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Estate agents threatened by property websites

Cliff D'Arcy
by Lovemoney Staff Cliff D'Arcy on 14 September 2012  |  Comments 17 comments

New rules could break estate agents' grip on home sales, but would this be a good thing?

Estate agents threatened by property websites

Along with bankers, bailiffs, bouncers and traffic wardens, estate agents regularly feature near the top of 'most-hated professions' surveys here in the UK. 

Hence, news that the government is to relax the rules surrounding the sale of private homes will delight those Brits fed up with sharp-suited property salespeople! 

Cutting more red tape 

The government is absolutely desperate to dig Britain's property market out of the doldrums and turn it back into an engine of economic growth. Hence, last week, the coalition announced plans to ditch planning permission for extensions and conservatories. 

This week, consumer affairs minister Jo Swinson at the Department for Business, Innovations and Skills announced plans to alter the Estate Agents Act and scrap the Property Misdescriptions Act, so as to make it easy for property websites to take on high-street estate agents. The aim is to make sales of private homes easier and cheaper, helping to restore a vibrant and active market for domestic property. 

This 'bonfire of red tape' would reduce the regulations surrounding property sales. Right now, the law treats many websites that display property sales in much the same way as estate agents. This forces these online services to check that property descriptions are accurate, pushing up their costs and fees, while slowing down their service. 

Hence, the government plans to give property websites more freedom to compete with estate agents by scrapping the legal requirement for them to them to perform detailed property checks. 

Good for buyers, bad for agents? 

While any new competition in tightly controlled markets is to be welcomed, estate agents warn that this proposed change could lead to fresh problems for buyers. They claim that websites that match up buyers and sellers are no match for local experience 'on the ground', backed up by consumer regulations, reliable property descriptions and government-approved complaints procedures. 

However, I feel that estate agents are protesting too much. In effect, the proposed amendment would create a two-tier market for selling homes. On one hand would be the low-cost, no-advice route via websites, while on the other would be traditional estate agents with their local knowledge, negotiating skills and fees of between 1.5% and 2.5% of each sale's value. 

Even so, the Royal Institution of Chartered Surveyors (RICS) claims that, "This [proposed change] could lead to delays, increased costs and even sales falling through, causing frustration and stress for all involved." Given the success of the Internet in enhancing, simplifying and speeding up other aspects of our personal and financial lives, this sounds like sour grapes to me. 

Could Tesco return to house sales? 

It will be interesting to see whether these changes might prompt supermarket to enter or return to this market.

At the peak of the property boom in 2007, Tesco launched Tesco Property Market, an 'online notice board' that charged property sellers £199 to advertise a home. Alas, the subsequent collapse in home sales, plus a successful legal challenge by estate agents, led to the site being shut down in its infancy. 

Another site that struggles on against the estate agents' near-monopoly is Tepilo, a free service run by property guru and TV presenter Sarah Beeny, who welcomes the move to relax red tape for low-cost 'sale by owner' intermediaries. 

In an interview with the Daily Mail, Beeny argued, "This is an important step and can only be a good thing for sellers. If people want to use an estate agent, that's fine and they still can, but you can't ignore that the Internet is here and people want to do things in a different way. Good agents should have nothing to fear and should be happy that they can prove the value they add." 

Fat fees under threat 

In summary, estate agents may be making a needless fuss, as they perform up to 97% of all home sales. What's more, increased choice and lower costs will surely help to stimulate the property market, thus benefiting all participants. 

On the other hand, enhanced competition may encourage estate agents to introduce flat fees, rather than levying fees as a percentage of sale prices. Again, this could save sellers thousands, while putting more pressure on one of Britain's least-loved business sectors. 

Finally, if you think estate agents are expensive in the UK, then look westwards towards the US. In America, fees are around the 5% to 6% mark, which explains why 'sale by owner' transactions account for up to three-tenths (30%) of all private home sales! 

More:

Compare and find mortgages

The pros and cons of online estate agents

Home extensions push up property values

Mortgage fees hit new highs

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Comments (17)

  • PDB11
    Love rating 72
    PDB11 said

    How can the property market possibly be "an engine of economic growth"? You can't create wealth by buying and selling houses!

    I suppose you can create wealth by building better houses, but that is made more difficult, not less, by rising house prices. Besides, to grow the economy properly you need to export stuff. Immigrants coming over here and buying houses counts, but I don't think it's what they have in mind...

    Report on 17 September 2012  |  Love thisLove  0 loves
  • russbiker
    Love rating 57
    russbiker said

    Let's hope all those estate agents don't go bust - the high street would be nothing but charity shops.

    Report on 17 September 2012  |  Love thisLove  2 loves
  • nosbort
    Love rating 125
    nosbort said

    @PDB11

    I think that the theory is that if people are buying and selling houses they spend money on furnishing and kitchens etc. which causes economic activity and is the 'engine of economic growth' of which the article speaks. There is, however, a flaw in that argument which was demonstrated quite notably just before the recent crash (and probably creating the conditions for the crash). The flaw is that the entire economic engine was run on borrowing so all it actually did was cause debt which became impossible to cope with some time in 2007.

    Report on 17 September 2012  |  Love thisLove  0 loves
  • babyhk
    Love rating 7
    babyhk said

    In some cases there is a need for an Estate Agent as when jointly selling my Dads property which was unoccupied , we needed the support of somebody showing round viewers especially as we are both women and most viewings were in the evening.

    We interviewed 4 local Estate Agents with a list of prepared questions and the one we chose was paid on the time they took to sell it .

    They actually showed over 30 people round which would have cost us time and petrol and hurried a rather lazy solicitor.

    We never had to meet the new owners. Everything ran smoothly and we would have no hesitation in doing this again.

    Report on 17 September 2012  |  Love thisLove  1 love
  • ronat42
    Love rating 62
    ronat42 said

    Nosbort,

    @PdB11 was I think referring to the overall economy under Labour in that there was a great deal of economic activity using low interest loans to buy a lot of goods, most of which were imported or produced by foreign companies. This just created a feel good factor with no account of the consequences which are now crippling us and a great deal of our neighbours.

    As far as estate agents are concerned, I have always found that the house should sell itself if it is priced fairly and it is that where they tend to get wrong when touting for business, quite apart from knowing that, even if they don't sell it, they can continue to charge for their inactivity. We sold our last house 35 years ago and 3 agents priced it at £26K, £28K and £30K. We then approached the agent who sold it to to us and he quoted at least £36K and we eventually sold it to a friend of our neighbour for £36,500 within 24 hours and he told us he would have happily paid £40K. It all leaves us to wonder about how trustworthy the other 3 agents were and what their motives were.

    I also know of a work associate whose son worked for an agent and bought a property for £17K from a deceased owner's son and sold it within a week for twice that figure and was pleased to brag about how 'clever' he was.

    Sadly, this is all too common in our world these days.

    Report on 17 September 2012  |  Love thisLove  0 loves
  • oldhenry
    Love rating 265
    oldhenry said

    Hey , I know of an engine of economic growth. Cut each others hair! What a suggestion. Cameldung could not have thought of that as he is not a qualified accountant , as I am.

    I should be the Chancellor. I would NOT bank on house sales as a growth indicator as they rely on borrowed money. What I would rely on is the sales of goods made in the UK by people paying UK taxes bringing in foreign currency so we can buy resources to make more goods to sell to others. Simple? Wow, the Victorians had worked that out! But sady since the 1960s politicans have gone for an easy life of relying on house price inflation to fund the economy. It does not work, it cannot work. Osborne needs lessons from Frau Merkel!!

    Report on 17 September 2012  |  Love thisLove  1 love
  • Meanmachine2
    Love rating 37
    Meanmachine2 said

    As oldhenry says the only way to get out of recession is to make things to sell. If people havn't got employment & job security how can they buy houses?

    The only snag is now this country does not have a manufacturing base & instead has a so called service industry which simply trades foreign made goods.

    A simple solution would be to stop paying the £45 million a day to the EU & use it to subsidise goods made in this country so making us more competitive. If we started making goods again to export, employment would rise, workers would start paying taxes & everybody would feel happier & could then buy houses.

    Back to the bad old days when the system worked.

    Report on 18 September 2012  |  Love thisLove  0 loves
  • Aitken B
    Love rating 109
    Aitken B said

    If the stock of housing remains the same it is true that buying and selling houses does not of itself create much wealth. However, if we have a vibrant property market there are a number of spin-offs not least of which is that builders large and small will start to build again with all the additional economic activity that generates.

    Borrowed money is prefectly OK provided it can be paid back. The problem was not that money was borrowed but that it was lent to too many people who had no chance of paying it back unless they could sell at an inflated price probably to other people who could not afford it, the so-called sub-prime market. Basically it was a pyramid scheme which is illegal. One of the major problems we had (and still have) in the UK is that we relied on financial services as our major industry thus when the financial crash happened we had next to nothing to fall back on. Financial services is not a wealth creator. Sure some people "made" a lot of money for themselves but they did not create anything all they did was take money from other people. Like Government they were/are paracites on the wealth creating sector.

    Not everyone can be involved in wealth creating industries as some sectors that do not create wealth are necessary but when the balance of an economy is too heavily tilted towards non-wealth creating support industries it creates a time bomb just waiting to explode. The fuse on ours was lit in the US when they loaned all their money to the sub-prime market and then packaged their toxic debt and sold it round the world. The financial industry saw only the possibility of making "loads-a-money" in the short term and either ignored the dangers or did not wish to look. Our wonderful Government was also asleep at the wheel or deliberately ignored the dangers. Both the bankers and the Government were either disreputable or incompetent but neither have had to suffer any consequences of their behaviour.

    They (the Government) appears to be talking about repealling the Misdescription act which applies only to estate agents and property developers. I think it and and the Misrepresentation act should go the other way and widen the scope of the acts to include vendors.

    Consider the case of the prospective purchaser who spends a considerable amount of time and money (£5k) viewing and considering the purchase of a property only to see the vendor snatch it off the market when the full asking price was offered.

    My view is that the vendor was guilty of misdescription in terms of the price of the property (price is one of the items covered by the act) and of Misrepresentation of their intention to sell and should have been liable to reimburse the prospective purchaser's expenditure. The law, The Government and Parliament however seems to accept this disreputable behaviour as perfectly acceptable.

    Report on 18 September 2012  |  Love thisLove  0 loves
  • Steviebaby1959
    Love rating 28
    Steviebaby1959 said

    I find it shocking if anyone would scrap the Property Misdescriptions Act 1991, it was put in place against anyone, estate agents, internet home selling companies, to toe the line on misrepresenting property sales and providing customers with duff information, and if these website companies are getting more involved, the law against them should be strengthened, not, damn well scrapped.

    Report on 18 September 2012  |  Love thisLove  1 love
  • FireBlade
    Love rating 25
    FireBlade said

    Great news for people sick of Estate Agents, whose fees are wholly disproportionate from the amount of work they do.

    I'm so dissatisfied with the estate agents i've just used that i will NEVER use an estate agent again.

    Report on 18 September 2012  |  Love thisLove  0 loves
  • killick_becki
    Love rating 58
    killick_becki said

    Surely the website owners can just have a clause saying "It is the responsibility of the poster to check the accuracy of the posts they are making" or lawyer speak to that effect. Then we do not need to scrap the Property Misdescriptions Act and it is easier for websites to accept properties.

    Report on 20 September 2012  |  Love thisLove  0 loves
  • Grumpyoldgit
    Love rating 1
    Grumpyoldgit said

    It's not just estate agents, but surveyors too. They don't give you any useful information; just cover their own backsides, in case they have missed something. A structural engineer is much cheaper and will spot any defects.

    Report on 20 September 2012  |  Love thisLove  0 loves
  • coloratura
    Love rating 61
    coloratura said

    "Me feels that a General Election is coming on". Easing planning on extensions and conservatoiries (for a LIMITED time - until after the election maybe). Scrap the "property misdescriptions act" so anybody can sell any tarted-up old dump without any comeback (and don't think surveyors won't have opt-out clauses). You get the picture. Now if the Government really wanted to get the property market going on a more permanent basis they could drop the VAT on extensions to say 5/10% but then they wouldn't want to do that as it would affect their pockets as it goes into Government coffers (for that read "salaries/expenses"). .

    I've lived on this planet long enough to see the same old, tired repeated actions by Governments of whatever persuation - just before elections they change things temporarily to look good and then after the election....guess what?

    The trouble is that we keep on voting for the same old parties swinging back from one to another so let's be brave and vote for one of the lesser parties. Ukip's my vote as I think the E.U. is bleeding us dry and they have been proved to be none to honest and are just a place where retired (usually by the electorate) M.P's go to make more money although I have been put off a bit by the fact that Nigel Farage (sorry if I have mis-spelt that) has said he would be willing to enter a pact with either the Tories or the Labour party. Rather than keeping on with the same old thing going I would rather vote for the Monster Raving Looney Party - after all, they can't be any worse than any of the others and at least we would have some fun on the way.

    Report on 24 September 2012  |  Love thisLove  0 loves
  • electricblue
    Love rating 643
    electricblue said

    I do get fed up of the idiots who are happy to keep trotting out the absurd statements about the UK not having a manufacturing base. Just because your pound shop is full of cr*p from China you should not forget the billions in automotive, aerospace and many high tech and high quality items the UK exports around the world, also controlling many major corporations around the world producing goods using British expertise. The UK is a competitive base for manufacturing, but instead of burying their heads, more smaller companies need to hire German and French speaking sales executives and take advantage of the vast market on our doorstep. The UK is now suffering particularly badly because the USA has an anti-business idiot for a president and English speaking markets have always been a quick-fix for our exporters.. Don't fall for the lies about the Euro, either - it's clear to me that we have been conned into resisting the Euro because a direct and easy comparisons would start all of us asking why some prices in the UK are artificially at a ridiculous premium over those charged in France and Germany.

    Report on 24 September 2012  |  Love thisLove  0 loves
  • easygoing
    Love rating 156
    easygoing said

    Yeah right! I have only bought two houses and on both occasions the estate agent acted efficiently and honestly.

    Give it ten years and all the on-line and other cheap options will have turned up so many horror stories that estate agents will be back in the ascendancy although of course with different name!

    I have a feeling that the change to planning laws will never get off the ground as the government will lose more than it gains after the neighbours of the extension/conservatory builders become upset at inappropriate additions.

    Report on 24 September 2012  |  Love thisLove  0 loves
  • toucanweb
    Love rating 0
    toucanweb said

    About time too, we own the worlds largest website for selling your house free online (http://www.propertysell.co.uk) and have even had restrictions from companies like RightMove etc with listing our properties, there is a thriving market if you can tap into it, of websites where you can sell your house yourself and about time the monopolised Estate Agents were put in there place, why pay £10,000 to sell your house when you can do it for free?

    It is up to individuals to make the correct choice in purchasing a property using the correct legal procedures and they do not need government legislation, we can make our own decisions, no doubt a few people will make the wrong choice and blame the government for their decisions.

    Report on 27 September 2012  |  Love thisLove  0 loves
  • Johnno71
    Love rating 0
    Johnno71 said

    Love the article, but I think there's another alternative that's not really covered.

    There's a big gulf between traditional high street agents and private sale type sites as mentioned in the article. A key downside with traditional agency is that it can be very expensive. On the other hand, the big drawback with private sale is that sellers can't get on to Rightmove and the other big portals, which is where most of the buyers are.

    There are now a growing number of online estate agents who will list properties on Rightmove, etc, but at far lower cost. Online agents usually work on a fixed fee basis (typically charging around £500) with no commission.

    The result is that the seller ends up paying far less than with traditionally, but still gets the same online coverage as well as support and advice from an estate agent.

    Online agents are regulated in exactly the same way as high street agents and bound by the same legislation. They must all be registered with the Office of Fair Trading and be a member of one of the two Ombudsmen schemes for the estate agency industry.

    The precise level of service varies between online agents, but it is easily possible to give a full service whereby everything is done for the seller except for the viewings, which they conduct themselves.

    In other words, photos, floorplans and descriptions are produced; valuations are done; a For Sale board is put up; buyers are vetted; feedback is sought after viewings; advice is given; negotiations are done; and sales are progressed to completion: all in the normal way.

    By way of full disclosure I run the online estate agency http://www.househop.co.uk so I have an interest in their success. But I truly believe that this is the way the market is going and we are getting more and more referrals from clients who have successfully sold through us, so we must be doing something right!

    Report on 27 September 2012  |  Love thisLove  0 loves

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