 for the London area.
But others, such as House Network, gives customers the option of a fixed rate of £795 upfront or a slightly higher fee on completion, a ‘no sale, no fee’ deal. This reduces the risk of wasting your money. Some also offer deferred payment option. 99Home offers three fixed rate packages: £99 upfront plus Combo/High Street packages where sellers pay £99 upfront and £400 or £900 after the sale is agreed. The prices quoted were all correct at the time of writing this article in July 2018. Please check on online agency websites for the latest prices.
Most online agencies won’t accompany viewings. Sellers have to show buyers around their own property. Some but not all online agencies will vet buyers, checking names, addresses, finances and if they are in a property chain. For an extra fee of £300, Purplebricks will get a local property expert to conduct viewings. Added costs for services which are standard from traditional agents, such as marketing packs and For Sale boards, can soon mount up. So, you need to check exactly which services are offered in an online package before signing on the dotted line.
Lack local knowledge
Most online agencies will visit your home to value it with an increasing number employing ‘local experts’ for this. But they often have huge patches to cover and are less likely to have detailed knowledge about your property market and neighbourhood. “For me, having local knowledge is a massive bonus,” said Claire Chambers of Chambers Estate Agency. “We are not only selling the property but the area, such as local schools, but sellers have to weigh up whether that’s worth paying extra for.”
Lack of local knowledge means they could undervalue your property or overvalue it and lose the sale. Gary Marples, of Stevens estate agency, said: “I know if one side of a street sells better than the other. If someone is providing valuations for a wide area how can they have that level of local knowledge? I would not want to value a property 10 miles away, let alone 40 miles.”
Homeowners Alliance suggests overcoming this disadvantage by asking three local high street agents to value your home before deciding whether to sell online.
Lower completion rate
Once you have paid the upfront fee, what incentive do online agencies have to find a buyer or secure a sale? The comparison website GetAgent.co.uk found that traditional agents typically found a buyer for 80 per cent of the homes they marketed. The study looked at homes listed by four leading online agencies over a year in 2016 and early 2017 to see if they sold. Purplebricks completed on just 57 per cent of listings, HouseSimple completed on 58 per cent, while eMoov and Tepilo were at 51 per cent and 48 per cent.
Mr Marples said: “There is a terrible fall-through rate. For the fees they are charging they can’t have enough staff to do the job properly. It takes an awful lot of hard work to get through to completion. If I have an online agent in a property chain, I usually think it could be the weakest link.” Online agents are also less likely to have good relationships with local surveyors and solicitors to progress sales, say traditional estate agents.
Less personal service
While someone will visit to create floor plans and take photos, you won’t normally communicate in person. Sellers will have to deal with someone in a national call centre by email or phone instead of popping into the local office of a traditional agent. “There are still a lot of people who want to deal with you face-to-face, especially older people who are not necessarily clued up with the internet or social media platforms.”
“I think the frustration can come in the after sales service when people are trying to get an update and can’t always speak to the same person,” said Ms Chambers who set up an independent local estate agency with an office rather than high street shopfront to cut costs.
Is an online agent right for you?
Potential savings are huge, especially for more expensive homes. But if your property doesn’t sell or the chain breaks you could be worse off as the upfront fee is non-returnable. Online sellers who don’t find a buyer could then end up going to a high street estate agent – paying two sets of fees.
However, if your think your property will sell relatively easily and you are best placed to show potential buyers around your home and happy to do some of the legwork like chasing solicitors, then using an online agent could save you thousands.
But if you’re stretched for time or prefer a face-to-face service with more personal support and advice from a local property expert, then it may be worth paying more for a traditional full-service agent to secure a sale.