Features

How the internet can – and should – destroy estate agents

If ever there was a business model ripe for disruption, it’s theirs

28 June 2014

9:00 AM

28 June 2014

9:00 AM

Whatever you think about the internet, it does bring one great benefit to mankind — the gradual death of the old-fashioned estate agent. The funeral is still some way off. At the moment, only 5.5 per cent of UK house sales are carried out through the new, ultra-cheap, online estate agents. But that has risen from practically zero a decade ago. By 2018, the figure is expected to rise to 50 per cent, and to as much as 70 per cent by 2020.

I’d have thought the increase will be even more rapid than that. At the moment, 90 per cent of all homebuyers begin their search on the internet before most of them go on to a bricks-and-mortar estate agent to complete the deal. It won’t be long before they realise their journey to the High Street is a wasted — and ruinously expensive — one, and they’re better off staying online for the whole transaction.

Most traditional estate agents charge 1 to 2 per cent on the sale price, plus VAT. The new online agencies charge a flat fee of around £500. Apply the 2 per cent figure to a typical London house, costing £403,792, and you save yourself £7,576, about a quarter of the average Londoner’s net salary, by using the new option.

The business model of the old-fashioned estate agent is ludicrous. Why pay someone £20,000 to sell you a million-pound house in London, but £2,000 to sell you a similar £100,000 house in Burnley? It’s not like you’re paying for much expertise — no qualifications are needed to become an estate agent. You could set yourself up as one tomorrow. They’re certainly no better at valuing your house than you are — thanks to the internet, I have an encyclopaedic knowledge of house prices in my street over the past decade.

And why pay for the estate agent’s grand office and his decal-plastered company car? Typically, 8 per cent of your fee goes on the estate agent’s branch, 7 per cent on his car and 51 per cent on his salary and the firm’s commission. What do you get in return — a whistle-stop tour and a few photos of the side return?

The estate agent’s knowledge, too, is extremely fragmented. Try asking an estate agent in Chelsea about comparable properties in Islington and he’ll refer you to his company’s Islington branch. These days, thanks to the internet, you can make the comparison yourself without getting off the sofa.


New online agencies have stripped the overheads to provide you with the bare minimum. You tend to conduct your own property viewings — which a recent YouGov survey says 55 per cent of Britons would prefer, rather than go to the bother of giving estate agents a set of keys and arranging mutually convenient viewing times.

The fastest-growing online agent, sellmyhome.co.uk, takes the photos, does the floor plan, sorts out an Energy Performance Certificate and advertises your house on an online portal, and all for £499. You do the rest — not just the viewings, but also the online description.

Maybe you’ll be just as disingenuous about the charms of your outside lavatory as the old-fashioned estate agents. But you won’t be mad enough to sabotage your own sale the way some disreputable estate agents do: tearing down rival ‘For Sale’ boards; pointlessly overvaluing your property; making up pretend rival buyers to hike the sale price so high that the sale collapses; concealing the sole agency agreement so that, when you try to switch agents, they hit you with a 3 per cent penalty charge.

Again and again, the internet has destroyed old cartels: think of the minicab apps that expose the overpriced, inefficient practices of black cabs. Or, even better, consider how the internet gets rid of the supposed professional altogether and lets you do the job better yourself. Airbnb, the American home rental company, has revealed how overpriced hotels are; we’d prefer to stay in each other’s houses than in a tiny, single-bedroom cell.

Every time, the old guard objects in vain to the new, more efficient kids on the block, as the cabbies and the hotels have. It’s like the old story of prostitution in Turkey, where the practice is legal but heavily regulated. Ladies employed in official brothels enjoyed a degree of protection which led to a decline in the quality of their services — and, not to put too fine a point on it, their person. A decade ago, the state grew less energetic in keeping out new entrants. As a result, the city was overrun by younger, lither and more reasonably-priced Natashas — to the fury of the old guard, and the delight of Turkish gentlemen.

No business is as interested in sorting out your life as quickly, efficiently and cheaply as you are. Some things you can’t do for yourself — like brain surgery. But other simple things — like selling your own house — are much better done by you. Buying a house should be no more complicated than buying a kettle. We should also do our own conveyancing — a long word used by lawyers to conceal an extremely simple transaction. Why pay £1,000 for something you should be able to do online for next to nothing?

When it comes to selling your house, you can now do practically all the sales basics yourself — the photography, the floor plans and all the rest of it. The supercheap agent noestateagentsplease.co.uk lets you do all that, and only charges you £49.98 to put your ad on their website.

When you pay a few hundred quid extra, you’re really paying for exposure to more people — for the online agent to register your house on one of the popular property websites, like the three biggest ones: Prime Location, Zoopla and Rightmove. It costs around £15,000 a month for an online agent to register on the big portals — which the cheaper online agents, like noestateagents-please.co.uk, don’t do.

In the old days, you were essentially paying for a less efficient property advertisement service from the traditional agents. In return for trousering that stonking 2 per cent of the house price, they’d kindly stick a photo of your house in their front window. These days, the old-fashioned estate agents are online, too, but they’re still charging you 2 per cent for a service that should cost a tiny fraction of that.

Estate agents began life as medieval stewards — disreputable figures whose sharp practices were reined in during the 18th century, when they were replaced by more respectable land agents and surveyors. The definitive way to clean up the age-old, dodgy reputation of the estate agent is to become one yourself — for your own house sale. Thanks to the cartel-busting internet, you now can.

Got something to add? Join the discussion and comment below.

Harry Mount is the author of How England Made the English.

You might disagree with half of it, but you’ll enjoy reading all of it. Try your first 10 weeks for just $10


Show comments
  • tjamesjones

    “No business is as interested in sorting out your life as quickly, efficiently and cheaply as you are.”

    That’s a great quote. And I agree with your criticisms of real estate agents. But I think you underestimate the need for brokerage. Everybody lies about everything in real estate: the owner lies about the neighbours, the buyer says they are a cash buyer when in fact they have a chain. Nobody really knows what a property is worth, unlike a kettle, and this can create a large spread between what the buyer wants to pay and the seller will accept. Without an intermediary to smooth things over, I can see a lot of transactions not completing. I don’t think that we’ll get to 50% online by 2017, but what I do hope we see is lower fees for real estate agents, less plush offices, and ultimately a better service.

  • Che

    Agree, the need for brokerage to manage the transaction
    is vital for a successful outcome.

    I was one of first ‘budget estate agents’ to launch a
    disruptive On-line estate agency back in 2006. At that stage, not being an
    estate agent and looking at the problem exclusively from the perspective of the
    customer, (ergo my house which was the first one we sold) it seemed like a
    really simple and straight forward proposition, here’s a web site, fill your
    boots!

    I’d successfully grown and sold one of the first on-line
    car insurers which was the often regarded the reason for demise on the high
    street insurance broker and the journey ahead seemed identical to the one I had
    just been on.

    Eight years of
    learning and the slight inconvenience of a recession and housing market crash
    to deal with only now can I truly say I ‘get it’! My simplified learning thus far: ‘Don’t try
    and disrupt estate agency, disrupt the estate agent.’ As a customer you have 12
    weeks of transaction ahead of you, your solicitor won’t really help for most of
    it (don’t get me started on that industry) so you need a honest, fair, transparent,
    value for money person in your corner.

    As a result we (House Revolution)have evolved into a very
    effective and accurately priced modern estate agency.

    Relate the need to Goldilocks trying the bear’s porridge:
    High street estate agency is too hot, expensive and the service is terrible.
    Online estate agency is too cold, budget and engendering a feeling of low
    levels of support. ‘Brand X’, just right; fair pricing with the right agenda
    and people delivering excellent service….How
    to grow it whilst keeping the fees right and not teaming up with an arrogant TV
    Dragon or semi retired Greek Airline owner? That’s the challenge!

  • Just a thought

    I was going to just jump on the whole how on earth do you know the Turkish sex industry has changed so much; as surely you would not just “write something” without having first hand knowledge and evidence of your comments…..
    But then I think perhaps this man has an agenda a personal hatred due to an experience he has had the kind many have for phone hacking journalists or those who think promoting that ending the jobs of 1000’s of people would be something to encourage! no…. surely not he is much more savvy in his work, no way would he have thought yeh….. sack em all….. all those agents offices, with 3 to 5 staff in each….. all out of a job, that will help the economy!
    So Mr Mount (I hope that’s not what they know you as in Turkey!) would you care to tell my 40 odd staff that they no longer have a job…..
    One of them has just had her second child, lovely girl, gets all kinds of thank you cards from the many delighted people, or perhaps the young apprentice I’ve just taken on, he was looking to be placed somewhere for about 18 months….. with no luck, because everyone was “cutting back” due to the internet reducing their need for staff…..! OR
    What about one of my lovely administrators I have, she has just battled Cancer won the fight, said “work took her mind off her treatment so much” we cannot claim any part to her spirit and will to make it and her success story, but she thinks work helped……let her know 2 months ago….. sorry I know its a tough time but unfortunately….
    So Mr Mount, what is your agenda “sack tens of thousands of hard working, honest staff from the frontline to the back office staff” OR is it Agents charge too much and they should charge less?
    You could have written your story and have had some maybe many High Street agents agree….. I have two local competitors who charge far too much double what I charge (which is rarely over 1% nowwa days) and they don’t need to! But I guess before you wrote your story you have called every agent in the country, spoke to every staff member and then have researched the local feeling about each company before such a awful story about how their service adds no more help than as if your were buying a kettle…..
    Or do you stand by the view how ever many staff are on the pay roll of estate agents up and down the country would be better on the dole tomorrow……..
    I personally don’t like your style of writing, only for the direct attack on me by the generalisation of your story! but do I want you to lose your job, your home, your family perhaps! no why would I, we can all survive, people can make their own choice in life to go “high street” or continue to kill the high street as “online” has but this is a story which smacks hatred without research or much thought to the wider implications of your “wish”.
    anyway Mr Mount, (who I suspect will not care less about this or any other opinion which doesn’t agree) I would love to have heard about how you would plan to put all of the “unemployed agents” back into work……. or perhaps you simply do not look beyond your hatred for an industry and “people” simply do not matter….. which would sum you up if this were to be the case.
    Good day to everyone.

    • Flintshire Ian

      Sorry, but technology can and does change the world. For estate agents as well as coal miners…..and even journalists.
      Estate agency employees may need to retrain and find another way to earn a living in the same way as the staff of most high street travel agents, internet cafes, bank clerks and other clerical trades, specialist white goods retailers….and the rest of us.

      • Just a thought

        Morning Flintshire Ian – I get that BUT the story above does not talk of how the industry has changed, may change or could change for the better with any balanced opinion IT simply slates estate agents in a generic form saying anyone can sell their own house its like selling a kettle.
        Anyway, opinions: everyone is allowed them and I respect, his and yours as much as the next persons. It just makes my blood boil that he does not know me, my company, my charges my staff the levels of customer care we go to…..
        Do I pop him in the same boat as the cretin journalists who tapped the phones or poor innocent families to sell a story…..no why should I, that was a few, surely not all of them!
        Have a good day.

        • Flintshire Ian

          He had a dig at the taxi trade on the back of one bad ride, which is partly why I included journalists. Print journalism is on the turn anyway as people expect more and quicker (maybe even better?) from news media and only on line can deliver that.

          Like cabbies, estate agents are easy targets though. if there is any value added then the clients must be missing it. I sold our last house quickly in 1998 with a home made board in the front window and got my asking price. In this (different) market I am on my second estate agent and nowhere near a sniff of a sale, admittedly for a bigger and even in real terms, much more expensive house. All that both seem to have done is measure up, take a few photos and upload to Rightmove. Well worth 1.25% of any sale, I don’t think. At least the photos are halfway decent from the current agent – the first lot sent a saleswoman from the office with a point and shoot digital camera.

    • albiontyke

      Unless they improve efficiency, service industries only shuffle the money around as do estate agents. Think of all the extra millions of pounds going back into the economy via the millions that have been saved by the vendors, thus boosting the revenue of other industries and ultimately creating employment elsewhere.

  • James Rees

    I agree with the criticisms of estate agents and have similar disdain for the agents that this article focuses on. Clearly not every agent or business is bad and for those who do a good job, charge a fair fee etc then this will seem unfair. However as an industry there needs to be greater professional standards. Brokerage is precisely what estate agency is about.

  • rtj1211

    Most people don’t know what the key attractions of their property are to others, ergo they don’t know how to market it. Most people are better letting an estate agent show potential purchasers around rather than doing it themselves.

    For those who are natural salespeople, an estate agent may be expendable. For many, they are a necessary evil.

    You should always eliminate estate agents who ask for a higher percentage commission for a lower sale price achieved, as I hilariously was quoted in Oxford in the 1990s. It takes a special kind of service provider to treat their potential customer as an idiot to be fleeced, after all.

    • albiontyke

      From my experience, estate agents tend to be some of the worst trained salesmen/women in any industry I know. I have been in sales and marketing for 35 years, they come bottom of the pile regarding skills on how to present themselves, their company and how to successfully close a sale.

  • Oliver Ales

    Collectivists attack free enterprise, private property, and prosperity by claiming collectivism as the sole conduit for altruism while accusing individualists of being selfish and greedy.

    • Terry Field

      You are an agent – your fangs, drip with blood. How did the kinder-sacrifice go today – bloody satisfactory!?!

  • Terry Field

    How can one be certain that – without a pushy estate agent, the optimum price for the property is achieved?
    If that can be guaranteed, the agents should have stakes driven through their hearts, their coffin earth scattered, and garlic strands should be smeared over the doors of their centres of bloodsucking.

  • Mrs Josephine Hyde-Hartley

    It’s good to be able to go and look at the estate agents in one’s local town, i think. At least you can see for yourself what’s for sale, under offer or sold.

    There may be advantages to internet processing, but so long as high street workers don’t start mixing the two ways/means of doing business up in such a way that puts the effects of modern IT and communications first, eg using ” back office” language, terms and conditions in the face of ordinary real customers, we should do alright.

  • David Prentice

    Meh! A necessary evil. Like dentists.

  • hamishpringle

    Dear Harry,
    Enjoyed your out-pouring and I’m sure the market’s going the way you say, but meanwhile we’ve had good service from John D. Wood.
    For interest please see my article on this topic http://static3.thedrum.com/opinion/2014/05/06/marketers-and-advertising-agencies-should-heed-mistakes-estate-agencies

    Best wishes,
    Hamish

  • Fenton!

    The fee is 6% in the States. Imagine that.

  • Pink Residential

    I think that you still need features of a traditional estate agent. We cover the whole of England but take each house on ourselves so customers get professional details, which we compile and write. We also do all the negotiating and run sales after offer yet we charge an online fee of just £395 plus vat totaling £474. Many online are giving a cut down service which we do not. We do not accompany viewings and this is the only difference to us and a traditional estate agent. PinkResidential.co.uk

  • Harry, just thought I’d point out that the internet (in the estate agency world) has been running for about 17 years now…
    Point is any middleman not adding value will, of course, be at risk from the middleman.
    I think your article is unbalanced, biased and poorly researched.
    You could be forgiven for thinking that your article was about journalism.
    And by the way – whether you are a high street or internet based company – we’re all online.

  • Sam

    I own an Estate Agents, with a High Street office, which primarily I recognise principally as an advertising tool. Foot fall is nowhere near where it was when I first came into the industry 18 years ago. I launched my business late 2007, with the strength of online marketing in mind, bewildered with the service my then boss provided, who was an ex-scaffolder!

    Most certainly fairness in fees are something I feel strongly about. It’s about fairness ultimately and service, that’s why ourselves we operate a fixed fee model, but I have to say there is a hell of a lot more involved in the process than simply uploading photo’s and a floor plan. There will always be room for a High Street Estate Agent, as there will for online agents. It’s a matter of personal choice and that is people’s prerogative. The opening line was already showing signs of bitterness. Then to suggest people could do their own conveyancing? That bordered on ridiculous, so I stopped reading. Wonder what lenders would think about that?

    The ultimate winners through all of this, who are also under the microscope now are property portals themselves. Are people aware of what the major property portals charge Estate Agents? What needs to happen first is full scale licensing of Estate and Letting Agents. This would be a massive clean up operation and bring better services to the people. We are fully qualified and affiliated to all the major governing bodies. Makes no difference to the public though who cannot tell the difference between a professional agent or an amateur. That’s why fairness and service levels in the main are so disjointed across the industry and we get such bad press, so the quicker our industry becomes regulated the better for all.

    A true English gentleman displays and appreciates courage and honour. Some of the comments you make displays bitterness towards any capitalist philosophy.

  • Sam Oiocha

    All the arguments for defeating your liberal teachers and professors: http://tinyurl.com/q3gkwf2

  • Trevor Mealham INEA mls

    Private sales for a good 30+ years have represented 5%~8% being mainly family to family sales or landlords to long term tenants. Not knowing the industry, or writing biastly in favour of a budget agent model the reporter hasnt researched the fact that for 20 years proper traditional agency hasnt been allowed to happen due to the restraints of the structure of the rightmove data schema which only allows data to go from the main agent – upwards to main portals. Old fashioned agency allowed good old paper sub forms to go vertical to other b2b agents alike agents in the USA under a system known as mls. This is now possible in the UK under the INEA mls idx data feed structure where budget agents are not allowed in. Budget agency may increase a little in the next 3 years but then it will decrease and die out as mls takes off in the UK. MLS can make a vendor far more than budget agents claim to save as a main broker agent can gain extended local exposure. Gaining more prospective buyers through a door can mean more better offers. Agency is also governed by Trading Standards, HMRC etc and likely changes needed in legislation such as updating of the now 1979 Estate Agents Act are all likely to favour better consumer service which frankly budget agents fail to do.

  • Trevor Mealham INEA mls

    One of our member agents recently quoted to vendors to market at a guide of £2.3m to £2.9m. A budget agent quoted far, far less and another larger agent quoted £2.4m. Our agent quoted 2% MAIN AGENCY to bromer the property out to sub agents. In days 8 viewings were arranged and a offer was accepted of £2.8m with 5 agents having ckntributed tk viewers visiting.

    So as in this case a budget fee of £299/499 would have seriously cost the clients several £100’s of £1,000’s.

    In London by agents collaborating in the interest kf sellers and landlords we are seeing many sales and lets done away from main portals zimply as one agent has the property and ankther has the better applicants.

    Budget agents have too little in the pot to be able to fee split, as such many vendors and landlords are losing time and access to best offer scenarios.

  • Trevor Mealham INEA mls

    Now can we have a good debate about journalist who don’t understand industries and fail to do level research into other ways an industry is evolving further using the web in different ways.

  • d beckham

    Harry Mount! He obviously has a chip on his shoulder. He should not be blaming society and the way it operates for his shortcomings. His looks and unseemly demeanour is more down to his poor gene pool than the fault of every other poor bugger that he chooses to pick on. I bet he hates with a passion high earning good looking footballers. Probably goes to bed at night whimpering how unfair life is.

  • EstateAgent.me

    Great article and we are here to help! Get started asap with no upfront fee: https://estateagent.me/newbusiness/themes

  • Andy Slater

    If online estate agents can indeed grow to 70% by 2020, that will be one of the most disruptive moves any well-established industry has ever seen. Similar to how the internet transformed the music business.

    The growth of online estate agents also speaks volumes and I’m backing the movement! So much so that I founded http://trustedagents.org.uk to help compare all the major agents – something I struggled to do (the site is not-for-profit which I hope helps you excuse the plug)

  • This is wrong… on-line agents won’t get the seller anywhere near what they deserve for their home…

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