Low fee estate agencies, particularly Purplebricks, have come under fire from the CEO of Spicerhaart, who says the downward push on fees has worsened standards across the industry.
Where estate agencies would previously charge around 2% commission on property sales, rates are down to just over 1% on average, with fees and profits slumping as costs have escalated, according to Paul Smith.
He said: “The inevitable consequence of this is that standards have slipped compared to a decade ago, making the experience worse for both customers and staff.
“These so-called ‘disruptors’ came into the industry offering a tech first experience, but we only have to look at Purplebricks to know that these low cost models are unsustainable and don’t make money. All that’s happened is that everyone is now charging less for their services and the whole sector is far worse off as a result.
“Where estate agents earn around 10% of the fees charged, that gives them just £99 from a £999 sale. The traditional negotiator would have earned an average of £450 on a 2% sale. Which commission is going to attract the very best in our industry?
“Everyone needs to realise that if Purplebricks has had a decade to make things work and still can’t, despite throwing many millions of pounds of investors’ money at advertising, it’s never going to work!
“Our industry needs brilliant people backed by tech, not the other way round. But most importantly, everyone needs to put their prices up and start to charge what they are worth.
“We all know that having low cost firms involved in a chain causes huge issues for everyone else in the chain because the staff aren’t there to deliver the service needed. Just look at Purplebricks’ negative customer reviews and you can see the consequences of not having enough staff to deliver the service required. The whole industry suffers as a result.”
With Purplebricks now ‘considering a sale’ and its share price tumbling to just 7.40p, Smith says it is clear the Purplebricks model has now failed and they have been ‘found out’.
He added: “The fact their most senior people aren’t estate agents says it all. In the current economic climate, with a buyers’ market, only the skilled estate agents will win. They needed people from grass roots level who had risen through the ranks, to deliver the changes required.
“We have also seen significant interest from Purplebricks’ staff applying for the jobs we have on offer all over the UK and will certainly welcome the best to join us.”
Any idiot can be the cheapest.
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Paul Smith whinging about PB? Now there’s a thing you don’t see every day!
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FACTS
The low cost hybrid model does work, but only when its your own business.
The low fee doesn’t mean you get a lesser service in fact you are dealing with the owner so the service should be fantastic!
The reason for the lower fee is because the overheads are lot lower.
The profit ratio is far greater with the hybrid model so in theory we are charging more than high street agents for our services.
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Alas these are not “facts” but mainly myths.
The low cost-hybrid model only works when you have mass and an ablity to cross sell mortgages, legal, insurance like crazy in a busy sellers market It will die in a tough market where selling houses is a skill and volumes are low.
Low fee is bound to mean lesser service unless you have some technological breakthrough that allows you to do the important things cheaper. Usually what is happening is cutting out doing the important things. That is not good cost saving.
Prices are not connected to costs. Charge what you are worth, spend what it costs, the profit is the bit in between. So if you have a cost advantage as you claim you are wasting it.
As someone involved in 4 different properpty markets …. you would all be better off is the market moved back up in average fee more towards the skill focused overseas markets.
So again …. this chap is right on the money.
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My running costs are £2500pcm, my average fee is £1750, I sell on average 8 properties a month which gives me a profit of £11,500pcm (£138,000pa) working as a hybrid from my home.
That’s a FACT, would you say that works?
Low fee because low overheads, get you head out of the sand…lol
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Your website says differently!
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Oh dear….s71…I do delete completed properties, so your comment is a little silly.
To help you out before you make a bigger fool of yourself, type in Richard Benjamin Spiller to companies house, look at the two trading companies then come back and to this thread with your thoughts…..
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Congratulations on a fine result.
That’s just a solo partnership with no branch. It is basically what was invented by the same chap who wrote this article several years ago. A good model if you are a good self-starting agent. And you are clearly doing not bad at all doing it. So well done.
But if you are really good you can do 80% the same listing at £3,000 a month which on your numbers would be a very impressive £18,000pcm. Even better …
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I appreciate the comment, thank you.
If I am honest I would hate the thought of how much tax I would have to pay, I am 43, after doing the hybrid model for 17 years I am lucky enough to be at the stage where the repeat clients keep me at this healthy level, I have little stress, the garden is my office when the suns out, I am not stuck in an office. ( and I save my clients thousand in fees compared to high street agents) win/win.
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interesting. Who answers the phones and chases sales when your out selling or on holiday etc?
How much does rightmove cost you?
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Its better than interesting its ****** fantastic, earn 6 figures working from home doing something I love….
The phone is always with me(my mobile), so if any calls are missed I will always get back asap. Likewise if you want to speak to someone in a high street office and they are out on an appt, 7/10 you get to speak to someone that hasn’t got a clue, at least with me you speak to the director who knows every detail of every property.
My Rightmove costing is average for an estate agent.
Its a great lifestyle and for anyone reading this, if you are good enough do it for yourself, work from home, be your own boss – you wont look back……
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This chap is bang on the money.
Speaking as an expert who has worked a lot internationally and is an expert on internet businesses of many types. ….Purple Bricks was always a complete fake. It never delivered value to the customer.. it has used lots of marketing and backing to try to sell a bad product. it has been found out but has damaged the industry for a bit.
When you sell your house you need the best doing the job. I would not sell my Ferrari through webuyanycar.com I would lose £15k instantly I would sell it via and expert in Ferrari sales and get the best price but pay them £3k for doing so. My car is worth 1/3rd the average house in the UK Nobody should sell their biggest asset the wrong way. Purple Bricks will have lost their customer £1ms in failed price realisation. Internet models are superb in many situations. But this was always a misfit and the investors deserve what they get with an 8p stock-price. It’s worth nothing and needs to collapse.
From working overseas in this industry. The quality of service and skill applied in many countries to get the price is in a different league to the UK system. The average fee is 3% and they are worth every penny. When I visit UK agents I can see that the skill levels has declined badly in the t years I’ve been away.
The article is spot on.
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I am a developer was an agent for many years
Where is your evidence and proof that PB sell at less than an agent
No way would I pay 3%
I sold recently through a local agent who charged less than the competition and got a higher price they they valued my new houses at.
Last year I sold a new house through Savill in Richmond 1.5%
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GM Jan-byers
You are misunderstanding me. Nobody will pay 3% in the UK exactly because the market has evolved into a low fee low service model. I wouldn’t either here.
In the overseas markets I refer to those markets the fee competition is between 2 and 4%. Here in the Uk it is between 0.75% and 1.5%. You cannot get any good service in the world without paying for it. The standard of marketing and sales management in these countries is in a different league to the Uk and the customers willingly pay 3%. So his point that the industry here has been devalued is spot on.
Selling a house through Savill’s in Richmond at 1.5% mis exactly the point. Why didn’t you use pruple bricks …
There is loads of evidence that a PB models undersells prices. The model is bound to and the price realisations are not as good on line for like properties I have looked at. I can tell you a couple of great stories of poor service agents losing customers money. It’s the easiest thing in the world to do.
Getting higher that asking price in a strong market is easy. It doesn’t mean you got the right amount. Indeed if I concivnce you to start just under to get enough people interested it should always go over.
So you sold through Savills when it was important, and a local agent and have never used purple bricks …. your actions suggest you agree….
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you are getting confused…
Webuyanycar do not sell your car they buy it for cheap then sell it for more…
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Hi Rich
The car goes to an end consumer. The price you get is all about service.
WBAC does nothing to sell the vehicles. They buy it cheap and sell it at trade. The eventual seller then puts the effort in. So you are effectively selling your car via a cheap novice and getting a very low return as a results. Cost to you to do it 0 and zero effort. Great model for cheap cars where it doesn’t lose you much, gains time, and you may get the benefit of having cash.
Next alternative is you sell it yourself and put effort in – sort of autotrader. You will get a better price. You pay a few £ and you put some effort in yourself.
But give it to a Ferrari specialists and you put no effort in and even net of the £3k you pay you will get the bet net price for yourself.
So these are three routes to selling a large asset. When it gets valuable the third one is a no-brainer for the intelligent seller.
There are similar analogies in many internet inventions – jewellery, musical instruments, art etc
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Webuyanycar is equivalent to webuyanyhouse They are not estate agents but investors preying on desperate people.
Anyone looking for a car will go on autotrader….anyone looking to buy property will go on rightmove, if they car or property is the right price they will sell.
It doesnt matter which estate agent you use to sell, if its on rightmove and the right price it will sell, its not rocket science!
or whats your thoughts on this…..
If an estate agent markets a property on rightmove at the right price they wont sell it unless the estate agent charge high fees?
The only thing you would pay more in fees for is a better service, a self employed hybrid agent will give you a brilliant service if they are any good and you don’t need to pay the high fees because we don’t charge them because we don’t have the overheads…can you not see that….
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100% wrong I’m afraid .. but not going to waste anymore time explaining. You have just proved in your comment that a single person hybrid model will never get the best price for a customer.
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Sorry my friend you are wrong….the vendor decides what offer to accept not the agent, the agent does the marketing/sales progression, to state that an agent who charges a higher fee will get you are higher price is ridiculous but I guess its that’s only thing you can say to clients to get them to use you?
I guess if you could prove otherwise you wouldn’t mind wasting your time…
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All you are telling me that you have a mistaken understanding of your own industry … its easy to prove that the price achieved is driven by what the agent does and that influences the price acheived up to +-5%. That is why the great ones in overseas markets get their 3% fee.
FWIW I’ve just bought a property in the UK for 5% less than I should have paid due to an agent believing what you have just stated above. Living proof that you are wrong. Is that good service to the customer? Lost them £30k!!
From what you have told me, I would definitely buy from you, but never ever sell through you.
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So you are telling me that only agents that charge high fees can sell properties for the right price and that agents who charge a lower fee because they have lower overheads can only sell properties for lower than the market value????…is that what you are really saying…lol
In whose opinion was the property you purchased 5% lower than it should have been…?…yours?….at the end of the day a property is only worth what someone is going to pay for it.
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I’m sorry Rich but you are being increasingly naive and starting to get towards offensive.
FWIW worked with companies selling more houses sold per day than you do per year and at 3% average fee rates. Ignore me if you want to, it really doesn’t matter to me. I’ll just enjoy my Ferraris and smile.
On the underselling …. It’s not an opinion. It is indeed a fact. As you say, a house is only worth what someone is willing to pay for it. I was willing to pay £30k more for it and they messed up. They sold it for far less than someone was willing to pay for it. The agent selling process was abysmal and they thought that if you stick it on RightMove then the job is done. They simply hadn’t generated the right level of interest for such a good property and I took advantage of their failings to get a bargain. Their client paid a 1% fee for a very bad service. Saved £2250 in fee. Lost £30k on price. Especially funny given i have an emotional engagement with the property so was easy to sell to. But hey if an agent is going to do such a poor job they are gifting me £30k I wasn’t expecting …. who am I to argue.
It’s very simple really. Only agents who do the job really well with the right skill and activity can sell houses for what they are worth.That activity and skill costs money. If you are just charging a lower fee and cutting out a lot of what should be done you will get poor prices. Period. It’s not funny. It’s grown up reality known the world over (I know 7 countries pretty much inside out).
The issue is that the UK disruptors have undermined the image of real value added, so people can temporarily get away with bad service and making a good living at the expense of their customers. I don’t like that and am delighted it may be starting to change. You see to be believing the same BS. Well good luck to you. You are making a nice tidy income so carry on.
Hence me saying that the chap in this article is right on the money about what has happened in the UK. He is spot on. Customers are losing money all the time from bad service. The industry has struggled to sustain high service levels in the face of over-marketed fakes. That’s it. Simples.
Be a fake if you like or be the quality professional worth 2% even in the UK. I know which I would rather be.
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Firstly I agree with the article in respect of PB.
What I don’t agree with is people saying the hybrid model doesn’t work, it clearly does as proven by myself. If you are good enough it works.
You are getting very confused and shouldn’t tar one bad low selling fee agent with every low fee agent, I am sure there are plenty of bad high selling fee agents out there??
I would say years of providing a fantastic service is priceless, it gives you a reputation and a business that is successful. I don’t do gimmicks like virtual tours or posh shiny brochures because they are not needed and a complete waste of money.
I sell houses and have done successfully selling more than any high street agent over the last 16 years where I am based. That’s a fact, its not fake.
I make more profit per sale than most high street agents, I am not greedy, I make a decent living with no stress and have the beauty of not being stuck in the office, I am my own boss and love what I do.
My last question to you is do you think a high fee agents would sell as many properties if they didn’t stick it on Rightmove?…if the answer is “Yes” then I apologise and you are right, if you think they wouldn’t the I am right and that’s the end of this thread.
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What a daft question. The best agents advertise in all the right places. RightMove is clearly top of that list. But far from all of it. Your last sentence makes no sense I’m afraid. The thread ended long ago really…. S
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Oh dear let me make it very simple for you with a straightforward Yes or No answer.
If a property is advertised on Rightmove at the right price will it sell?
We all know the answer and that concludes this debate/thread. xx
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So, with the cheap shot agents starting to fail, we now need to see agents raising their fees and charging what they are worth rather than trying to compete with Mr Cheap! Survival of the best?
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No that will not happen
People’s incomes are being hugely squeezed everyone is looking to economise
Agents will nkt be immune from people’s new reality
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Yes it will take time. I have worked in several industries needing to margin recover. But it will happen. The people economising are not those moving house. And finding buyer will be much harder. So high quality service is now valuable. Miss the chance at all your perils i would suggest.
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Sellers should pay the stamp duty and buyers should pay the agency fees as a buyers premium. Job done..
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Pay cheap. Get cheap.
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I agree that this article is spot on. Whilst I don’t blame PB completely they have been the most visible in their efforts to say a cheap fee policy works. It doesn’t work as a business model and it has never given a customer true value in terms of service and outcome. Even in an easier market they simply were not doing the best job for their customers – have been really found out in a tougher market. It is time that we as an industry get some pride back into what we do, realise the value and importance of what we do and charge for it. If you have a business that has hit low overheads then great – you can have a bigger margin but don’t cheapen what you offer.
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I have to say I find it quite incredible that, bearing in mind we are looking at a much reduced number of housing transactions ,agents in the main have still yet to raise their fees.Even some of the biggest brands in the country are charging less than one percent and will take the instruction at any cost. We probably know the reasons why but even with all the add-ons in this market that plan doesn’t work.
Is it harder to sell houses today than it was a year ago, why then charge the same ?
There’s going to be blood on the high street I’m afraid !
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And spicerhaart are perfect! Don’t make me laugh! Half their agents are terrible! Rude and frankly incompetent!
sort your own stuff out before you attack others.
everyone including PB know and admit they have issues.
these comments don’t show your own business in a good light. If anything it makes you look petty and unprofessional.
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That seems very shallow whataboutery in extremis.
I don’t think whether that business is doing well or badly had anything to do with the article. The article is a very experienced person laying out the harsh truth of the UK markets. PB has more than issues. It’s fundamentally flawed as a concept.
If anything comes across as petty and unprofessional it is your own comment. What is the relevance of a of that. Indeed a point he makes is standards have dropped across the industry. I am sure he includes himself in that. Nobody needs to sort out themselves before commenting on what is wrong with an industry. That would be bizarre indeed.
I’m sorry everyone but his analysis is spot on. Whether he can manage through the industry in a mess to great success I cannot say. But he clearly has hid head screwed on.
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Sellers have to pay stamp duty and buyers have to pay brokerage fees as buyer’s fee. The job is done.. https://coreball.co
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