Anyone considering working for or setting up an estate agency franchise right now must need their head testing.
Not only is it a challenging time to start up an estate agency business, given the stagnant housing market and extortionate marketing costs, but many of the franchises themselves have seen a sizeable collapse in their share prices, with Hunters and Belvoir down by a half, Winkworth a third and the Property Franchise Group by a quarter from their all-time high, causing confidence to plummet.
Of course, it’s not just franchises who are feeling the pinch, with all eyes on Countrywide right now to see if their not-so-nattily-titled Back to Basics ‘Distribution Strategy’ will lift them out of their sink hole and up their share price from its paltry all-time low of under 10p!
In my last column, I questioned whether investing in estate agency right now is a good bet, and that includes buying into franchise operations, in particular those American-owned franchises which are trying to get a foothold in the UK market.
Why would franchisees choose to buy into something with so little brand awareness right now and give such a high amount of their hard-earned commission back to the USA or UK master franchise holders?
For example, I fear Keller Williams will have limited success if their plan is to focus on getting referrals instead of marketing their business. We all hope to do a good job so clients tell their friends about their great experience, but you won’t get any business in the first place if your marketing is invisible.
Even those with a high street presence like RE/MAX and Century 21 haven’t had the impact over here that you’d expect, given the size of their operations overseas.
For those with little estate agency experience, there are advantages of buying into a franchise, such as support and training and an already functioning website. But very quickly, if you’re doing a good job, you’ll come to resent paying a large percentage of the money you’re earning to those who are higher up the business chain. So why not go it alone?
It’s a difficult decision for those wanting to start out right now – but there must surely be a question mark as to whether franchising is the way forward.
What does the future hold for online agents?
Just five months after Emoov’s purchase of Tepilo and Urban, Emoov founder Russell Quirk has put the business up for sale.
Even though he says there are interested parties, with Foxtons rumoured to be one of them, you can’t help but wonder why anyone would want to buy such a enterprise.
The vocal entrepreneur admitted himself in a carpool karaoke-style interview – some may describe it more as a car crash interview – that Tepilo’s big shareholders hadn’t come through with the money they’d promised. He said he’d been ‘let down by some of our shareholders based on what was promised, signed and ultimately delivered’.
This raises questions as to what was promised and by whom? Why would anyone buy shares in a business and then pull the plug on any promised funding so quickly? What went wrong? What gave them cold feet? Or was there more to this deal than meets the eye?
Plus, what now for those who work for the newly united businesses? What does their future hold? And for the customers whose purchases are currently going through? And for those who will undoubtedly think twice about signing up?
Quirk has also confirmed what I’ve been saying all along. That online estate agency is unprofitable based on the fees being charged.
Connells abandoned Hatched, and Countrywide dropped its failed online experiment. Even Purplebricks has yet to return any profits, despite its best efforts to run high street agents out of business.
Quirk also conceded that you need a critical mass of around 30,000 annual listings if charging less than £1,000 up front, regardless of whether you sell.
What investor is going to want to buy Emoov/Tepilo/Urban knowing how much money they’ll need to ‘burn’, in Russell Quirk’s words, in order to grow?
The industry has not been kind to Quirk, believing him to be an outspoken man who is good at his own PR.
But one thing I can tell you about entrepreneurs is that they learn from their setbacks and they usually bounce back. I’ve a feeling we haven’t heard the last of Russell Quirk just yet.
Keep an eye on your sellers
How often do you check what happened to properties marketed by you that were subsequently taken off the market, to see if they did eventually sell – and to whom?
We’ve been keeping a close eye on Land Registry data for some time now and marrying it with voter records as well as our own to see if the purchasers had indeed been introduced by us in the first place.
So far, we’ve recouped over £1m in fees, with a number of vendors taken to court while others have paid up before legal action commenced.
It’s a shame that some sellers stoop so low and do a private deal with people we’ve introduced – even though they’re aware of the risks of being caught.
You’ve spent time and money on promoting their property – so don’t let them get away with it!
Turn detective on those fraudulent and untruthful sellers – you might be horrified by just how much money you’ve lost!
• Paul Smith is CEO of Spicerhaart and a regular columnist for EYE