Online Estate Agents v Traditional Estate Agents – A Conveyancer’s Perspective
This blog article was first published on my law firm - Matrix Legal’s website in July 2017
Online estate agents have become more and more popular over the last few years with many promising to save property sellers thousands of pounds compared to traditional estate agents. In the past 15 years, the mainstay of searching for properties for sales has changed with 98% of Britain’s buyers searching online through the likes of Rightmove UK, Zoopla or OnTheMarket. In this blog post, we address some of the most frequently asked questions, including:
Who are the best online estate agents?
Are online estate agents good?
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Tepilo review?
HouseNetwork review?
HouseSimple review?
What are they?
Unlike traditional estate agents who will usually have a local estate agency office, online estate agents are, well primarily based online, working instead from a central hub office, potentially with some local property experts who may work from home. Most of the service and interaction with the online estate agents are via their website and occasionally by email. This lack of a local estate agency office considerably reduces the cost for the online estate agents. They claim these costs savings are passed on to their clients, by way of lower fees.
How are they different? Why are they growing in popularity?
One of the main reasons that online estate agents are growing in popularity is because they offer a fixed flat fee, depending on the level of service required, instead of a percentage fee charged by the high street agents. Many online estate agents market themselves using the tagline ‘they save their customers thousands of pounds, especially if the customer is selling a higher value property in the South East of England’.
From the buyers’ perspective, all viewing bookings are made online. My online research revealed feedback from various online users that this approach is great because they are able to confirm bookings even out of usual office hours with confirmation e-mails arriving almost instantly. The way this works is the seller of the property/customer of the online estate agent indicates their availability via the online estate agents diary management system which is built into their website. When the prospective buyer books a viewing, the system is able to confirm almost instantly whether the seller will be available to conduct the viewing.
There is also the option for the seller to select a service via the online estate agency’s website whereby the viewings are conducted by a local representative of the online estate agent.
Usually but not always, if a buyer wanted to submit an offer on the property, this would be done online, via the online estate agency’s website. Feedback on the offer is usually given by phone so that there is some element of negotiation.
The main criticism of online estate agents compared to traditional estate agents, where the latter is primarily motivated by the prospect of a high commission fee if the property is sold, is that because the online estate agent charges a flat fixed fee upfront, there is less motivation for the online estate agent to ensure the property is sold or remain involved in the process once an offer has been accepted.
Many traditional estate agents, perhaps threatened by the growing popularity of online estate agents have now resorted to becoming hybrid estate agents, where they offer a fixed flat fee service, similar to the online estate agents.
What has our experience been of dealing with Online Estate Agents?
One of the earlier issues we faced when dealing with an online estate agent is what to do with the handover of keys following completion of a sale or purchase of a property. In the early days of online estate agents, we initially struggled to figure out what would actually happen with the keys, primarily because it appears even the online estate agents were unclear about this. Over time, the practice has now developed that the keys are usually handed over directly by the seller to the buyer or occasionally, the keys are dropped off with the solicitors who will then hand it over to the buyer which of course only works if the solicitors are local to the property being sold. We have also known of some sellers leaving the keys with a neighbour for the buyer to collect.
The fact that there are no commission-driven sales people involved in an online estate agency marketed property, does mean that we as conveyancers, do not get chased/harassed by the estate agent to speed up the conveyancing process. As a conveyancer, over the years, I found that most traditional estate agents will apply some element of pressure to speed up the conveyancing process and occasionally such pressure does have the potential to undermine the professional and quality of the conveyancing service. Fortunately, we have never ever had to compromise on this but sometimes, the pressure does become somewhat unbearable. A lot of this is of course driven by the fact that the estate agent is pushing the process very hard in order to get their commission fee paid sooner rather later. There is of course no such hard sell or harassment from online estate agents because they have already been paid and so lose interest in the process once an offer has been accepted.
A downside to not having a traditional estate agent who really acts as the middle person mediator/negotiator between the seller and buyer does mean that occasionally, tricky negotiations, especially involving money or contribution for certain expenses have to be dealt with directly by the seller and the buyer. This can mean that a seller and buyer who may not have as much experience in reaching an agreement or negotiating such issues, unlike a traditional estate agent, could lead to some sticky situations and occasionally frayed nerves between the seller and buyer. Moving home is usually a very emotional time and so you have to think whether the additional stress of having to negotiate such matters directly with ‘the other side’ is necessary. It does also mean that sometimes, the negotiations are dealt with by the conveyancers/solicitors who, in my personal experience, I have found to be the least qualified and experienced to negotiate such issues with a view to reaching an amicable compromise. They’re just too confrontational & not collaborative - see case study below.
The other major disadvantage that we found with online estate agency arranged transactions is that there is a lack of a chain monitor. What I mean by this is that a traditional estate agent would usually monitor the length of the conveyancing chain to ensure that (a) it is complete, (b) there are no delays, and (c) any issues which might affect the chain are quickly identified and resolved. Traditional estate agents will frequently speak to various other estate agents up and down the chain to ensure that progress is being made satisfactorily and there are no delays. This valuable insight and project management is missing from the online estate agency arranged transaction.
One major positive for conveyancers is that in an online estate agency arranged transaction, we do not need to hand over a large chunk of the sale proceeds to the estate agents, which is of course the norm where a traditional estate agent charges a percentage of the sale price to the seller. During my 15 years experience of working on conveyancing transactions, I have frequently paid out tens of thousands of pounds to traditional estate agents upon completion of a sale and have on occasion thought to myself the agent has done very little to earn such a large fee. Perhaps, this is yet another reason why there is an increasing popularity of property sellers choosing online estate agents as opposed to traditional estate agents.
Case Study
We are acting on the sale of a flat in Streatham, London SW16 which has a short lease of 58 years remaining. Our client sold the property via an online estate agent and after several price drops (because the online estate agent had initially severely overvalued the property), an offer was accepted by our client. The buyer made it a condition of their offer that the lease is extended simultaneously so that on completion of the purchase, the lease has been fully extended to around 148 years.
Unfortunately, when the lease extension process and terms were being negotiated during the conveyancing transaction, there were various sticky negotiating points including who was to be responsible for the legal costs of extending the lease. The lack of an estate agent in the traditional form has resulted in some frayed nerves between our client and their buyer. This was in turn passed on to the corresponding solicitors and has made the entire process much more complex and time consuming. As a result, it is likely that we will have to charge our client additional fees and likewise, the buyer’s solicitor is also intending to charge their client additional fees for the complications and delays that have arisen. It is conceivable that if there was a traditional estate agent involved, the traditional estate agent would have taken a lot of the strain of the negotiation of the various issues out of the equation which therefore could have reduced the legal costs for both our client and the buyer. So while there has been a saving by our client on the commission fee that she would have paid to a traditional estate agent, some of that saving has been handed back, so to speak, by way of higher legal fees.
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