Brokers should consider joining online agents, says Harpal Singh, managing director of Conveyancing Alliance Ltd
The mortgage industry is split into many parts and yet all those differing parts are reliant on each other for their success without a (relatively) harmonious relationship between each other the industry, at best, fails to function as it should and, at worst, falters and collapses. Therefore, it is in all our best interests, whether you are an adviser, lender, distributor, conveyancer, HIP seller, or estate agent, that the relationships are strong and that consideration and co-operation with other parts of the chain is not simply a ‘nice to have’.
I say this because while the differing parts of the mortgage machine are interlinked, it is rarely the case that each part has a strong idea what is going in the other parts. While over the short-term this may not fundamentally affect your business, over the long-term it is always beneficial to be clued up on the issues certain other parts of the chain may be facing, particularly when there is likelihood of ‘read across’ to other stakeholders.
For instance, at present the estate agency world is undergoing a series of challenges and indeed, perhaps something of a revolution, which is likely to affect all market players, particularly mortgage advisers. The link between advisers and estate agents has perhaps not been as strong as it possible could be due in fact to most agents in the past having their own in-house mortgage advice arms. However, the Credit Crunch and recession has seen many agents jettison their in-house advisers and look instead to link with other firms and introduce rather than offering it themselves.
This has produced a more fluid relationship between agents and advisers and it is therefore important to understand the evolution of the agent market which is currently taking place. As a business which is now firmly immersed in the agent world we can see at first hand its changing nature, which comes from a mixture of local developments and the wider introduction of global brands which could fundamentally change the way the property market works.
At a very simple level, the influx of ‘online agents’ into the market is having a real impact on the traditional, high-street operators. In days gone by the high-street agents would (still do) charge in the region of 1.5/2% and were (are) reliant on their high-street presence to bring the client through the door. The online revolution is beginning to change all this and now we can see a whole range of purely online agents, either covering specific regions or even nationally. With no high-street presence, overheads are low and therefore they can be much more imaginative in their pricing structures in effect, they’re able to undercut the traditional agents and can offer flat-fee models, either at the front or back end, rather than a percentage on sale option.
In effect, these online agents are providing a personal touch to the vendor in that they come round to the home and value it, deal direct with all enquiries, etc, however what they don’t have is the costly high-street presence. The major cost for these agents is advertising the property, and to do this they opt for the current powerhouses paying Findaproperty and Right Move to list their properties. Again, we should point out that online agents do not have to be national in their reach many are choosing to only focus on certain regions. Plus, and this is an interesting development, a number of mortgage advisory firms are choosing to branch out into the online agent route for their area. In effect, this can work as a lead generation mechanism for the sale of the mortgage and other financial products.
The other model attacking the traditionalists is the completely online ‘agent’ who can be seen as much more of an advertiser of property or perhaps a facilitator rather than an agent. These propositions have no personal contact with the vendors and are therefore able to charge hundreds not thousands of pounds for selling a property. To keep these fees low the vendor almost has to do it themselves, taking and uploading photos, constructing their own floor plan, etc. Plus, the property will only be marketed on the agent’s site rather than on the larger powerhouses mentioned earlier who have more considerable advertising spend, brand recognition and reach. In this sense the vendor is taking the option of a dirt-cheap agent, but with the cost of doing most of it themselves and with the risk that the property may take that much longer to sell.
This all creates challenges for the traditional agent but perhaps the biggest challenge is coming from the mega-brands. We have recently seen the established of the isold virtual agency – borne from Tesco and Spicerhaart who, only in the Bristol area at present, are offering to sell the property for a flat fee of £999. isold wants the consumer to come to them direct and for this they will be offered a free valuation, portal advertising on the likes of Right Move, and access to Spicerhaart’s call centre. In essence, this is something of a half-way house between the concepts above, it’s a flat fee offering but with a personal service of sorts.
Alongside this we have the introduction of Google to the market, who are styling themselves as fully-fledged competitors to the main portals such as Findaproperty. However, whereas the established players charge agents to place their properties on their sites, Google has said it will not. The agent will still be Google’s customer but they will get a free listing – the costs will be covered by advertising. The consequences for the pay to advertise sites could be huge given the reach of Google and its size and power. After all, if you Google ‘property’ on Google, then whose site is likely to come up first on the list?
Now all this change and potential upheaval may not seem of great interest or relevance to mortgage advisers, however, there is certainly much to be concerned about. Take the isold offering for instance, Tesco are not a company renowned for sticking to one area, theirs is a multi-sector approach and it is probably the case that it will try to provide all services around a property sale. So, this is a question for advisers, if Tesco get it right with isold, who do you think will be looking to provide the mortgage advice as well? Tesco will look to sell everything and this could end up with brokers ousted from the deal.
Also, with Google not requesting payment from agents to place properties on its site, will they look to gain revenue through the sale of ancillary products such as mortgages it’s completely possible that they may simply generate the leads and sell them on, or they may want to sell mortgages and financial products themselves. This seems a less likely outcome given Google’s inclination to stay online but it is not inconceivable.
So, mortgage brokers have some thinking to do clearly there is an opportunity to join the growing number of online agents. A number of advisers have already done this, but there is also a sense that advisers and existing agents should look to form closer relationships and support each other even further. This could involve the sharing of client data, or formal agreements to refer to each other – all will help in ensuring both parties are kept in the loop, especially given what may well be coming over the horizon.
