Virtual middlemen flourish in Britain

by Richard Warren in London, SCMP

Dec 07, 2011

 

A new breed of discount property brokers, "virtual agents", is appearing in Britain.

These online estate agencies offer to market homes at one-tenth of the price of traditional estate agents.

According to Peter Joseph, founder of online estate agency Think Property, there were only 10 web agencies in Britain six months ago, but now there are about 100.

The virtual agencies typically charge a fixed-rate fee that works out at less than commissions at traditional estate agencies. Many online agents will market homes for less than GBP400,000 (HK$5 million), but a typical fee charged by traditional agencies is 1.5 per cent of the sales price, which means the vendor of an average-priced property would need to pay about GBP3,615 if an agent finds a buyer. According to the Land Registry, the average price of a British home is GBP241,000.

Most services provided by traditional agencies are offered by online firms, including property valuation, negotiating a sale and putting up a "For Sale" board outside the home.

However, online firms focus solely on marketing a client's home through internet property portals like Zoopla and Rightmove, dispensing with traditional media, including magazine adverts and leaflets.

Joseph said marketing online is the most effective way to sell a home. "Everybody searches for property online, so why do we need the traditional high street estate agency model?" he said.

Fifty homes have been marketed by Think Property since it launched in April. Nine have been sold, all for prices 90 to 95 per cent of their asking price, Joseph said. Properties took two to three months to sell, he added.

Online agencies contact clients via e-mail, which Joseph said was "perfect" for Hong Kong-based investors, because it gets around the problem of the time difference.

Vendors using online agents are more involved in the marketing process than those with a traditional agency, because they are asked to show prospective buyers around their homes. Joseph said this was advantageous to making a sale, because a vendor could give more details about their property than an agent.

Hong Kong-based buyers ought to ask a friend or relative to handle viewings on their behalf or strike a deal with the managing agent if it was a rental property, Joseph said.

David Dalby, residential director at the Royal Institution of Chartered Surveyors, said managing agents might charge to handle viewings, so that would add to the cost of going through an online agency. It was better for a sales agent to show prospective buyers around a property than for the owner to do so, he added.

"An agent will steer a buyer to key features of the property without giving a running commentary," he said.

Traditional agents also had the time to provide a "mentoring and guidance" role to sellers, Dalby said. "A high street agent will do money-laundering checks to find out where [the buyer's] money comes from."

Dalby said traditional and online agencies both had a future. "When transactions are made over different jurisdictions, then there will be an increase in virtual business."

Increasingly, traditional agencies may operate like their online competitors. "High street agents will make more use of technology and may not need shop fronts so much in future," he said.