The Rise and Fall of Online Estate Agents

This month’s blog is about how to focus on the truth and not get swept away in hyperbole… not always easy in today’s world!

Throughout 2016 and 2017 the property pages were awash with news about Purple Bricks and co – the new breed of ‘online estate agents’ who were going to change the way residential property is bought and sold, forever. Companies like Purple Bricks and Emoov were touted as the future, amidst rumoured valuations in the hundreds of millions, while traditional estate agencies were labelled soon-to-be things of the past.

At the time it was disorienting to be reading this in the news, and as the market was flat anyway (mainly due to geo-politics), it was easy to wonder if the press, and the people behind these websites, were in fact calling it right. The sheer level of news on the subject could feel convincing at times.

On closer inspection however, it was not such a clear picture. And among our network, questions arose about the business model of these new brands. We decided to do our own due diligence, and as a result felt vindicated recently when Purple Bricks was marked down by 80% and given a ‘sell’ rating by investment bankers. This was after the other major player, Emoov, was placed into administration late last year.

Here are our three key learnings from a time when our whole industry and livelihood was questioned, by the kind of hyperbole not seen since the first dot com bubble:

1. Trust your gut… and consult your network:

When something doesn’t seem right, often it isn’t. We got together with our peers to discuss the real nature of the threat from online agents. Pretty soon (as documented in our blogs with Homes One and Winkworth last year – https://nicolasvanpatrick.com/online-brands-a-word-from-our-peers/) we worked out the absolute minimum viable product needed to sell a house, and the online agents looked hopelessly unable to fulfil such a responsibility, on even a micro-local basis, let alone the type of global scale they were prosthelytising about. There is only one way to sell large numbers of houses on peoples behalf – and that’s by having robust teams of experts who are capable of doing so. Websites and online activity can help to find buyers and sellers – but they can’t transact by themselves. For that you need a human being who is able to address complex needs on both sides of the equation, and provide the correct market knowledge to support the completion of high value, once or twice in a lifetime, transactions.

2. Businesses need real business models:

If you can’t see what the business model of a new idea or brand is, the most likely explanation is there isn’t one. With the online brands, common sense told us that this new phenomenon – rather than being a cost saving way of selling your home – was in fact an exorbitantly expensive way for you to advertise your home online, on a deficient platform. And that once vendors had been ‘stung’ once, they were highly unlikely to return, and add another four figure fee (in return for nothing) to their house sale process. Time has proved that very few houses were actually sold via the online model, and that many vendors ended up instructing traditional agents, once they’d been fleeced for the listing fee. Happily, that means that those of us who love what we do and enjoy providing an excellent service to our clients, are now well placed to so again – and the sale process for vendors is thankfully less confusing than it was a year or so ago.

3. Things change gradually not suddenly:

We are reminded that generally speaking, big changes happen incrementally over time, rather than rapidly and dramatically. Of course technology is here to support us all in doing business more efficiently and effectively. However with something like the sale of a house, which is usually complex on both the financial and emotional levels, it will never replace human intelligence and experience. With the advent of prop-tech, we are seeing better funnels and distribution channels, which enable people to connect with their dream home more easily, and sellers to find the right buyer at the right price. We see that match as being the key role played by technology. Once the connection is made, humans take over to conduct the transaction in an appropriate way. Over time, we estimate that technology will become extremely good at the former piece of the equation, and agents will continue to become better at what they do as the property wheel keeps turning.At Nicolas Van Patrick, Homes One and Winkworth, together with our peers, we look forward to continuing to provide an excellent bespoke service to our clients as these twin paths unfold together – with our clients needs and wellbeing the first priority.