- Online-based real estate agents have launched, competing with the traditional agents.
- The U.S. is yet to establish an industry of online real estate agents.
- Online real estate agents offer huge savings but do not guarantee any sales.
The Internet has led to an incredibly positive change in many global industries. One of the first and most publicized being the music industry with the start of Napster, the Mp3 and concept of free music.
Next up, the TV and movie industry. Remember Blockbuster video? Younger generations might not, but I’m sure they have heard of Netflix.
The Internet has changed everything including how we consume news, how we shop, socialize, publish, make payments, order taxis and more. Everything is easier and more cost effective.
However, there’s one industry that has been remarkably stubborn — the real estate agents industry. With such an emotionally charged purchase or sale and with British real estate agents in almost every corner and crevasse, it’s easy to soak up the sales talk and entrust them to deal with the whole process.
But more and more people are starting to realize that an estate agent completion fee in the UK of 1.5 percent or thereabouts is just a little ridiculous. That fee alone would cost you $6,000 on a $400,000 home.
Will online real estate agents disrupt the industry now?
The UK real estate market seems to be spearheading the online movement, with new Internet-based agents emerging each month. These online agents operate solely on the Internet and allow users to sell their properties by listing on their site and marketing on several other sites.
The U.S. is yet to release a model that follows suit; due to this, many of the to-be-mentioned businesses are UK natives.
First, Generation Y (aka the millennial generation, born in 1981 or later) are digital pros. They’re now at the age where they’ll be transacting a property. By default, the Internet is their place to go when looking for a product or service, especially for something as important as selling a property.
Aside from this generation, older generations are increasingly using the Internet for important tasks such as online banking, shopping and more. We no longer look in shop windows to see what’s for sale in our local area.
Over 90 percent of property buyers search online on sites such as PrimeLocation and Zoopla. Why not take the property listing process online too?
Established, new, prominent and private entrepreneurs everywhere are helping to back this movement. Poundland tycoon Steve Smith founded EstatesDirect, Sir Charles Dunstone — founder of Carphone Warehouse — has a major interest in HouseSimple, hedge fund legend Neil Woodford recently invested in Purplebricks and the list goes on.
The pros and cons of online real estate agents
Naturally, many people are opposed to such disruption — with some even labeling online real estate agents as “parasites.”
It’s understandable — huge businesses are built on the back of the real estate agent fee. “Why online-only estate agents are no match for a locally-based traditional firm,” published by OnTheMarket, which is run by traditional real estate agents, argues why “online-only real estate agents are no match for a locally based traditional firm.”
The budget of buyers
Quoting the article above: “Buyers invariably extend their initial budget, in some cases by a third … There are many twists and turns in the life of a property transaction which a computer will never allow for.”
If a buyer extends their budget, it’s a simple case of them searching for more expensive properties. Furthermore, the twists and turns in a property transaction are dealt with by an account manager, which almost all online real estate agents provide.
A veteran agent with thousands of hours of in-field exposure cannot be compared to a virtual estate agent who has no experience on the ground and in person.
While in its infancy, online real estate agents are already responsible for thousands of property sales a month. Although this does not compare to the number of sales in the physical world, reviewing the independent feedback of any popular online real estate agents will show just how delighted 99 percent of customers are.
The fees of the online estate agent have also been considered questionable. Most will work by charging an upfront fee regardless if your house is sold or not. If the property does not sell, this would mean having to pay a conventional agent on top of what you had already paid.
Most sites advertise your property until it is sold. And other online real estate agents work on a no upfront fee basis or a tiny capped percentage once the home sells. There is an option for everybody.
Due to lack of experience in the industry, a valuation from an online estate agent might not have the quality and reliability that a local estate agent’s expert valuation will have.
Local real estate agents also use proven online tools such as Mouseprice to help value a property. Comparing the property to those that have recently sold nearby, it gives a reliable ballpark figure that can be refined based on the specific property’s specification.
As you’re unlikely to work with an estate agent in person using an estate agency site, this leaves you to show any potential buyers over the property. These potential buyers have not been vetted by the estate agent first, meaning anyone could be coming to view your property and create a security risk.
If an individual showing the property is concerned about their safety — be it legitimate or the result of scaremongering — they should indeed not show their property alone. They could conduct an open house viewing, which almost all online real estate agents facilitate.
If required, most online real estate agents will still show the property for you, but this will cost extra per viewing.
Again, the lack of an in-person agent leaves the property owner handling unknown territory by themselves. In this case, the negotiation of price. If the buyer is experienced, they might be able to out-negotiate or intimidate a first-time seller.
Almost all online real estate agents do indeed negotiate the price for you, and they have significant experience in doing so.
The real estate agent outlook
The benefits of using an online estate agent are vast and undeniable. However, the traditional agent is reliable and well-known. For now, they will both coincide in the industry, acting as separate entities. Only time will show the evolution of both and who will gain the edge.
Carl Greenlake is a student contributor currently studying out of City University in London, England.