Log on to www.daniel-james.co.uk, the website of a Suffolk estate agent. It is slicker than most local agency websites but offers the usual search options for finding properties by price, size and location. Only when you hit the “contact us” key does its secret unfold… the address for Daniel James Estate Agents is a post office box and not a high street office in its catchment area of Haverhill.
James Rogers set up the business in the spring, deliberately choosing not to have a physical office for three reasons.
First, by relying on the internet, he felt he could start up more quickly and cheaply than if he had to find and refurbish a shop-front office. Second, his much-reduced overheads could be passed to customers through lower commissions. Third, the risk to himself and other investors is reduced.
“It’s been a success. Of course this isn’t the right approach for everyone. We’ve had a few members of the public who haven’t instructed us because they were worried about not being able to go into an office on a street. But we’ve had other instructions directly because of the lower fees and because people recognise that most buyers now start their hunt on the internet,” says Rogers, who worked for corporate agents in traditional offices before setting up Daniel James.
Lower start-up costs
He spent about £10,000 on software and computers, a fraction of what a start-up business with an office and even basic refurbishment would need.
He uses his software to do three things, almost simultaneously: he provides online advertising for his clients’ properties on his own site and the Rightmove and Vebra portals; he produces conventional hard-copy details for mailing to registered would-be buyers; and he submits ads to the property supplements of local papers.
“The pictures and virtual tours we also do ourselves using Vebra software,” he says. There are downloadable floor plans and general property details too, and interested parties can register online. All the information is organised by Rogers and his colleagues at a private office hired cheaply in a non-prime area. The website gives details of how people can fax, telephone, e-mail or write to the firm, but they cannot walk into a branch office.
Rogers insists the focus of the business remains local, even though its internet base means it could, in theory, stretch the catchment area beyond the geographical boundaries a traditional office might be forced to accept.
The agency goes to some lengths to stress it is a “real” agency that happens to use technology rather than an internet company that happens to sell homes.
Its trained negotiators make pitches, offer valuations and accompany viewings, just like traditional agents.
Rogers believes his unique selling point is that he provides a service as good as any similarly sized traditional agent but with much lower charges – usually £1,000 plus VAT on a no sale, no fee basis.
The agency was launched on the back of a strong local housing market but it hopes to come into its own when prices stabilise and competition becomes tougher in the next 12 months.
“My competitors have vastly higher overheads. I certainly do not want any one of them to fail, but if we’re in a more difficult market I do believe my business has the advantage of being able to offer the same service at substantially lower costs, both to my clients and to me as a manager,” says Rogers.
So far, www.daniel-james.co.uk has one other virtual estate agency competitor. Henry Pryor, an estate agent formerly employed by FPDSavills and The London Office, has gone for a similar approach with a new business called Charles Lister.
The details of the business
Henry Pryor’s operation works like this:
● “Real” estate agents with physical offices subscribe at £1,000 per office per year, or £100 per office per month.
● The subscribing agents’ property portfolios are uploaded to www.charleslister.co.uk. The full contents are accessible only to subscribing agents but anyone can interrogate a “public” area, just as they can a more conventional estate agent’s website.
● Any one agent – even if it covers only a small geographical base – has access to homes on sale in other areas. So if a customer walks into an office in, say, central London and asks about properties available in Yorkshire, the agent can scour the broad database.
Charles Lister links more than 100 offices across the UK through a small version of the Multiple Listing System (MLS), in use across the US and in parts of Europe.
Charles Lister charges one joint agency fee of 2.5% if a property is sold to clients who found it via the site. This is shared with the office that marketed the property.
According to Pryor, the sellers gain because, instead of paying one estate agent office as little as possible to sell their house, an extra commission of 1% or so allows the property to be linked to hundreds of others.
“As a result, clients get the best professional advice on marketing their property with the knowledge that we are striving to get the best deal regardless of where the buyer is found,” he says.
Pryor spent £60,000 setting up the firm against what he believes would be a typical £120,000 on the first year’s activities of a physical office with two staff in an out-of-London town.
He is keen for the website to give the impression that the firm is a “real” estate agency. Prospective homebuyers can feed in the usual criteria of price and house size, and an on-screen mapping service allows a very precise location to be chosen if the would-be purchaser wants to be more specific than the usual town name or larger postal area.
Charles Lister also boasts membership of the Ombudsman for Estate Agents scheme and puts its property portfolio on the Primelocation portal, just as a conventional property agent would.
“I have no shop-window premises. What is the point of having an expensive office in central London if I try to match buyers and sellers in two completely different parts of the country?” Pryor asks.
Starting off with critical mass
“We started off in September 2004 with a critical mass of 3,500 properties and hope to keep getting agents on board. They probably couldn’t justify charging more than the market norms for commission,” admits Pryor.
“But in Cirencester there are 24 estate agents’ offices. In Battersea there are 22. Today if a buyer wants to get a home in one of these locations he has to visit every single agent and register separately with each one. It’s a huge chore,” he argues.
There are problems of course. First, many agents oppose MLS operations because they believe they dilute fees rather than represent an opportunity to raise them. Second, agents are wary of putting so much faith and investment in a service that is run by technology.
Pryor believes he has a success on his hands, but is not counting his chickens yet. “As with all things technical and innovative, the property establishment’s lethargy may yet kill it off!”
