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How Do Online Agents Work?

What is an online agent?

Online agents are estate agents that operate virtually, rather than from an office on the high street. Their services are usually a more basic, stripped back version of those offered by local estate agents. Because of this, they're also generally cheaper.

How popular are online estate agents?

Using an online agent has been an available option for homesellers for many years. But they've only really come into the mainstream in the past few years.

They are still much less popular than traditional high street agents. According to the latest TwentyCi Property & Homemover report only 7.9% of properties across the UK are sold by online estate agents. Over 90% of homesellers still choose a local agent.

Virtual agents are more popular in the North West, the Midlands, and Yorkshire & The Humber, where 10% of home sellers choose to work with them. They are also more commonly used by home sellers whose property is worth less than £200,000.

Why do people use an online agent?

Online estate agents tend to sell their services as a cheap and flexible alternative method of selling your home. They have tried to separate themselves from the negative connotations that many people have of estate agents. The people who choose to work with them are generally attracted by the following factors:

Low, upfront and fixed-fees

On the face of it, online estate agents appear to offer a much cheaper way to sell your home. These agents charge a small fixed fee, rather than commission, and many online estate agents promote this as a way to budget effectively, or save on the commission costs charged by high street estate agents. If you're looking for a basic sales package, with no extras (like viewings, marketing, or sales progression - which incur extra fees), the low fixed-fee offer could be appealing.

When we spoke to homesellers using an online estate agent, 80% of those interviewed told us they chose their agent because they wanted to save money.

Control / flexibility

Other homesellers are attracted by the control offered by online estate agents. Given their pared back approach, the homeowner has to take responsibility for key parts of the sale, such as hosting viewings and negotiating offers. Some people choose this option because they have professional experience of selling property. Others are attracted to the flexibility the online agents' stripped-back approach offers.

Negative feelings towards estate agents

Some homesellers are pushed towards using online estate agents because of a previous negative experience with a high street estate agent. Estate agents have a notoriously bad reputation. According to the latest Ipsos Mori Veracity Index, only 30% of consumers thought estate agents were trustworthy. Working with an online agent offers the opportunity to reduce the amount of time spent actually dealing with estate agents. This is appealing to some who have had a bad experience.

How does an online estate agent work?

Valuation

Before putting your house up for sale an estate agent will need to conduct a valuation. This is the case regardless of whether you're selling your property with a traditional, online, or hybrid agent. This valuation will provide a guide for the asking price you include on your property advert.

Unlike traditional high street agents, an online estate agent won't actually have to visit your house in order to value it. Because they aren't local experts they rely on online data about historical property sales in your area. They'll analyse the local property market to see how much houses in the area have sold for previously, and how other properties are currently priced. At a very basic level they will take an average of price per square foot of these recently sold properties, and multiply this by the size of your house.

For example: if homes in your area have sold for an average of £500 per square foot, and your house was 1000 square feet in size, an online estate agent would value your property at around £500,000.

There are many flaws to this method of valuing. Firstly, it's only accurate if all the recently sold houses in your area are like yours. If you live in a detached house, but the majority of surrounding properties are terraces, this type of valuation won't be very accurate.

Secondly, an online only valuation doesn't take into account all the unique features of your home that impact its value. You might have a beautiful period fireplace, or have undertaken renovations recently. These can't be assessed properly without an in-person valuation, and so won't be included.

Because of the inaccuracy of online only valuations, many hybrid estate agents now also conduct in person valuations. If you have a valuation from one of these 'local experts', make sure to ask exactly where they are based, and which other properties in the area they have worked on. The more experience they have in the area, the more accurate their valuation is likely to be.

You don't have to rely on a single valuation. Many estate agents will offer no obligation, in-person valuations for free. These give you the chance to discuss their different services, and to hear where they would position your property price-wise. You can book valuations easily, through our comparison tool.

Marketing

Once your home has been valued, your estate agent will help you to create an online property advert. This will be used to promote your sale on all the main online property portals.

Will the photographs be professional?

What's included in your online agent's package will vary depending on your provider. Many companies will include writing a description of your home as part of their service. But it's likely that you'll have to pay extra for professional photos to be taken of your home.

Similarly, if you want to advertise your property offline you will need to take control of the process. Some online agents offer the option to purchase a physical 'for sale' sign. But, you might also want to consider putting adverts in local newspapers, in community centres, and on social media. These things will not be included as standard if you are using an online estate agent, so if you're budgeting, make sure to include any extra fees in your calculations.

Viewings

Once your house has attracted the interest of potential buyers virtually, the next stage is to show off your property in person. Viewings are an opportunity for buyers to see the details that make your home special up close. It'll help them get a sense of the geographic location of the property too.

Will I need to arrange / host viewings with potential buyers?

Most online agents don't include accompanied viewings as standard. This means that if you use one of these companies you'll have to be physically available to meet, and guide potential buyers through a tour of your house. If you're uncomfortable with this (or think your selling skills won't match those with expertise) some online agents offer accompanied viewings as an add-on extra.

Some companies offer this as a pay as you go arrangement. This gives you the option of hosting some viewings yourself, but having extra support for others. This can be useful if you can't be free at a certain time or you decide that you want extra help later on in the sale. If you're using Housesimple or sellmyhome.co.uk, you will pay viewing fees on this pay-as-you-go basis.

Other online estate agents (usually hybrid agents) have specific more expensive packages for selling your home which include accompanied viewings. These include agents like Purplebricks. These viewings will be hosted by 'local experts'. Bear in mind however that these representatives may not actually be from your neighbourhood. They might not be aware of the specific geographic features (like schools and transport links) that make your property appealing. So, if you're using an one of these 'local experts', make sure you brief them on these things before they host viewings.

Offers

Once you've received an offer from a potential buyer you can choose whether you want to accept it, or to negotiate for a higher price. Some online agencies will provide help with negotiation, others will leave that to you.

If you choose to accept the offer, your conveyancer will spring into action. They'll negotiate the finer points of the contract, arrange surveys, ensure all the potential buyer's finances are in order, and prepare for exchange and completion. Usually a traditional agent will help guide you through this process. They'll ensure that everything is in order, and chase your lawyer (and your buyer's lawyer) to make sure the sale goes ahead smoothly.

In contrast, online agents offer limited sales progression support. Some, like Purplebricks, do provide access to a call centre type service, to help if you need it. Others have no sales progression support unless it is purchased as an extra. Sellmyhome.co.uk, for example, charges £299 for their 'completion management' service.

How involved will an online estate agent be?

When enlisting an online estate agent, it's important to remember that they are likely to be pretty hands off when it comes to your home sale. They will value and list your property on the major online property portals (Zoopla, Rightmove, OnTheMarket). But after this they will place much of the responsibility for selling into your hands.

We interviewed a group of sellers that had chosen to work with online estate agents. Of those we talked to, 40% said that they spent more time than they'd expected managing the sales process. On top of this, around 50% felt the online estate agency they chose was poor value for money - in part because of this lack of real support and involvement.

Some estate agents will offer packages that include greater involvement in the selling process. These include pay-as-you-go hosting of viewings, or help with post-offer sales progression. These packages will usually cost more so double-check what's included in your contract before committing to an online agent.

Each online estate agent's standard offering is different, so check the terms and conditions carefully before agreeing to work with them - particularly if you're looking for a certain level of support during the sales process.

If you're unsure about the level of support and involvement you're after, exploring your options is a good place to start. Many estate agents offer free valuations. These are an opportunity to meet and interview the people you might work with to sell your home. We recommend meeting at least three before choosing the right one for your sale. You can easily book valuations through our free comparison tool.

Are online estate agents any good?

Home sellers seem to have a wide range of experiences when using an online estate agent. Some people report having a positive experience, and feel satisfied that they have saved money. Others find that the process is much harder, and slower than expected. A significant minority didn't manage to sell their property until they switched to a different agent.

When we spoke to home sellers who had worked with online agents almost 50% felt that the agency they chose was poor value for money.

Online reviews tend to reflect the extremes of opinion. Home sellers are either extremely happy or extremely dissatisfied by the service offered by their online estate agent. This could depend on where you are in the country, how many local property experts work there, and the company's experience level.

There has also been some controversy surrounding the reviews of some online estate agents. At the end of 2019, Wired published an investigation into Purplebricks' Trustpilot reviews. They found evidence that the firm screens the reviews it receives in order to manipulate its online ratings to be more positive. There have also been reports in the property industry press that Purplebricks offers incentives in return for positive reviews. If true, this accusation calls into question Purplebricks' claims that it is the 'highest rated estate agent in the UK'.

Will an online estate agent get me the best price for my home?

No, an online estate agent is unlikely to get you the best price for your home. Research by several bodies has shown that local high street agents consistently outperform online estate agents.

There are a few reasons for this. First is that online estate agents lack the local knowledge that elevates a high street estate agent's sales pitch. Local expertise can help promote a house because of its proximity to schools and transport links, or because of the features that make it different to other properties on the local market.

The second reason is because of a high street estate agent's connections within the local property market. The best local agents usually already have a database of interested buyers in the area. In contrast online estate agents operating a nationwide call centre approach do not have the same access to local buyers. These connections, combined with the fuller marketing service high street estate agents provide, go a long way to explaining why high street estate agents have greater success at selling homes for the best price.

This is not to say that some online estate agents do not provide a good service. But, rather, that the best local estate agents will consistently outperform online estate agents.

How does an online estate agent make money?

Like traditional high street estate agents, online agents charge a fee for their services. They also make money from add-on 'extras'. Add-on costs can include fees for: hosting viewings, resources for marketing (like a 'for sale' sign, or professional photographs), and sales progression services.

Online agents will also earn revenue from referral fees. It's common practice for online estate agents to recommend particular suppliers of legal services. If a seller elects to work with one of these recommended providers the online agent will receive a referral fee.

Unlike traditional high street estate agents some online estate agents make using partner services non-optional. This guarantees that they receive a referral fee.

Purplebricks's 'Pay Later' option is one instance of this. This option allows you to defer payment of your estate agent fee for 10 months, but also legally ties you into using Purplebricks's preferred legal supplier 'Premier Property Conveyancers'. The only way out of this clause is to pay Purplebricks a 'administrative fee' of around £360.

This means that either way they receive an extra fee on top of your basic estate agent fee package.

Why do online agents ask you to pay upfront?

Online estate agents ask for payment upfront because it reduces the risk for the estate agent. They will get paid regardless of their performance, or if their business goes under (like Emoov in 2018, and House Network in 2019).

Some online estate agents are now also offering other options. Most common of these are options to delay, for example, Purplebricks's 'Pay Later' option. You won't have to pay your fees upfront, but you will be required to pay regardless of whether your agent sells your property or not.

If you choose one of these 'Pay Later' options many agents will require you to make an agreement with a credit company as part of the contract. They may also require you to use one of their partner services, as part of your estate agent contract. These partner services are notoriously poorly reviewed. Therefore, it's important to double check the terms and conditions of your contract before you decide to defer payment.

Why are high street agents more expensive?

High street estate agents have higher fees because they offer a more complete service, and often get better results.

A high street agent's fee goes towards a full marketing service. This will include advertising across multiple channels and engagement with known local buyers. Traditional agents will also vet a buyer’s identity, and their ability to buy before they come and view your property. At viewings, they'll use their local knowledge to entice buyers into submitting an offer on your property.

They'll then negotiate offers, to ensure you get the highest price, and offer a full sales progression service (for no extra charge), so all the legal elements of your sale go through quickly and smoothly.

Part of the reason high street estate agents are so motivated to offer this complete service, and get you a speedy sale is their fee. Because traditionally, agents’ fees are commission-based, they only get paid once the sale completes. This means they are keen for a quick sale. But, commission-based fees also mean the amount an agent gets paid depends on the final sale price. The higher the price your property sells for, the more money your estate agent makes.

This means it's in your estate agent's best interest to get you the highest possible price for your home. A fixed upfront fee does not incentivise online estate agents in the same way.

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