BrightSale - Estate Agency 2.0

What a difference a week makes

2008-07-25T07:12:00.001-07:00

It was Tuesday morning, and as I got into the car something already felt different. There was a strange feeling to the day, something I hadn't felt for a long time, I couldn't quite put my finger on it until as I reversed off the drive I immediately had to do something that I hadn't for what felt like months on end...I had to put sunglasses on so that the morning sun didn't blind me. A stunning morning with the crisp blue skies you remember from childhood had dawned and oddly everything else started to fall into place from there.

The usual two mile queue that greats everyone trying to get to work on time out of Epsom towards the A3 was nowhere to be seen. Of course the children were off school! ...the DJ on the radio sounded optimistic, dare I say happy even! The weather forecaster promised a week of sunshine with temperatures reaching nearly 30 celsius by the weekend. This was too much, I was smiling uncontrollably for no reason, I even turned up a Queen song as I reached the A3 in record time! Could things get better? You bet!

The 8am news came on the radio and provided the 'bricks' for my mornings optimistic 'cement'. Petrol prices were coming down. Our dear friends at Tesco, Morrisons, Asda and Sainsburys had agreed to reduce petrol by up to 5p a litre. Wonderful.

The odd thing about it all, is that here at Brightsale we knew it was coming. Whilst we are not claiming to be the Estate Agents version of Nostradamus, this blatant disregard for the 'Doom and Gloom' of recent months had been echoed by our own performance throughout July. We have found viewing levels to be much higher than that of April or May, and with motivated able purchasers and realistic vendors meeting each other with their price expectations, this months sales have been the best of the year so far.

So, stock up on the sun tan cream, fill the car up and should you be thinking of selling, why not try an agent who remains positive week in, week out? One who explains and qualifies the adjustments you may have to make on your asking price rather than just tells you every week that your price is too high. People still have to buy property, there is no reason why yours shouldn't be one of them.

PMA 1991 - Stop Mis-describing the Misdescriptions Act!

2008-06-30T06:18:00.000-07:00

An excerpt from our latest research report into the myths surrounding the Property Misdescriptions Act 1991...

What is not fair is traditional agency’s misinterpretation of the law to justify their costly and cozy business practices, to the detriment of online estate agents. And of course the biggest culprit is the oft quoted, and oft mis-quoted, Property Misdescriptions Act 1991. The Act is well-named, because there cannot be a more widely “misdescribed” piece of legislation on Britain’s statute books.

Another great piece by our research team that is a must read for anyone interested in this often murky subject. Click here to read the full report.

Preparing for a viewing

2008-06-25T02:33:00.000-07:00

"I got home last night and my wife demanded that we go somewhere expensive…so I took her to the petrol station."

With national press and TV coverage bemoaning the state of the economy and specifically the housing market, it’s no wonder that the typical British trait of poking fun at ourselves in times of need begins to surface once more. All we are hearing is ‘house prices are falling’, ‘cost of living increasing’, ‘fuel bills to soar by 15%’. My point is that we know life does go on. We make these jokes to soften the blow because in reality people still need to buy houses and people still need to sell houses.

The trick is making the most of both what your property offers, and every opportunity that your agent provides you with be it an open house day, professional photography, floorplans, a specific advert for your property or just a For Sale board. Grasp them with both hands. Make sure your agent’s description focuses on the very things that made you buy the property, because you can be sure that if they attracted you to it, they will attract someone else to it.

In return though, and I think I speak for most of my competitors here, a simple request : Please, please prepare your house for viewings! With buyer activity limited, the buyers out there are not only thin on the ground but also very knowledgeable. Your home needs to stand out from its competitors and if you cannot do that by being cheaper than them, then you need to be better. Below are some general pointers that will make all the difference.

Kerb Appeal

The viewers pull up to the front of the property, open the car door and look around. If the neighbours have five foot high grass and old bathtubs/fridge-freezers/washing machines/car parts (delete as appropriate) in the front garden it really doesn’t help. Whilst I understand that you don’t have any control over what your neighbours do, a polite request or even a helping hand to clear any unwanted ‘rubbish’ wouldn’t go a miss. Now, your own front garden will of course not be in this state, but we need to go a couple of steps further. Firstly cut your lawn (stripes are nice, but not essential!), remove the bins from the front of the house. If you have a driveway nearly finished, finish it. If you have a driveway finished, clean it. No oil spills and a quick weed will go down a storm. The percentage of purchasers whose first request when registering with agents is ‘off street parking a must’ is phenomenal, it saves money on car insurance and is hugely convenient, so as they say, if you’ve got it, flaunt it.

Tidy up

Rooms look larger and more inviting when they are neat and uncluttered. Put clothes away and close cupboard and wardrobe doors, make the beds, do the washing up, clean the sink and remove any limescale from taps. Kitchen work surfaces should be clear, make sure bathrooms are clean and toilet seats are down. Remember that the presentation of your kitchen and bathroom are very often key to leaving that good impression. If you have an extractor fan with a light, use it! Light up the glistening hob beneath, if you have under cupboard lighting use it also, sometimes in preference to your main kitchen lighting. Your home should look warm and cosy both inside and out. Replace any dead bulbs, open the windows, (even for a few minutes – to get rid of any cooking or pet odours). If it’s winter, make sure your home feels warm. Empty the kitchen bin, make sure the windows are clean inside and out, turn off the TV and put the radio on softly and tidy away any children’s toys you have. Control pets as much as possible, for instance people who don’t like dogs can be really put off a house by an aggressive loud barking dog.

During the Viewing

While people are viewing your property, you have an opportunity to find out what’s important to them. Listen for clues and, where possible, tell them about the features of your home and the neighbourhood that you think would appeal to them or are relevant. There is no point in bringing to their attention the excellent pub 100 yds down the road that has live music every night if that is not what they are looking for. Once you have told them everything you think is useful, let them look round the property again on their own so that they can gather their own thoughts and impressions. Ask them what your agent was like setting up the viewing. Was he or she helpful and informative? Did he/she really ‘sell’ your property. This will give you an excellent insight in to how your property is being marketed.

Conclusion

Contrary to popular belief, the market isn’t Dead. There will still be more than 600,000 homes sold this year even under the very worst case scenarios; and there is no reason why yours shouldn’t be one of them.
As the Scouts say ‘Be prepared’, and as Henry Ward Beecher said, ‘The difference between perseverance and obstinacy is: that one comes from a strong will, and the other from a strong won’t.’
You will sell your property if the price is right and you have prepared properly.

Traditional agents begin to take online seriously

2008-06-09T04:56:00.000-07:00

It is nice to have an opportunity to agree with Paul Smith of SpicerHaart for a change. After we had the temerity to suggest that his purchase of Tesco’s online estate agency might lead to Spicerhaart branch closures (BrightSale Blog [May 7th 2008]) he contacted us directly to complain. He had a point, in that we have no evidence of closures either real or planned at this stage (but you can be sure that we are watching closely and if we see SpicerHaart’s being shuttered you can be sure we will straight back to the issue). But for now … enough.

However, in his column in Estate Agency News this month (June 2008) Mr Smith was in much more constructive form. He forecast that 3% of vendors would choose to sell their properties ‘online’ when the SpicerHaart / Tesco Property Market is re-launched. Given our current estimate for completions in 2008 of around 1 million, this means 30,000 properties sold online in the next 12 months or so.

But more importantly, Mr Smith also stated that his forecast predicted an online market share of 10% by 2013. By then we estimate that completions will have recovered to their ‘trend’ rate of around 1.5 million annually. This suggests that in 2013 the online market will be some 150,000 completions per year. At an average fee rate of 0.5%, this implies an online market turning over £150 million annually from commission fees alone. Ancillary service revenues would boost this past £200 million.

These numbers are very large and must be very troubling to the traditional sector. But aside from the investment of the far-sited Mr Smith and SpicerHaart in the Tesco platform, there really has been very limited investment to date in pure online estate agencies. This is very surprising, and stands in stark contrast to the $12 million invested in the leading online agency RedFin in the US.

But if Mr Smith is correct (and we hope he is) then the era of significant investment in online estate agency is about to begin.

Is the Writing on the Wall for Rightmove?

2008-06-07T14:22:00.001-07:00

The City of London appears to be throwing in the towel on Rightmove. In October of last year (2007), as the term ‘credit crunch’ was just beginning to achieve common currency, RightMove’s share price was riding high just below 620p. But since a mini-rally in March this year, it has been falling steadily. Until recently the share price had been supported in the downturn by the ‘theory’ (mainly disseminated by Rightmove itself – but bought by some analysts) that as it got harder to sell houses, agents would need Rightmove more and more. In fact, Bloomberg quoted RightMove Managing Director Ed Williams as saying earlier this year: “A tougher housing market means that property advertisers examine the cost effectiveness of everything they do … This plays to Rightmove's strengths''.

Well yes … and no, Mr Williams.

The problem for Rightmove is that estate agents are indeed examining the ‘cost effectiveness’ of everything they do, and our discussions with agents suggest they are increasingly wondering why they should be paying up to £475 a month per branch to Rightmove when Globrix is increasingly doing the job for free. Indeed in the middle of April Globrix was able to announce that it has risen to 750,000 properties listed, which is not far behind Rightmove now.
From our perspective there can be little doubt that Globrix will surpass RightMove - probably in a short space of time - unless Rightmove abandons its outdated ’subscription’ model. by not including the listings of online estate agencies, RightMove is limiting the number of properties that its customers see. This ‘invisible’ universe of properties that are on Globrix but not on Rightmove is growing at a rapid pace, leaving Rightmove looking like the Dutch boy with his finger in the dyke - desperately trying to support a model that is being swept away.

There will be an inflection point, reached quite soon, when Globrix’s listings equal those of Rightmove. As soon as that point is reached, Rightmove will begin to hemorrhage agents because in this climate, if an agent can save up to £475 per branch per month and achieve the same result they are going to. And once one or two break ranks - an avalanche will ensue.

Rightmove’s share price has already plummeted from 620p last Autumn to just 330p now (6th June 2008). Investors are reading the writing that this clearly written on the wall.

Big Step Forward for Online Estate Agencies in the US

2008-06-01T10:57:00.000-07:00

Online estate agents in the US won a huge battle last week by being granted access to the comprehensive MLS database of ‘for sale’ property.

Online estate agencies in the United States had, for the last few years, been engaged in a bitter struggle with their traditional ‘realtor’ (read: traditional high street estate agency) competitors for access to the “Multiple Listings Service” (MLS) database of homes for sale in the US. As anyone who has bought or sold property in the States knows, fees there can amount to 6% - with the buyer and the seller each paying 3% to their respective agents (yes, even the buyer usually has an agent in the US). Given such exorbitant fees, it is little wonder that a dynamic ‘for sale by owner’ (FSBO) sector of online estate agents has developed over there.

But until last week’s judgment, the organization representing agents, the National Association of Realtors, had restricted access to the MLS listings service to try to stifle competition from lower fee online agents. The situation was investigated by the antitrust division of the Department of Justice, and the NAR has had to climb down and drop its prohibition on online agency listings.

The parallels with the UK are interesting, although not exact. Here the National Association of Estate Agents (NAEA) does not actively discriminate against online agencies. That job is left up to the previously dominant portal RightMove (which was established by a group of traditional agents). RightMove does discriminate against online estate agents, and actively tries to perpetuate the monopoly of high street agency by refusing to allow listings from any agent not employing a traditional branch network. Fortunately for vendors in the UK, RightMove’s dominance is fading fast (along with its share price) as the News Corp. backed non-discriminatory portal Globrix has leapt from nowhere to second place in the portal rankings. And given the progress Globrix is making in terms of traffic numbers, and the squeeze on agents’ marketing budgets as transaction volumes plummet, it looks to be only a matter of time before RightMove loses its 800 pound gorilla status.

So it looks as if the marketplace in the UK will facilitate what the DoJ has had to do in the US, namely to allow a fair and level playing field on which traditional and online agencies can compete. It is not too much to ask.

Property Portal End Game Begins

2008-05-07T03:28:00.000-07:00

Apologies to all the early birds who read this when it was first published. It seems I got my "findas" and "finders" mixed up. It is indeed FindaProperty not PropertyFinder who are involved in this deal.

The news that FindaProperty and Primelocation are to merge comes hot on the heels of the tie up between HotProperty and PropertyFinder. This looks like the beginning of an end game for the first iteration of the property portal model – where estate agents paid a subscription fee to list properties . The move can surely only be welcomed by cash strapped agents who now have one less subscription to find each month. It still looks like there are too many similar portals, however, and we expect to see further consolidation before the year is out. Fish4Homes has never really recovered from the debacle of having most of its properties (without their agents’ consent) listed on the sell it yourself Tesco Property Market last year, and looks to us to be the most likely next victim. Even Primelocation does not look impregnable to us, with its big new website launch turning out to be rather a damp squib earlier this year.

Perhaps because the early portals were set up to replace newspaper advertising, agents have been surprisingly tolerant of the subscription model. But this is now starting to change. The entry into the market of the advertising-only funded Globrix has shown agents that there is another way. After its initial rather buggy beta version, it has emerged as a strong and usable portal which will surely continue to gain traction with the News Corp. marketing machine behind it. We are also intrigued by other funding models such as the payment for leads model that is being explored by companies like Zoomf. We think this has some exciting possibilities, although property portals are not quite MoneySupermarket, and it is not easy to define exactly how valuable a ‘lead’ is at the time it is forwarded.

We expect all portals to be advertising and / or lead generation funded within the next couple of years, and we expect there to be only two or three mainstream ones (led by Globrix) with a larger number of ‘niche’ operators leading the innovation charge. The future looks better than the past, and should certainly be cheaper for estate agents. This is welcome news.

Is Spicerhaart's new venture a signal of a mass branch closure programme?

2008-05-07T03:27:00.000-07:00

Spicerhaart’s purchase of Tesco’s online estate agency may well herald the start of a massive high street branch closure programme, not just for Spicerhaart but for other high street estate agents as well.

We believe that by buying Tesco’s online platform, Spicerhaart is experimenting with a branchless model that companies like BrightSale have practiced for some time. If successful, we would expect to see a rapid closure programme of expensive and increasingly redundant Spicerhaart high street branches. This could see up to 227 Spicerhaart high street branches closed.

As we predicted in our recent research note Is there a Future for Traditional Estate Agency? (BrightSale Research, April 2008), online estate agencies like BrightSale are set to replace traditional high street (high cost) agents in most areas of the market over the next few years. Spicerhaart’s move seems to be admission of this possibility.

Even before Spicerhaart’s announcement, the high street sector has been struggling in recent months. Yesterday, MovewithUs predicted that 4,000 agencies could be shuttered before the end of the year.

But the gloom on the high street is not mirrored in the online sector. At BrightSale we are seeing a big huge increase in demand for our online estate agency product, with listings up by 46% since the beginning of March 2008. Customers are embracing the reduced costs and ease of use of the online product as never before.

Spicer deserves some credit for its early change of tack. Most traditional high street agents are simply sleep-walking into oblivion in the face of the new challenge from online agencies.

We welcome both Tesco and Spicerhaart into the online fold because their presence in our market will further credentialise the online estate agency offering.

And we will not be churlish and remind Spicerhaart CEO Paul Smith that a year ago when Tesco launched the Property Market he wrote a passionate attack on the idea in Estate Agency News, concluding: “Tesco might think that ‘every little helps’ – but it won’t be at my expense”.

But I guess he is allowed a change of haart.

We Don’t Need No (Inside Track) “Education”

2008-04-29T06:31:00.000-07:00

Generally, we have been sympathetic to the plight of struggling estate agents and developers grappling with the current market situation. But every now and again something good does result from the downturn. For us, the demise of the ‘get rich quick in property’ industry cannot happen a moment too soon, and it is therefore with some relief we learn of the bankruptcy today of Inside Track.

Inside Track marketed itself as a company that “educated” its seminar attendees (who paid £700 per day for the privilege) about property investment. But this “education” does not appear to have included one of the most basic lessons of all: that the price of assets can fall as well as rise. The company’s unbalanced approach to speculation is given away on the home page of its website, where it states that:

“We have educated more than 100,000 people like you, and have directly assisted them to invest in more than £2.5 billion of UK and international property, creating hundreds of property millionaires in the process.”

We wonder how many of the Inside Track “millionaires” will still be millionaires once they have finally liquidated their over leveraged Spanish and Thai property portfolios.

Our real gripe with Inside Track was not that they encouraged ordinary investors into the market right at the top of the cycle, it is after all hard to restrain the ‘get rich quick’ instinct once it starts to be fanned by ‘pump and dump’ property shows on TV and in newspapers. But Inside Track not only provided the “advice” on how to invest in property but also the investment properties for the newly “educated” investors to buy. This is pretty much the same issue that Wall Street stock analysts had in the late 1990s, when “analysts” wrote glowing research notes on stocks they privately described as “s**t”, and then sold them to hysterical retail investors. That scandal resulted in billion dollar fines and jail sentences for some executives. Inside Track followed much the same strategy, as numerous horror stories have borne out, but we doubt anything much will be done about the practice here in the UK.

We definitely believe that property investors should be educated. But those doing the education should not also be the ones pumping ‘can’t lose’ developments in Spain and Thailand as part of the course.

So its goodbye to Inside Track, but probably more like auf weidersehen – as we’ll probably see your like again at the top of the next cycle.

2008-04-15T08:21:00.000-07:00

Today's RICS survey shows that 78.5% of surveyors reported a fall in house prices in March. This is not surprising, as we pointed out in our recent research report, Is There a Future for High Street Estate Agency?, house prices in the UK - as a percentage of average earnings - remain well above the peak ratio of 1989.

The property derivatives market, which we believe offers the best guidance on future price trends, continues to point to steep falls ahead. Our friends at DTZ sent us up to date prices this morning. They certainly make for interesting reading:

Average / House Price / Change
Current    £194,094
Mar-09    £170,803    -12.0%
Mar-10    £163,039    -16.0%
Mar-11    £161,098    -17.0%
Mar-12    £163,039    -16.0%
Mar-13    £166,921    -14.0%
Mar-14    £174,685    -10.0%

Bear in mind also that prices have already fallen almost 3% from their high of £199,600 in August 2007.

In traditional estate agency there have been two responses to the gathering evidence of a significant correction in the market. The first is simple denial. Hence we still have forecasts from 'commentators' such as Savills' Lucian Cook who as recently as February still predicted a 3% increase in house prices this year.

The second response has been to increase fees. This is rather more puzzling, although it is great for online agents like us. Hence we read in last weekend's Financial Times that Savills was proud to announce an increase in their fees to 2% - 2.5% in the last couple of months. This was justified, according to the FT, on the basis that 'property is harder to sell now'.

Well forgive us for being a little churlish, but surely it is always hard work providing buyers and sellers of property with a quality service. Surely that doesn’t change regardless of the state of the market.

So why the increase in fees, and why so proud about it? The FT piece went on to rubbish online estate agents by lumping high quality, full service, companies like BrightSale in with 'sell it yourself' websites like Houseladder and claiming that they couldn’t sell property in a bear market.

Far from it, our rigorous approach to completion chain management has left us, if anything, at an advantage versus the high street brigade in more challenging times.

We wrote the FT to clarify the matter, but regrettably that have not deigned to print our response. Far be it from us to suggest that this might have something to do with the amount of colour advertising that Savills does in the Weekend FT. But in the interests of balance, we thought we should publish the letter the FT rejected here:

Dear Weekend Editor:

Your rather lop-sided defence of the traditional estate agency set up a false dichotomy between traditional high cost agents such as Savills and 'sell it yourself' websites as provided by Tesco and Asda ('We're back to having to work hard', Weekend FT, April 5th/6th).

Pure ‘sell it yourself websites’ such as Tesco's had no chance of success. The convoluted process of buying and selling residential property in England and Wales (which HIPs have done nothing to alleviate) means that vendors certainly need an experienced agent's help in managing the completion process.

But sadly your correspondent completely overlooked the fastest growing sub-sector of the market: the full service online agency. These companies employ experienced hard working agents but in more efficient call centre locations. In a report published last week (Is there a Future for High Street Estate Agency?), my own company noted that listings with such agencies had leapt 58% in the last nine months alone. If this sub-sector were counted as one group it would now be the tenth largest agency in England and Wales (by instructions).

Your correspndent also seems to ignore the fact that traditional agency fees have been in steady decline since 1997. It would defy all business logic if a period of steeply falling demand for estate agency services (with lower transaction volumes) was met with a sustainable increase in prices.

Our research shows that if house prices and transactions fall in accordance with previous cycles, that the costly branch network and staff overheads built up during the doom years could be an anchor that drags down traditional high street agency for good (as has all but happened in conveyancing and travel agency). The future certainly belongs to estate agents who work hard, but probably not from expensive high street premises in logoed cars.

Yours etc.

Andy Etches
CEO

BrightSale Research Department Starts With a Bang!

2008-04-02T04:47:00.000-07:00

Commenting on the publication of a major BrightSale research report (Is There a Future for High Street Estate Agency?) BrightSale Managing Director Andy Etches said:

“A combination falling house prices and completion rates is going to cause major upheaval in the next couple of years. Many traditional agents are already struggling. We demonstrate in this report that the high costs associated with an increasingly redundant branch network are going to be the anchor that sinks the traditional agency ship.
Online estate agency, by contrast, is growing rapidly. Online listings are up 58% in just the last nine months (to 3,200), making the online sector now the 10th largest ‘estate agent’ in the country.
Vendors are feeling the pinch, and they are keen to secure the best deal possible when selling their properties. This is causing them to migrate to online agents in record numbers.”

Read the full report here.

2008-03-25T10:52:00.000-07:00

WHAT IS AN ESTATE AGENTS VALUE?

One of the most common questions we are currently being asked as more and more people instruct us to sell their property is 'Why don't you do a valuation?'

Having been a valuer for some ten years of my sixteen in agency, the last seven at least have been dominated by data available to us for free. It's simple really. At the risk of blowing the lid off traditional estate agency skills, how do you think they value? You guessed it, they use the internet. Whether you like it or not anyone with access to the internet can find out the price of a home in your road and even how much you paid for it yourselves. Most of the big property portals have a 'back end' agents only access area, which we can all access. If your have been trying to sell your home at any point in the last say, ten years we can find out just by entering the postcode. Up will come the price you were trying, what agent you were with and how long it was on the market.

When you book a valuation with an estate agent, one of the first questions asked is 'How much do you think it's worth?' That's just to find out if your thoughts are in line with the data available to them.

When the agent arrives from 'X and Co' arrives with trusty clipboard in hand, what is he or she looking to achieve? The answer is just to sign you up to their company. They may have a look around first, probably presumptuously doing brief room sizes and pretending that the white bathroom suite alters your value whilst paying the odd compliment here and there. I tell you now, it's all for show. They had the value ready at their morning meeting that day, simple as that. The reason for measuring the rooms is to try an assumptive close later in the meeting, something like '....Oh well I've prepared the details already, all I need to do is take some photos and we're ready to go. Your happy with what I've said, just sign here, there's no need to have another agent round.'

To prove the point though, the ace up my sleeve is this. What happens in the majority of cases when a sale has been agreed.......?

A survey/valuation.

This is carried out by a surveyor who has the final say in what your property is worth and whether the bank/building society should lend that amount on it. Does he have a local office? Has he ever sold a house in your road before? Probably not. Where does the person that decides if your house sale goes through or not get his price?.....You guessed it again.... the internet.

Cut out the wasted hours listening to preconceived sales pitches and tell us what you want to get for your home, we'll check how realistic it is and offer you our advice and then we'll sell it for you. Simple really.

Is Brightsale 'outside the box'?

2008-02-29T09:10:00.000-08:00

I hate that phrase. It was used far too often when I worked at previous estate agencies. The new advertising campaign was always 'outside the box', the viewers were always told to think 'outside the box' if there was something that my negotiators blatantly knew was to their dissatisfaction. All in all it became really annoying. Ironically I sit here now nearly a month into my new position realising that I am now genuinely working, thinking and acting 'outside the box'.

Brightsale is an estate agent, it does everything an agent does and yet charges in some cases a quarter of the fee.

Having sat at the desk of a flagship estate agency knowing that my first £100k's worth of fees were just paying the rent, let alone the five negotiators and their continuous bumps in sign written cars that annoyed everyone and also lost that anonymity, that personal service the public desire from someone selling their home. Whilst sat there at that desk in 2007, the realisation dawned on me that hardly anyone came into estate agents anymore, so why did we need this big flash 'starship enterprise' looking office? The public aren't keen on estate agents, fullstop. A house in the window (along with dead flies and an out of focus plasma screen) is spotted by a couple walking past and yet neither of them want to go in, knowing that they will be pounced on by a pack of wolves all commission hungry as if a pound coin coloured full moon were out. Instead they walk back to the comfort of their home and use the internet.

Thats where we come in. Call it 'outside the box' if you will, but instruct us to sell your property and we will advertise it at 0.5% and with no sole agency tie in period. We will appeal to all those estate agent haters and yet carry out the very same job with emphasis put on contacting you with regular updates, figures and statistics for how your property is performing. Viewers will be vetted to weed out timewasters and once an offer is placed the potential purchaser will be financially qualified also. Once a sale is agreed we have experienced sales progressors who will ensure that your property isn't just added to a 'pipeline' of sales going through that are left to boil. (Interesting fact, the average estate agent works out their branch performance by assuming a third of its sales will fall through. IT IS EXPECTED!)

Foxtons’ Class War

2008-02-29T07:55:00.000-08:00

Not only are Foxtons in hot water with the OFT with regard to their rental contracts - which the OFT claim can lead to unsuspecting landlords owing Foxtons significant amounts of money far into the length of a contract - but big F are now being targeted by the far left pressure group ‘Class War’.

We understand that Foxtons’ Islington branch on Upper Street is to be the subject of a ‘Class War’ demonstration on Saturday 3rd of March. We are particularly amused by the way Class War are trying to promote attendance at the ‘demo’ – namely by sending out bogus property requests via the www.email4property.com website! Given the general lack of buyers in Foxtons’ traditional haunts of West London we imagine they would have initially been delighted to receive an enquiry.

But unfortunately where the email requests ‘number of bedrooms required?’ the class warriors have written that Foxtons are “the greatest con-men of our time”. If Jon Hunt were still at the helm of Foxtons (he sold his firm to unsuspecting private equity buyers just before the crash in traditional estate agency), we wonder whether he would have taken that as a compliment. Getting vendors to continue to pay 3% fees when high quality online alternatives such as BrightSale offer the same service for 0.5% might not be a ‘con’, but it is certainly is an amazing feat of sales. But in the long run we think that high cost agents like Foxtons will lose the class war with online agencies.

And then perhaps the enemies of capitalism will come looking for BrightSale instead … yet another reason why a bricks and mortar branch network might not be such a good idea in the future!

What is the Smart Money REALLY Telling us about Future UK House Prices?

2008-02-26T03:11:00.000-08:00

One of the less desirable aspects of the recent bull market in UK property is the rise of the ‘property expert’. These self-appointed oracles do not have good track records predicting market movements. Almost all of them underestimated the strength of the market during the upswing, predicting a ‘flattening’ of the market year after year.

So what are the ‘property experts’ saying now? Well considering that their impact (and hence market value) is rather less in a bear market than it has been recently, it is not surprising that they are much less bearish than many individuals! The general consensus at the moment is for a period of stagnation in house price inflation at worst. Fionnuala Earley, Nationwide's chief economist, is predicting that growth will drop to 0% by the end of this year. Likewise Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors (RICS), is predicted zero per cent growth for 2008. The pundits on the talk show sofas are generally pushing the same message. A ‘flattening’ but no outright declines.

But what is very striking is that as you get closer to the ‘smart money’ you find a more bearish picture emerging. Goldman Sachs predicts a fall of 5% in prices in 2008 and a further 2% in 2009. And these were the guys betting against US sub prime mortgages before most.

When people really have to put their money where their mouth is, the picture looks even bleaker. There is now a blossoming market in property ‘derivatives’ traded by professional investors. They speculate on the future price of the Halifax Property Index (HPI). The prices they predict make disturbing reading. As of January 2008, they predicted a general price decline of at least 9% over the next year, increasing to 11% over three years. Amazingly, in 5 years time, the market predicts that UK residential property will still be 11% below where it is today. If we assume (very conservatively) retail price inflation of 2% a year that means that UK property will fall by more than 20% in real terms over five years.

These prices can be followed at DTZ’s website in their monthly newsletters.

How can such negative predictions be squared with the prognostications of the ‘experts’? The real answer is that they can’t. There is an old saying that ‘talk is cheap’. Property experts don’t want to be turkeys voting for Christmas, and so they are desperately exhorting people, a la Corporal Jones, not to ‘panic’. But the reality is that none of these commentators are actually betting on it! And those that are, are betting on a pretty bumpy ride for quite some time.

Gazundering - The Purchasers Revenge?

2008-02-22T06:50:00.000-08:00

After years of climbing prices and vendors having the upper hand, the mortgage application figures show that the shoe is now firmly on the other foot. Finally, a buyers market....

However, this does pose its own inherent problems. Whereas in a rising market the vendor could ruthlessly raise his price towards the end of the conveyancing process, siting more interest and the fact that the conveyancing had taken four months in which time the price had risen by 10%. Now we are faced with the exact opposite.

The front page of every recession hungry tabloid is laden with doom and gloom stories and purchasers are now using this to their advantage. The difference being however that with Gazumping, the public were somewhat protected. If the purchaser was requiring a mortgage then the lender involved would send a surveyor to the property to give it a value, thus ensuring that even in a rising market the purchaser would not pay 'over the odds' as the lender themselves wouldn't lend the higher amount. With
Gazundering though there is no failsafe for the vendor, the only protection they have is the strength of their agents ability, not only to keep the current purchasers desire high but also to progress the sale swiftly and with professionalism.

Getting in at the bottom

2008-02-15T02:51:00.000-08:00

As interested observers of the carnage at Humberts we applaud the choice of the former finance director of Countrywide to be the new CEO (Mr Michael Nower). Following the ill-considered spending spree of the previous management team, he inherits a top heavy business full of high street agents with legacy cash payments still owing on many of the purchases. So Mr Nower clearly has his work cut out.

But we must not forget that Mr Nower was part of the team that sold Countrywide to the private equity firm Apollo right at the top of the marketin March 2007 for the princely sum of £1 billion. Given that Savills stockprice has fallen by more than 55 per cent between then and now, Mr Nower andhis colleagues probably saved at least £500 million for their shareholders at Apollo's expense. Respect due, although don’t forget that the Countrywide management team did also try an MBO before the sale which was (fortunately for them) rejected by shareholders.

Having demonstrated his ability to sell at the top, Mr Nower clearly believes he is getting into Humberts at the bottom - as he is reportedly being paid only in Humberts shares (which is pretty much all that is left right now. But whilst flipping Countrywide at a fat price to a US private equity fund presumably ignorant of the brutality of British property cycles is one thing, turning around a company with a fundamentally flawed business model is something very different.

We will monitor the patient with great interest.

What is going to happen to Tesco and Rightmove?

2008-02-12T02:37:00.000-08:00

We read this week that Tesco is planning to revisit the estate agency space in March with a relaunch of the ‘Tesco Property Market’. Readers of our blog will remember Tesco’s very ill-fated first forey into the space with a pure ‘sell it yourself’ offering in July of 2007. After traditional agents rose as one to protest, Tesco quickly dropped the plan – although not after having so badly damaged the reputation of Fish4Homes that this blog believes that Fish4 may now be holed below the water line. Our understanding of the new Tesco venture is that it will be based around individuals located in Tesco stores, providing some personal interaction with a website behind (rather like the TrailFinders in Selfridges in London - except rather less grand!).

So far so much better than what they tried before. But the venture still has some serious difficulties. Clearly the greatest of these is access to portals. It still seems very unlikely that RightMove will allow listings from the new Tesco platform, despite Tesco’s sabre rattling about taking legal action against RightMove (which seems to have gone rather quiet). If so, then the other ‘traditional’ portals will follow suit. So this makes Globrix (www.globrix.com) a potential kingmaker in the future evolution of the market. We firmly believe that Globrix is likely to gain serious market share quickly as soon as it is released from beta testing and feels the full benefit of the News Corp. marketing budget. Although Globrix listings are ‘indexed’ from the web we are uncertain whether or not they will display Tesco’s listings. Our understanding is that at the moment Globrix is leaning against allowing Tesco listings, again for fear of generating bad will amongst traditional agents. In all honesty, we wonder why they are so worried, given that traditional (and online) agents simply cannot wait to have a high quality alternative to RightMove et al which is funded from advertising and not their stretched marketing budgets. But it does seem that Globrix have the power to make or break the new Tesco venture – and what they decide may have serious ramifications for years to come

A bright start to the new year

2008-02-07T12:54:00.000-08:00

Today we welcomed our new National Sales Director Jason Cheeseman (16 years estate agency experience) to our team and opened our Southern UK HQ in Chertsey in Surrey. We are more and more confident that 2008 is going to be a breakthrough year for online estate agencies, and we are investing accordingly (we will shortly be making an announcement about additional venture capital funding for BrightSale).

The house price recession is going to hit traditional agencies hard. Through the good years, much like Gordon Brown, they did not husband their resources and now they find themselves with bloated cost structures and inefficient business models. Your Move has announced a significant number of branch closures and Humberts appears to be teetering on the edge of bankruptcy (although the stock has ‘rallied’ to almost 13p today!). We are going to read a lot more stories like these over the course of 2008.

The future in estate agency belongs to those who can provide a great service to customers at a price which represents good value. It is very difficult for many traditional agencies to do that given their reliance on high street branches that no one uses, logoed cars which alienate customers, and commission hungry sales people who often lack experience and training. BrightSale is an alternative, and having worked and invested quietly and diligently over the past 12 months we are now going to push hard to claim a much greater share of a market that has not served the British public well for far too many years.

2008 is going to be a bright year.

Bloodbath in Traditional Estate Agency

2008-01-22T05:26:00.000-08:00

It seems unbelievable given the apparent health of the industry last summer (2007), but there are now clear signs that the traditional model of estate agency is breaking down much more quickly than we anticipated. We have always assumed that eventually estate agency would move towards better value, more customer choice and better service by embracing the internet and jettisoning its outdated practices in the same way that travel agency and conveyancing did some years ago. But it seems the pace may be picking up. The culprit, of course, is the imminent house price recession – as well as competition from online agencies like BrightSale.

Yesterday’s trading statement from traditional national estate agent Humberts will not make the national press as Northern Rock has done. But in our ‘little’ world (although commissions from estate agent fees reached £4.4 billion in 2006) this was quite a bombshell. Humberts said it needed an urgent recapitalization and would make a loss for the first half of the year. Its Chairman and CEO resigned and its stock plunged 44% on AIM to just 14p (it had been well over £1 in early summer 2007).

Humberts is the UK’s 10th largest estate agent. If it is in this much trouble then the pain in traditional agent land must be pretty severe. Humberts is a good barometer because it has been a model of how ‘traditional’ agency has been done for a long time. It boasts a 150 year history and has been busy buying up other high street estate agents right through the top of the market. It made at three major acquisitions in September 2007 alone - in the West Midlands (Halls), London (Thomson Currie) and Kent (Fox and Manwaring). Humberts was aiming to have expanded to 90 branches by the end of 2007. All these firms have the same very long history going back many decades.

The result of this spending spree on traditional assets appears to have been that Humberts has saddled itself with a large cost base just at the top of the market. With revenues from these assets declining, the market’s judgement was severe indeed.

It will be very interesting to see where Humberts gets its needed injection of capital from, but it would be amazing if the new management did not reconsider the ill fated dash to buy up high street firms and look more creatively at the business of buying and selling property. If that happens, perhaps we may see the first traditional agent jump across to a more internet-based model. We would be delighted to see this, and it would certainly not be the first time that innovation had sprung from adversity.

But either way, as the old Saatchi and Saatchi poster had it, traditional estate agency isn’t working.

See Humberts trading statement at:

http://www.humberts.co.uk/p.dtx?c=about.relations.news

Mousesale moves forward

2008-01-18T04:13:00.000-08:00

We were very pleased this morning to read that ‘sell it yourself’ website mousesale.co.uk had decided to stop flogging the dead horse that is private sales and become a BrightSale-style full service online estate agent. We are delighted to welcome them aboard! This is a market which is growing rapidly and the more players offered a good service the better for the beleaguered and over-charged traditional estate agency customer.

Mousesale Managing Director Richard Garland said, “It is clear that in the current climate, vendors need more than just an advertising service to sell their properties.” Well amen to that! BrightSale’s negotiators spend many hours working on clients’ completion chains, legal issues and other complexities; and it was never clear to us how anyone could manage these issues on their own.

It was interesting that Mousesale had also become informed of the possibility of OFT action against HouseLadder.co.uk for providing estate agency services whilst claiming not too. We wonder whether Mousesale had been contacted by the OFT in this regard (Tesco abandoned its sell it yourself offering after discussions with the OFT). Mousesale’s release said:

“There is also the question of whether or not the Office of Fair Trading will allow them [i.e. sell it yourself sites like HouseLadder] to continue to trade in their present format as the OFT believes some of them may in fact be offering estate agency services. It has been claimed that www.houseladder.co.uk have been cited by the OFT for trading as an estate agent, rising to fears that clients who have signed sole agency agreements with agents could be hit by double fees if they sell via private property sales sites too.“

We couldn’t agree more. The OFT has made its position very clear, it can only be a matter of time before enforcement action is taken against those ‘sell it yourself’ sites which offer things like erection and removal of branded For Sale signs whilst still claiming not to be providing ‘estate agency services’.

Mousesale clearly decided to jump before it was pushed - surely the others cannot not be far behind?

HouseLadder Confirmed as an “Estate Agent” by the OFT, paves the way for Double Fee Claims

2007-12-05T08:48:00.001-08:00

We received an email from a private individual who had been following our thread regarding private sale websites. He was in the process of selling his property in Surrey through a local agent and contacted HouseLadder to ask about their services. A HL representative gave him the usual line that they were “not acting as an estate agent”. Suspicious of the claim that HL could provide ‘For Sale’ signs and facilitate buyer/communication and still not be an estate agent, Mr H (name is withheld) decided to contact the OFT for their opinion. BrightSale has seen a copy of the OFT’s opinion, given by Mr Chris Garland on 28th November 2007. In the opinion, Mr Garland states very plainly:

“In the OFT's view, assuming that you sign a 'sole agency' contract with your local agent, you would be liable to pay them their commission if you were to locate your buyer via Houseladder. This is because the agent is entitled to his commission if, during the period he is instructed, he finds the buyer or another estate agent finds the buyer; and it is the OFT's view that Houseladder is engaging in estate agency work.”

Mr Garland does say that a court would be the ultimate arbiter (of course), but he hints rather darkly:
“I can assure you that the OFT is closely monitoring the internet property retailer market and will, where appropriate, take enforcement action in respect of breaches of the relevant legislation.”

We understand that Mr H has registered a formal complaint with the OFT against HouseLadder and is awaiting a further response. Mr H specifically objected to HL’s claims on the home page of its website that he would not be liable for a double fee when the OFT’s view is plainly the opposite.

Perhaps most interestingly of all, we have further learnt that at least one financial claims company is looking into marketing a service to estate agents to recover the double fees on properties which have been sold on HL whilst they were under sole agency contract. Given the strength of the OFT’s view - and clearly Tesco’s lawyers gave them the same opinion – it is likely that a private sales website client is likely to get a bill for a double fee very soon now.

Whether HL or any of the others decide to fight in court will be an interesting decision. In our opinion, it would be very healthy to have this tested in court now, so the market can operate in the certainty that private sales sites like HouseLadder either are, or are not, acting as estate agents.

The OFT have made their view clear. It is time for the High Court to do the same.

Why are HouseLadder and other Private Sale Sites still claiming not to be “Estate Agents”?

2007-11-23T03:58:00.000-08:00

Tesco was forced to close its ‘Property Market because the OFT ruled that it was acting as an estate agent by providing For Sale signs and facilitating buyer to seller communication.

Roger Young, Director of Enforcement at the Office of Fair Trading, could not have been clearer when he told the BBC on 13th October 2007:

"If an internet property retailer does anything for their clients more than simply carry an advertisement, for example if their website has a message board for sellers to contact buyers, they will be doing estate agency work. It may well be that most internet property retailers are acting as estate agents."

After Tesco knuckles were wrapped by Mr Young, you would have thought that other private sale sites would have pulled in their horns and withdrawn claims about exemption from estate agency status. Not a bit of it! On the HouseLadder website as of yesterday they were still claiming:

“You can sell or let your home privately and NOT pay the agents commission. As Houseladder is not an Estate Agent, but an advertiser, there is no conflict with sole or multiple agency agreements. It is the same as placing an advert in your local paper.”

Given that HouseLadder provides For Sale signs and facilitates communication between buyers and sellers - how can they possibly claim not to be estate agents?

It would seem only a matter of time before Mr Young catches up with HouseLadder and forces them to retract their clearly erroneous statement. For their sake, we hope that happens before they are sued by a traditional agent with a sole agency contract looking to extract a double fee from one of their customers. We are watching to see which happens first.

Come on HouseLadder (and the others), the game’s up. Either quit the business or move over to the full online estate agency model and compete with people like BrightSale. The OFT have made their position clear and you are now misleading your customers.

Are the markets predicting a bright future for online agents?

2007-11-22T06:09:00.000-08:00

It is remarkable how little press coverage has been given to the dramatic price declines in listed UK estate agents since the summer. The larger companies such as Savills (down 57% since May) have US and commercial property exposure and are thus less illustrative of purely UK conditions. But what are we to make of a largely UK residential operator like Humberts declining almost 70% since 1st May? The majority of market commentators are predicting merely flat property prices for 2008, and not the kind of early 1990s-style house price recession that might be surmised from a decline of this magnitude.

The Government’s ham-fisted introduction of HIPs and a series of interest rate prices have certainly taken a toll on completion levels, but is it possible that the market is now finally waking up to the threat of genuine competition from online agents? The high cost ‘bricks and mortar’ estate agency model has remained unchanged for hundreds of years. But now it looks as vulnerable to online competition as traditional travel agency and conveyancing proved to be as online agents raise their game with sophisticated tools and expert call centres.

One thing is certain: the sale of Foxtons by owner Jon Hunt (to BC Partners in May for a reported £390 million), together with the sale of Countrywide plc (to Apollo Management LP in April), look like very strong candidates for trades of the year (for the sellers, that is).

Now the Dragons are blogging too!

2007-11-12T05:29:00.000-08:00

BrightSale is currently talking to a number of investors about a capital raising round. We are raising some additional finance to invest in further marketing and on additional resources for our main call centre operation. We firmly believe that 2008 will be the year that estate agency moves online in a meaningful way – and we want to be ready. In the course of our discussions, we came across another great blog from someone who obviously invests in a lot of start ups. Take a look at:

www.dragons-pen.com

It looks like it will be a humourous but insightful view from the perspective of a real Dragon!