Yahoo Finance The death of the estate agent as we know it
In Los Angeles they are known as whisper listings. Here, estate agents talk about the “off market”, “private market” or even the “iceberg market”. These are homes that are put up for sale on the quiet, without any public marketing, and sometimes without a sales agent involved.
So far this year, one in 10 properties in the UK have found a buyer this way. While this method of selling has existed for some time, it’s the seemingly insatiable appetite for property – which might be about to turn as interest rate rises come in – that has exacerbated the situation.
With high demand, in particular for country houses, the traditional role of the estate agent seems to be under threat from buyers and sellers taking matters into their own hands. In most cases, it works like this: vendors will still appoint a traditional estate agent, who alerts their network of contacts – often buying agents retained to seek out properties for time-poor, cash-rich clients – that the house is available on the quiet.
Fees for buying agents normally involve paying an initial retainer and then a fee of between 1 per cent and 3 per cent of the purchase price. For the vendor, a few viewings will take place and, assuming a buyer is found, the transaction will go through without as much as a hint appearing online or a For Sale board appearing in the street (that is until the Land Registry catches up and publishes the sale up to six months later).
Some vendors will approach buying agents directly with their houses, although the practice is publicly discouraged by many for fear of upsetting contacts on the sales side. For instance, a house in St John’s Wood, north-west London, recently sold without an estate agent involved. The price was said to be just under £20m – saving the vendor at least £240,000 in fees.
Since the advent of online property portals provided rocket fuel to curtain-twitching neighbours, the off-market has been the go-to method of transacting by owners of the most expensive or sensitive houses. With so much information available on the internet, guarding digital privacy has been a concern, and conducting a multimillion-pound transaction away from the prying eyes of neighbours, employees and digital voyeurs a priority.
Fear of leaving a digital footprint is another motivating factor. Once a property is broadcast on Rightmove (or other portals), its sales history – good or bad – is registered forever. All house-hunters are, thanks to freely available information on the Land Registry website, armchair valuers these days and a house that has lingered on the market too long runs the risk of appearing somehow tarnished, regardless of the real reasons why it has taken a while to sell.
What was once the preserve of the rich, famous or privacy conscious has now entered the mainstream, according to figures from Hamptons, an estate agency. The figure for off-market sales is 23 per cent in London (up from 20 per cent last year) and 24 per cent in the prime country house market. Such is the size of the off-market that platforms have been set up to specialise in these sales, with details of properties listed accessible only via a password.
Romayne and Oliver Hagger turned to the private market when they were searching for their next home. “We’d been looking for a house on the usual property websites for a while,” says Romayne, 49, an art consultant and interior designer.
“With five children between us who were approaching their teenage years we wanted to move to a more urban environment, close to shops and a train station for easy connections. Tunbridge Wells seemed the right fit. I was also starting up my business, Hagger & Mills, with my partner Molly, and we were keen to find a house that could act as a canvas for our designs, a place to show clients what we do and how we work with colour. So somewhere that had good-sized rooms of the right proportions and high ceilings was also important.”
The couple had struggled to find anywhere that looked right, and if something did come up that they liked, by the time they’d seen the house, it was too late and had already sold. So the couple turned to a local buying agent, Fiona Penny. “She is well known here as someone who has an ear to the ground and finds out about properties before they launch on the open market,” says Romayne.
“We were both working,” adds Oliver, 50, a company director. “We didn’t have the time to commit to finding a house, which can feel like a full-time job, and using Fiona gave us access to properties that we wouldn’t normally see by signing up with estate agents. In our first meeting, four of the seven properties she had to show us weren’t available publicly. Also, being represented by someone like Fiona means that the selling agents take you seriously – they know you are committed to buying.
“In a difficult market where the seller is in the driving seat, having professional advice means you have a sounding board to rely on and gives you confidence when it comes to deciding on whether to commit or pay over the asking price to secure the house. In my experience, when dealing with large sums, it’s always worth spending money on good advice – it pays for itself in the long run.”
Unrealistic expectations
With so much competition for houses in the current climate, it’s been easier for vendors selling off-market to secure high prices. The average off-market home sold in 2022 has achieved 99.5 per cent of its asking price, while 99.1 per cent of houses openly marketed have achieved their initial asking price, according to Hamptons.
But Philip Harvey of Property Vision, a buying agency, says that buying in this private market isn’t a cheap way of securing a property. “Transacting off market means that you’re at the mercy of the vendor and what they want; they always have the fallback of going to the open market if a suitable agreement isn’t reached – we often let this happen if expectations are too unrealistic.”
Vendors can also be wary about selling off-market as it never truly tests the value of the home by opening it up to the widest audience, adds Brian Bishop of Jackson-Stops in Taunton. “After originally instructing us to try and sell off-market, they often end up requesting the more traditional route. In almost every case, they will indeed receive a much higher offer within the first few weeks of being on the open market.”
With values at the top end of the market plateauing – some are calling March this year as the peak – some vendors are questioning whether they have missed the boat and are testing the water by putting their houses on quietly to see if anyone will bite.
“It is likely that we are reaching peak off-market sales levels,” says Aneisha Beveridge, head of research at Hamptons. “With the number of homes on the market forecast to rise later in the year, buyers are likely to be more cautious about paying a premium in the face of an increasing amount of choice. If this happens, off-market sales may retreat back into their prime heartlands.”
Ways to sell a house
The process of selling a house in this country has changed dramatically in the past 20 years. Before that, high street agents, and their shop windows, were the beginning and end of marketing campaigns (with a select few properties given extra exposure by being advertised in the likes of Country Life magazine and in newspapers).
Today, there are a plethora of options beyond using a traditional estate agent and paying their commission fees (anything between 0.75 per cent and 3.5 per cent of the sales price, plus VAT). But the onus is often on the vendor to make it work.
When Purplebricks launched in 2014 as an online agent offering much reduced costs, many thought it would signal the end of traditional agencies. Eight years on, and the jury is still out.
Online and hybrid agents – those that have some kind of physical presence but without the overheads of running a string of high street shops – make up 7 per cent of the market, according to figures from the data agency Twenty CI. Three brands –Purplebricks, Yopa and Strike – represent almost 70 per cent of this market.
Sam Mitchell is the CEO of Strike, an online estate agency which is “disrupting” the traditional estate agency model further by selling houses commission-free. Instead, the company’s app links buyer and seller together and Strike makes money from referral fees and selling upgrades (photos and services and suchlike) to the vendors.
He says that traditional estate agency ended when online portals launched. “They stripped away the mystique that agents held a secret key to market knowledge and buyers. We all have access to data these days, and everyone comes to the market better informed.”
Skirting tradition
One client of Strike, who didn’t want to give his name, sold his house in Putney, south-west London, for £1.6 million earlier this year. The process cost him just £450, which covered the cost of the photos, having a floorplan drawn up and an EPC (Energy Performance Certificate) done.
“Traditional estate agents would’ve charged me between 1 per cent and 2 per cent of the selling price, plus VAT. At the top end of that scale, that’s just shy of £40,000 – or the price of a new car. I’ve no doubt that agents can add value, but is it worth that much? I don’t think so.” After the vendor met with the representative of Strike and helped to write up the house description for the listing, it was put on Rightmove and within 10 days, after 10 viewings, was sold for the asking price.
Where vendors are motivated to do the legwork – those active on social media will often set up a marketing campaign on Facebook and Instagram – the online agency route can be successful.
Sophie Baden, 38, sold her house in Godalming, Surrey, using Purple Bricks. It was on the market for £490,000 and found a buyer within a week. “We did a lot of the work ourselves including the write-up, taking most of the photos, conducting the viewings during an open day – with tiny kids, we couldn’t possibly keep tidying up the house.”
Purple Bricks acted to list the property on the portals and provided a sale board. In order to vet buyers, Sophie asked a series of questions before confirming the viewings. “It was hard work, but we were very attached to the house and maybe that’s why we wanted to go the extra mile in finding the right buyer, rather than giving money to an estate agent for doing what, it turned out, we could do ourselves. I don’t think I’d ever use an agent now as I enjoyed the process so much.”
Others have fared less well on the platform, however. A couple from London, who didn’t want to be named, used Purplebricks to try to sell their home last September. “We were pretty confident that we could do it ourselves, having had lots of positive valuations from all the local agents. And, as we both work from home, we thought doing the viewings would be straightforward.”
The couple had had an offer accepted on another house so were keen to sell. “Our house photographed well so there was a lot of immediate interest, but trying to sort out viewings and dealing with time-wasters was a nightmare. Lots came to nothing.” Eventually, they found a buyer but then discovered he wasn’t able to raise a large enough mortgage. “It’s silly things like this that a good agent would have checked.”
By then, the house had been on the market for a while and interest waned. Not only that but the vendor of their new house had got nervous and they had to raise their offer to secure the house. The moral of her story? “Use an agent who has sold a lot in your area. We take expert advice on every other aspect of our lives and this is often the most important purchase.”
Property porn
Aesthetically minded vendors might choose another route to market. The Modern House was launched by two journalists in 2005, before the concept of online-only agency was born. It specialises in the sale of design-led homes “that pay attention to space, light, materials, nature and decoration”, says its website. It uses high-quality lifestyle photos – at a time when many were using fish-eye lenses as a gimmick to make rooms look larger – and properties were initially marketed through an email newsletter. Instagram came later.
The site quickly found a following, providing a source of “property porn” for those who favour a modern style. “People come to The Modern House because they want the kind of house that we sell – and will often hold out for the right one, sometimes regardless of the location,” explains India Alexander, head of appraisals. “We’ve sold houses to people who didn’t realise they were in the market to buy.”
Having successfully thrown a spotlight on modernist houses, the team launched a sister site, Inigo, which specialises in homes that are “old and imperfect in very beautiful ways”. While commentators agree that the team’s creative clout is strong – they actively recruit from backgrounds in the arts – others point out that selling a house is, at the end of the day, a sales job and question why vendors wouldn’t want someone on board who has lots of experience in closing a deal.
“We’ve been talking quite a bit internally about a potential shifting of the market,” says Lindsay Cuthill, who heads up the Savills country house department. “In very hot markets, new entrants can do well and surprise the likes of us with great sales. It’s not to say they aren’t talented but a lot of what happens in this game is governed by market dynamics.”
He believes that the minute the market loses the “froth” and goes back to normal activity levels, those old trusted qualities – people with experience and companies with the resources to market the properties far and wide – will once again be in demand.
Having said that, even traditional agents are embracing some of the lessons from the online-only breed: many run their own Instagram feeds and have embraced more lifestyle imagery featuring ruffled bedsheets, turning strategic lights off and banning wide-angle lenses.
At the same time, it’s clear that the online-only approach doesn’t always work, with some companies deciding that actually a high street presence is needed within a community, and recruiting local agents to do accompanied viewings is something that the market genuinely demands.
How to sell
by Paula Higgins, founder and CEO, HomeOwners Alliance
If using a traditional estate agent, aim to negotiate a fee that is 1 per cent plus VAT for a sole agency contract – this means that if you find your own buyer, you won’t have to pay anything to the estate agent.
Be wary of “sole selling rights” which means that if you find a buyer through a different source, you still have to pay the agent their fee.
The agent will be the first point of contact for any potential buyers so they should represent you and your property well – watch out for scruffiness.
Online and hybrid agents charge fixed up-front fees of up to £1,999. In most cases, if the house doesn’t sell, or you want to switch to a different agent, you’ll lose this money.
Most online agents will arrange viewings and provide feedback and offers via a dashboard. There is usually an extra charge if you want the online/hybrid agent to conduct viewings.
When it comes to getting a property through to completion, a good high street agent paid on commission will be incentivised to progress the sale, talking to both sets of solicitors to push it to completion. This is not the case with online/hybrid agents.
Selling off-market is becoming more popular, but it depends on what you are selling and it’s best to speak to your agent and do your own research. A desperate buyer may pay more to secure the property and to avoid a bidding war, but the seller needs to understand the market and avoid accepting a cheeky low offer.
Read more: 'We both sold our homes – but only one of us used a high-street estate agent'
