The rise of online estate agents in the UK

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The dramatic rise in homeowners choosing to go with online estate agents, rather than their more expensive high street counterparts, means there is an increasing number of options for you to choose from. The question is, what’s right for you?

To help you in your decision, we’ve dug deeper into how they work, how the services vary and also explored some of the less obvious areas that should be considered for this all-important decision.

Online estate agent fees and services

Online estate agents are known for their low fees, which can save people thousands of pounds when compared with the percentage-based fee that high street agents charge.

Most online agents charge a one-off fee at the point of instruction, or, allow you to defer this for up to 10 months. It’s worth noting though, the agents that offer you to postpone their fee will always collect payment, regardless of your property selling. With only 55 per cent of the homes that come to market selling, 45 per cent of homeowners who choose to pay upfront (or defer) can end up paying for a service that doesn’t necessarily lead to a house sale.

If that doesn’t sound appealing, you may want to look at the handful of online options that offer a no sale, no fee service where you only pay when your home sells.

It’s also worth considering what agents offer outside of their ‘normal’ service. All agents will provide you with a valuation, photos, floor plans and advertising on the likes of Rightmove and Zoopla. There are however some that charge extra to negotiate a sale price, or, help your sale progress to moving day.

One of the key and often overlooked parts of selling and buying homes is the legal work that commences once that all important offer has been accepted. In the UK, 33 per cent of home sales fall through during this stage, so it’s important to do your research and think about this upfront, rather than waiting until late in the process. Considering this early can speed up your sale and ultimately make sure everything progresses smoothly to moving day.

Below, we’ve analysed the top 5 options available, based on reviews and the number homes they have sold. We’ve also given an illustration of the additional, often overlooked costs involved in selling your home, namely the legal work that kicks in once you have accepted an offer.

1. Fixed fee payable regardless of whether the property is sold or not. 2. Average cost of conveyancing fees in the UK as reported in a study by Post Office Money and the Centre for Economic and Business Research. 3. Homesimple offers fixed fees starting from £695 and a no sale, no fee option of £1,495. 4. The legal fee payable for the supply of conveyancing services by Housesimple's conveyancing partners is £795+VAT, plus disbursements. Information correct as of 17 January, 2018.

Other areas to consider

Viewings

Most online agents encourage you to conduct your viewings. However, some do offer agent-escorted viewings - either for a set fee, or a cost per viewing. What’s best? That’s really up to you. It depends on your lifestyle and your preferences.

Buyers generally prefer to meet the homeowner as they see this as a fantastic opportunity to ask all the questions that matter - What’s your favourite restaurant in the area? What are the neighbours like? How easy is parking? Remember - nobody knows your home anywhere near as well as you do.

If however, you don’t like the idea of showing people around your home, Purplebricks offers a viewing service for an additional £300.

Negotiation and Sales Progression

All of the agents in our comparison offer sales progression and negotiation services as standard within their price. They will also complete in-depth checks on the buyer to ensure they’re in a position to progress with the sale and give you complete peace of mind. This service isn’t always offered as standard with the lower cost services so be sure to check these all-important areas before signing up with any service.

Legal Support

As previously mentioned, legal support is an incredibly important part of selling and buying homes and having the right solicitor in place can make a huge difference in the success of your sale. With 1 in 3 homes falling through after an offer has been accepted, the legal conveyancing industry is likely to be next in line for technological advancement.

With the exception of Settled, agents don’t offer these services in-house, so instead refer you to their partner conveyancer, or encourage you to find your own. It’s worth noting; if you are choosing to go with an agent that allows you to defer your upfront fee, they will insist on you using their partner conveyancing firm. Housesimple also charges an additional £200 fee should you choose to go elsewhere.

Here at Settled, we’ve spent years looking at every aspect of the home selling and buying experience, and it’s because of the breakages we have seen within the legal point of the sale that we have now brought this all under one roof. In doing so, we’ve increased the likelihood that your house sale will get through to completion successfully by 30 per cent (on average we get 87 per cent of homes through to a successful sale, compared to a 66 per cent UK average).

How do online estate agents work?

There are modest differences between the way online, and high street estate agents work. What high street agents sometimes lack in affordability, transparency and control, their online competitors tend to provide through lower costs, clearer insight, around-the-clock access and more control over how their sale takes place. In the majority of cases, they do this through the following means:

  • Charging a one-off, flat fee rather than a percentage fee based on home value
  • Breaking their package down into steps and services, which sellers can sometimes choose between
  • Providing an online logged in area where sellers can manage their ad and communicate directly with buyers 24/7
  • Homeowners hosting their viewings, so that buyers can ask questions directly and so that a strong buyer-seller relationship is formed

As internet-based businesses, online estate agents can be far more flexible with communication. Whereas a high street agent provides the seller with one representative, whose correspondence is usually carried out in-store or over the phone during office hours, online agents frequently offer a team of experts with telephone, email and instant online chat available to sellers.

With a web-based ad, plus instant and direct communication with buyers, sellers who use the online route gain the ability to make changes to their advert, monitor their ad’s performance and progress their sale at any time of day. And they can do all of this without relying on an intermediary to do it for them.

Online estate agents using Rightmove, Zoopla and PrimeLocation

You need only to see the statistics for the online property portals to understand why they’re such an essential part of marketing your home to potential buyers. A recent study found that an overwhelming 95 per cent of UK home buyers use the internet to conduct their property searches, making the traditional high street agent window ad - and even the trusty For Sale sign - increasingly obsolete.

Rightmove, Zoopla and PrimeLocation are used by all the online estate agents in our comparison, however, it’s worth noting that not all online services do and also some high street agents will choose either Rightmove OR Zoopla. If your still thinking of going with a high street agent, it’s worth double-checking which of these sites your home will be advertised on.

Rightmove is the biggest of these three top portals with more than 90 per cent of all UK estate agents owning membership with them. The site boasts over 127 million visits every month and 1.1 million homes listed on its website, making it a no-brainer for any agent who wants to get their customers’ homes seen.

Fig. 2 Graph showing difference in visits per month between property portals

How do Rightmove, Zoopla and PrimeLocation work?

Rightmove, Zoopla and PrimeLocation offer a wealth of unique features to help buyers find their perfect home. For more information on their features and how each of these top portals works, you can read our in-depth guides:

The rise of online estate agents

There was, of course, a time when online estate agents didn’t exist. By looking at the rise in their popularity, we can gather clues as to what the future holds for them and the industry as a whole.

The growth of the Internet and its effect on the housing market

The rise of the online estate agent started, of course, with the internet. The internet has brought opportunity for disruption in almost every industry. People now demand greater transparency, control and flexibility and that’s precisely what the new online offerings are providing.

Online estate agent market share

As a relatively recent phenomenon, with most joining the market after 2011, online estate agents’ exact market share is yet to be thoroughly investigated. Various sources reference a market share of 1 per cent-1.3 per cent from 2014-2016, growing to 3.7 per cent in 2017. In the future, many sources estimate that this is likely to increase to 25 per cent-50 per cent by 2025.

As the UK’s largest property portal, with over 1.1 million homes listed and 127 million visits to the site every month, market share on Rightmove is a good indicator of market share in the property space. Looking at its reports, a strong upward trend for the top online estate agents* can be seen from November 2016 to November 2017, increasing from 2.77 per cent to 4.38 per cent - a 58 per cent growth over just one year!

If this growth continued at its current rate, by 2020, online agents’ market share would reach 17.28 per cent. One thing is for sure, this new style of buying and selling homes is genuinely on the rise.

Learning from changes in the travel industry

To understand what online estate agents’ existing growth means for their future, we can look to other industries that have been similarly disrupted by the Internet. Disruptive businesses in retail, TV and banking all bear a resemblance to the online estate agent sector, but it’s the transformation of the travel industry that provides perhaps the strongest indication of what’s to come.

Just ten years ago, traveller research was gathered mainly through word-of-mouth recommendations, publications and books. High street agents controlled the travel comparison and booking monopoly. Now, companies like Airbnb, Skyscanner and TripAdvisor are household names, and travellers have taken the comparison and booking process into their own hands.

How the Internet changed travel

  • 2006: 57 per cent of British adults use high street travel agents to book holidays(R)
  • 2009: 49 per cent of British adults are now using online travel bookings (R).
  • 2012: A report into holiday bookings through high street agents shows a 13 per cent decline since 2008(R).
  • 2013: Thomas Cook, the world’s oldest travel firm, closes 195 of its high street travel agencies to reduce admin costs and upscale their online offering (R).
  • 2014: A report indicates a 46 per cent drop in travel agents from their 2004 level(R).
  • 2016: Just 19 per cent of holiday bookings were made in-store (R)
  • 2017: online travel bookings reach 83 per cent, with in-store bookings dropping to 17 per cent(R).

Fig. 4 Graph showing 2016 holiday booking methods in the UK via the Association of British Travel Agents (R)

How the online agent space is mirroring the travel industry

In the grand scheme of things, online estate agents are newcomers to the Internet revolution, but recent events - that reflect what happened for travel - indicate that industry transformation could be on the way. The property industry has been in need of disruption for a long time, and in lacking the same adaptiveness as their online rivals, high street agents have created the opening.

  • 2015: 95 per cent of all new residential property searches begin online on sites such as Zoopla and Rightmove(R).
  • 2016: Traditional estate agent fees down 0.5 per cent from 2011(R).
  • 2016/17: LSL Property Services closes 21 stores(R).
  • 2016/17: Countrywide closes 100 stores(R).
  • 2017: Almost 5,000 estate agents show signs of “financial distress”(R).
  • 2017: Countrywide profits to June were £447,000 down from £24.3m in the same period last year.
  • 2017: Revenue for London’s ‘leading estate agent’ Foxtons falls 15 per cent, with pre-tax profit falling 64 per cent(R).

All in all, given what we have seen in the travel sector, the future for online estate agents and online offerings within legal and financial services look to have a very bright future indeed.

How successful are online estate agents?

When you choose to sell your home with any agent, their success to-date is an important indicator of their ability to ensure the sale happens. As our homes are probably the biggest investment of our lives, sale price is a fantastic indicator of ‘success’. You want to get the best possible price for your home, and that’s down to good marketing of your home, setting a fair asking price and being open, honest and transparent throughout. 

We’ve dug a bit deeper into the leading online services to see how the top online services fare when it comes to achieving the asking price of the homes they sell.

Fig. 5 Table showing percentage of asking price achieved by the top online estate agents via HomeOwners Alliance

Contrary to what may be said about online estate agents delivering lesser value because of the lower fees paid, the asking price that properties listed with online estate agents is indicative that this is not the case. The average sale price achieved across the businesses we analysed totals 96.89 per cent, with both Settled and Emoov achieving 98 per cent.

Choosing the right service for you

As you can see there are a number of options to choose from when selling your home. Here at Settled, we’ve spent years speaking to thousands of homeowners just like you and it’s because of all the amazing feedback we’ve created our unique approach to selling and buying homes.

Settled is a B2C property transaction software streamlining the home buying and selling journey
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