Today we live in a world where almost anything can be bought or sold directly through an internet platform. The role of the middleman – from retailer to broker and even financier – is being hit on all fronts. And yet somehow the estate agent model, which depends on matching buyers and sellers, withstands.
It is, to say the least, a puzzle.
Before I go on I should declare an interest. I’ve started to think about selling my London flat, which has made me wonder: do I really need an agent to help me in that process in this day and age of online platforms?
Also, how easy would it be to arrange a private sale? And why on earth aren’t more people selling without the middleman?
The more I think about it, the more I struggle to understand how the estate agent model has managed to defy technology’s disruptive influence. Why would anyone pay a commission when an internet listing can open just as big a market door?
My suspicion is that, for now, the estate agent’s lingering presence relates to three things.
First, the mass-sell websites that exist today were designed to complement rather than disrupt the old model. Simply speaking, they make it very hard for individuals to market properties.
Second is platform liquidity and choice. Existing independent platforms don’t yet have the inventory or scale to attract buyers from the incumbent mass-sell sites that still depend on agents. This, however, stands to change as more inventory comes their way. Also, liquidity begets liquidity.
Last and not least, estate agents themselves are getting better at securing new stock and capturing continuing business, often through ever more aggressive tactics.
For example, in my experience it’s difficult to make a property inquiry in the UK without immediately being asked about your plans for your existing property. Valuations are presented almost as a condition for viewings. Estate agents have a reputation for being pushy but, compared with the last time I was in the market, they seem more desperate.
In short, the industry’s response to the technological threat has not been to improve service and desirability for its product but to become more monopolistic and cartel-like. This, of course, comes at the cost of the low-end of the market, which stays entrapped but fails to benefit from the clubby relationships still offered to the high-end part of the market.
While it’s true that these tactics have been successful thus far, I’m not sure they will be enough to withstand the trend towards disintermediation. It seems inevitable that the independent sites will gain critical mass eventually.
The real shame is that, in the interim, the industry has failed to recognise that it must evolve if it is to avoid being fully digitised. Evolution lies in recognising that the future is about more than just sourcing inventory or matching. People may have the power to market properties directly but they still desire all the indirect services associated with expertise and convenience.
That includes everything from drawing up plans, managing appointments, opening doors, fielding questions and, at the later parts of the process, hand-holding both the buyer and seller through the transaction process – one which can involve complicated chains that need constant management.
Yet rather than adapting, agents have become fixated with protectionist tactics focused on capturing new properties or the pushing of mortgages and finance to customers. And this is exactly the sort of thing that puts off would-be clients. The industry would do better if it responded more creatively.
For example, imagine a new type of model focused entirely on convenience, local knowledge, prospecting and the hand-holding of clients. Or, perhaps a model that understands that the cost burden should be shared equally between seller and buyer?
For many years the estate-agent market prided itself on being localised, specialised and fragmented. If you wanted to buy in Richmond, you had to go to the area to talk to local specialist agents directly.
Looking for and selling property was a labour-intensive process, one in which local knowledge was key and liquidity was guarded by a handful of local operators.
Property websites understandably changed the rules of the game. Market access was no longer linked to local specialists. Searches became quicker, deeper and further reaching. Buyers got more choice, sellers got access to ever wider audiences.
But rather than embracing this new field, the industry has seemingly stumbled at the last hurdle. Rather than turning itself into a market facilitator and gate opener, it’s stubbornly stuck to the role of gatekeeper and inventory guardian.
The problem with closed gates, of course, is that people will always find ways around them. I, for one, have already been tempted to jump the fence.
Izabella Kaminska is an FT Alphaville reporter