For some months I have been predicting a number of estate agents would either go out of business, sell up or merge with rivals; less stock available to sell, higher salary costs combined with rising Workplace Pension payments and increased pressure from legislation, taxation, etc, etc. There are many agents with disproportionate borrowings that make commercial survival unsustainable. We’ve seen a number of larger, well-known, firms absorb smaller ones recently, and at the start of this week saw one of the online ‘agents’, Emoov, go to into administration, with its employees remaining unpaid three weeks before Christmas!
For High Street agents in financial difficulties, “selling” their portfolio to another agent or a new agent to the industry may not generate much cash for the selling agent, but at least their clients are passed on, hopefully, to a reputable organisation that can fulfil their original needs. In the case of the online agents, the poor client has paid their money upfront (or entered into a finance contract with a third party!) and they have seen nothing for their fee. Oh dear! This is rather reminiscent of the builder who takes your deposit for a new kitchen and then you never see them again. Is this a ‘con’? Yet again, the reputation of estate agency is brought into disrepute.
The online ‘agents’, and I use this term loosely as I’ve never regarded them as anything more than an advertising platform, were created to change the estate agency world, or so we were told. Emoov started shortly after another well-publicised online company of a certain colour, around 9 years ago. As with all start-ups, it was not expected to make a profit in the first few years. It grew exponentially whilst at the same time acquiring a number of other online agencies, including Sarah Beeny’s much publicised Tepilo. The trouble is, it never has made a profit in the whole of its existence. And now it’s gone bust. What a surprise. The other online operation continues to grow. I read recently that its operating turnover to the end of the last financial year was £93m, up from £46m the previous year. One would have thought this fantastic, until you read the detail of the profit/loss account which showed an operating LOSS for the year of £21m – up from a loss on the previous year of £5m. They’ve certainly increased their market share (102% growth) but their losses have increased by 320%. These companies are simply ‘buying’ listings and are not sustainable business models. What happens to the clients when this one goes to the wall, as it inevitably will judging by its 10+ years track record of loss making?
Will these clients get their upfront £850 – £1200 back if their property hasn’t sold? Of course not. All the income generated is spent as it comes in, along with all the additional funding put forward by the venture capitalists and banks that keep these Goliath’s afloat. The only people who make money out of these operations are the senior managers (whilst their jobs exist and salaries get paid) and the stock market traders. The share prices rocket whilst these tech companies are growing, but as soon as expansion ceases, like a pyramid selling scheme, the pack of cards crash to the ground.
Sellers and landlords should be wary. The online agents appear to be really good value for money when you compare their upfront ‘fee’ to a traditional agents ‘commission’ when a sale or letting is concluded – but the traditional agent doesn’t take your money upfront, fail to deliver a service and then go out of business. The advertising looks glamorous and amusing; it’s all ‘smoke and mirrors’.