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Michael Banks says, so landlords can order exactly what services they want. “If you were to take every service we offer, it would still come in significantly cheaper than the high street,” he says. It’s easy to think that online agencies are
only able to cut prices because they don’t have the cost of high street premises. But the biggest savings come from rethinking what agents need to offer. For instance, Chris Sargisson points out
that since Zoopla and Rightmove have made house price and Land Registry data freely available, valuation of standard properties is no longer “a black art”. He sees it as purely a marketing device used by high street agents. By cutting out the valuation, House Revolution saves a huge amount of cost. Other online agents offer ‘desktop valuations’ rather than visiting the property. And most online agents have vendors and landlords handle their own viewings. Nicholas Marr, director of The Little House Company,
you measure to the microsecond the length of calls, and how many you handle,” he says, while “estate agency customer service is still in the Dark Ages.” He recently saw one agent’s door sporting a ‘gone to lunch’ sign; that wouldn’t happen at
Comparethemarket.com! Upad too offers its landlords an online
console where they can see every enquiry and the progress of the letting; “The landlord stays involved every step on the way”, Michael Banks says. Upad doesn’t do the viewings – the landlord does; since it charges an upfront fee, not a commission, it doesn’t need to keep tenants and landlords apart till the deal is done.
Where Upad adds value is in the marketing,
and at the other end of the process by handling all the documentation and legal aspects. “Absolutely we’re undercutting estate agents,” Michael Banks claims, “but we’re undercutting agents with a different business model. The focus of our business is not driving around looking for a parking space –
“Online letting agents have 2400 properties on Rightmove, the sector is growing but it
hasn’t hit critical mass.” Michael Banks, Upad
The online agencies have a simple
differentiator from high street agents; they’re cheaper. For the most part, they offer the certainty of a fixed fee, rather than a percentage of the sales price, and they tend not to tie clients into a fixed-term contract. Both Movestart and Monster Homes charge a £39 one-off tenant finding fee; sales fees vary. While some, like Movestart at £349, offer a single fixed fee, others also allow clients a flexible choice of different fee systems. For instance The Little House Company offers a one-off £345, or a £95 initial fee plus 0.5 percent commission; Fishneedwater offers a combination of four different services plus optional add-ons. House Revolution offers a fixed £999 fee, or a no-sale-no-fee package at 0.75 per cent; roughly, a fifth of vendors choose the fixed fee, including one canny vendor who sold his £1.1m house for that amount. “He was very happy,” says Chris Sargisson – “and no wonder, he must have saved £20,000 or so.” Average savings are less spectacular but still
considerable;
Hatched.co.uk claims its average customer saves around £3,500, and Housesimple, £4,105. But the biggest difference, perhaps, is that flexible fee setting puts the customer in charge – instead of a simple sole/multiple agency choice, vendors can choose between different service packages and different blends of upfront fees and success fees. Meanwhile, SpicerHaart’s online agency, iSold, comes in above the ‘pure’ online agents but well below standard agency fees with its £1499 fixed-fee package. For lettings, Upad offers “a full buffet”,
www.the-negotiator.co.uk
claims “You are the best person to sell your house because you know everything about your house.” Chris Sargisson says House Revolution started when he was selling his own house and tried to get agents to itemise the bill. “What could possibly cost eight and a half grand?” he asks. But while some online agents just strip out parts of the traditional process, he claims, “My version of estate agency is to understand what the costs of selling a property actually are. It’s not an online estate agent – it’s a business which changes the way agency works.” He says House Revolution has completely
re-engineered the business. “You just unpick the behaviour and say why are you doing that? How does it help the consumer?” But he believes you can’t take the human element out; “you hit a party wall problem, or another estate agent who’s causing a problem, and you need the support mechanism to handle the transaction.” So House Revolution has modelled the business around supporting the transaction handling after an offer has been made, rather than simply advertising the property. That’s a reversal of the trend with high street agents, which “put a lot of effort into the initial marketing but don’t then follow through with the support during the sale process,” he claims. So he has put huge effort into creating the
right systems to handle the process. An online account allows vendors to see the progress of their transaction in real time, at any time, and the system is monitored for efficiency. “I’ve worked in industries where
it’s being dedicated to doing particular tasks extremely efficiently.” For instance, Upad feeds over 1,000 portals and other websites automatically with its proprietary software; it’s taken three and a half years to build the system, and Michael Banks still believes they’re only half way there. Increased efficiency allows it to support 700 live properties with a customer services team of seven and still offer great service, he says. Cost is also stripped out, for many online
agents, by reducing marketing costs. Few of them advertise at all in the local press, going straight to the portals. Upad markets its services at grass roots level, through seminars with landlords’ associations.
COSTS AND PROFITS
With such low fees, are online agents making money? House Revolution is, according to Chris Sargisson - “It’s in the black, it’s making money, even if it hasn’t set the world on fire yet.” He says “If I can get one percent of the local market I’m happy” – which for House Revolution happens to be Norfolk. House Revolution sold 200 houses last year, and a bit of quick arithmetic shows that’s in excess of a quarter of a million pounds of revenue. But the cost of setting up the technology
platform can be high. Michael Banks says Upad has a high upfront investment, and to make it work, needs a high volume of business. “We make small margins and we need around 1,000 lettings a month. The savings we offer come from scale, not from the lack of high street offices.” With around 450 new lettings this month, Upad has some
TheNegotiator l April 2012 l 21
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