You may have noticed the growth in online estate agents in the UK. You can’t turn on the TV without seeing an advert for an online estate agent. Some offer deals that seem too good to be true, such a zero commission (which is actually a very big chunk of the money it costs to buy or sell a house), but how do online estate agents work?
How online estate agents work
It is reassuring to know that online agents are subject to the same requirements as agencies with physical offices. They must be members of government-approved bodies like the Property Ombudsman in case you have a grievance. So you can trust them just as you would any other agency. However, caveat emptor is still relevant, so do plenty of research before you make your choice.
In many ways, online agents work just as a high street agency would. For example, they will inspect your property to make a valuation, post details on Zoopla and RightMove, and arrange viewings. They may also handle negotiations with buyers, conveyancers, and check the buyer's situation (e.g. if they are in a chain and whether they have their mortgage offer in place). Some will use local agents, offering all the advantages of a bricks-and-mortar agency. However, each online agency varies, so take the time to check what they include in each package. Never take it for granted that anything is included.
The advantages of using an online agent
The most obvious advantage of using an online agent is the savings you'll make. Their fees are fixed rate, and considerably lower than a conventional agency. You could save thousands, especially if you live in London or the South East. The fixed-rate fees are extremely attractive if you're selling a more expensive property, compared to the percentage structure used by high street agencies. Using an online agent can also help your home sell more quickly, although these days every property will be listed on sites like Zoopla and RightMove anyway.
Some sellers find online agents more accessible. If you work regular office hours, you may have little opportunity to speak to a traditional agent other than on Saturdays. But online agencies often have call centres open outside these hours, so you can speak to them when it's most convenient for you.
There is not always a great deal of difference between online and traditional agencies. In this scenario, the case for using an online agent can be considerable. However, this depends very much on the individual agency, so always look very carefully at the deal on offer and how it suits your circumstances.
Typical costs
Purple Bricks is one of the best-known online agents. They charge £1,199 in London, and £849 elsewhere. Clearly that can represent great savings, especially for homes of a higher value. Estate agencies typically charge around 1.5%, or 1% of the sale price plus VAT. This is an incentive for them to get the highest price for your home. However, with London house prices easily surpassing half a million, you'll be paying at least £6,000 in fees. For a £200,000 house elsewhere, you would pay around £2,500. Some agencies charge as much as 3.5%, in which case the bill could run into 5 figures. So the savings can be substantial when you use an online agency.
Other online agencies have a different pricing structure. Sellmyhome.co.uk offer the choice of paying upfront, or when the home sells. Their usual price is £795 for upfront payment, and £1,499 if you wait until your home sells. This can be useful if money is tight, but you have a lot of equity in your home.
Watch out for hidden costs that can bump up the price of your online deal. Not all agents will include the cost of photos, floor plans, or 'For Sale' boards in their packages. While some sellers will be happy to dispense with a board, you can hardly do without photos. So while online agents will probably still cost less than a traditional agency, they may not be quite as cheap as they first appear.
Some online estate agents in the market
Initially, online estate agents were a scarce alternative. But in recent years, the market has become very competitive. Nowadays you can choose from many more, including:
• emoov
• Purple Bricks
• House Network
• House Simple
• Yopa
• Doorsteps.co.uk
• SellMyHome.co.uk
• Hatched.co.uk
• EasyProperty
• Tepilo
If you're considering using an online agent, you must do your research. Read their website thoroughly, and don't choose an agent in a hurry. Consider whether a bricks-and-mortar agency is best for your circumstances. You may baulk at the thought of paying them thousands, but a good agent can clinch that sale and save you a lot of stress.
Tips for choosing the best online estate agents
Consider factors like:
• Price
• Benefits
• Support & advice
• Marketing
• What is included in the package, e.g. photos and floor plans
• Length of contract
Read a website carefully and don't take anything at face value. For example, this comparison guide shows easyProperty as charging £295, which sounds seductively cheap. But this is only for a basic package. Plus your home will be sold at auction. This may be useful for hard-to-sell properties, but has its limitations. You can choose a reserve, but can't control the final price. You won't be able to decide which offer to accept if you receive more than one. However, the buyer will have to pay a reservation fee, which can offer a degree of security absent from conventional sales.
You should not make your choice purely based on cost. Sometimes it is worth spending more if it helps sell your house. Choose a poor online agent, and you've wasted your cash. It is also important to read a contract carefully before signing and be sure you understand what you are committing to.
The best online estate agents will never be pushy, something that can put people off traditional agencies. They will be happy to explain their services thoroughly and answer as many questions as you want to ask. You are under no obligation to use their mortgage advisor or conveyancer, so avoid any company that tries to push you into doing so. Online agencies can be just as guilty of this!
How to compare online estate agents
With so many online agencies, the choice can be bewildering. It is easy to lose track of which websites you have looked at and what each one charges. You will find it helpful to create a spreadsheet to compare different online estate agents. Include a column for pros & cons that could influence your choice.
Reading online estate agent reviews can be helpful, although you should exercise caution. We all know that reviews are not always honest! A good test is to look for balance. Overwhelming praise and gushing compliments can read as though the company wrote the reviews themselves. Also look for impartial reviews on sites like Which, who have no affiliations with any companies they review.
Online estate agent reviews can be found on various websites. But just because a company has poor reviews does not mean that it is not worth your consideration. Negative reviews may be written by someone with an agenda, and you don't know whether the writer has genuinely tried to sell a home with that company. Ask yourself whether the review is fair; complaints may actually be the fault of the seller, not the agency. However, repeated complaints about the same issue may indicate poor performance on that count.
Clinching a sale
Many online agents make grandiose claims about their success rate. But you should always ask yourself what the statistics actually mean. Numbers don't always tell the full story. Many online agents only achieve a sale for around 50% of the properties they take on, far less than the 80% success rate of traditional agencies. Even if an online agency manages to sell 99% of the properties on their books, that could take months. You want your home to sell quickly; of course this isn't guaranteed, but it's worth asking how quickly their properties sold. Or they may say that on average properties achieved 95% of their asking price. But in a buoyant area you would expect to achieve full asking price. And 5% off a million-pound London house is a bigger reduction than with a £100k one.
Whether you use an online or high street agent, the same issues make a house more saleable:
• Is your house priced correctly for the local market?
• Is your home in a desirable area?
• Do the photos show it off?
• Is it well presented, clean and tidy (including the garden)?
• Have you carried out small repair jobs?
• Does the price take into account any necessary renovations?
• Have you decluttered?
• Are the rooms staged to show their potential?
Overvaluing a house may be less likely with online agencies, who have no incentive to achieve a higher price. But you should check what similar homes have sold for recently before pricing yours for sale. The highest valuation is not necessarily the most realistic one.
Drawbacks of using an online estate agent
• You may have to handle negotiations with buyers and solicitors
• They may not know the local market
• You'll miss out on the casual browsers that pass by estate agencies with physical offices
• They have little incentive to sell your house if you pay an upfront fee. Plus with a fixed fee, they won't put in more effort or try to get a higher price
• Using an online agent can be a false economy
• You'll usually have to conduct (though not arrange) viewings
• If viewings are included, they may be limited in number
• You'll be paying the same regardless of the property value
• If you don't get a sale, your money is lost - even if you choose deferred payment
You should remember that online agents are cheaper for a reason. While they don't have the same overheads as agencies with offices, their cheaper rates mean that you can't expect the same level of service. Most won't show the property. That means you'll be responsible for showing viewers around, which can be time-consuming. It's also impractical if you are selling a house in a different part of the country, or another country. This may happen if you inherit property or if you have moved away for work before selling your home.
Online estate agents may suit you best if:
• You want to take charge of the selling process
• You need an economical package
• You want to reach buyers outside your local area
• You need a quick sale
• You are able to deal with viewings
High street agencies may be best if:
• You have an unusual or rural property, needing an estate agent with local knowledge
• You don't have the time to deal with viewings
• You want to achieve a high price
• The market is slow
• Your home has a high value
Resources:
hoa.org.uk
which.co.uk
dailymail.co.uk