Why does it still take seven months to sell a house in Ireland?
Estate agents and others need to devise a new business model
'With a significant increase in the number of sales falling through just prior to closing, estate agents must ask themselves if this is truly in the best interests of their clients.'
In the midst of many property market challenges, it may be time to evaluate the selling model for houses and some of the chronic inefficiencies in the residential estate agency model. A review of the scant commentary on this reveals that the length of time it takes to close a sale is viewed as the central consideration of a house sale. The consensus view is that this is an average of seven months. Is this an acceptable standard? How have we allowed such a situation, which does not benefit any of the stakeholders involved, to become standard practice?
The estate agent, the solicitor, the banker, the buyer and the seller all seem to have come to an agreement that seven months is an acceptable time frame for closing a sale. With a significant increase in the number of sales falling through just prior to closing, estate agents must ask themselves if this is truly in the best interests of their clients. How have we, as professionals, allowed the current market dynamic to evolve? It is time for a fundamental review of best practice in the interest of our clients.
However unpopular and anti-establishment this may sound, the current residential business model has run its course. The existing ‘sale agreed’ process is broken. Maintaining an extensive network of local bricks-and-mortar branches is now more about vanity and branding than any logical business strategy. A radical rethink is needed of existing processes. All stakeholders and representative bodies in the property sector need to come together and challenge our current approach and process when it comes to the buying and selling of property.
We live in a self-service world. One look at how banks are adjusting their business model to reflect this and it’s clear that the days when clients seeking to buy or sell property visit their local estate agent are fast becoming a thing of the past.
This reality must be faced, and indeed embraced, by property professionals and brands that hope to be around in the future. Building a real-estate industry that is sustainable for agents, solicitors, bankers, buyer and sellers should be a central aspect of the housing debate. This will be achieved only if all the policymakers in the industry come together with a view to making meaningful change.
There are many lessons to be learned from other industries who themselves faced huge challenges to their business model over the last 10 years. Technology has been the primary agent of change in society, driving innovation and improvement across our key industries, from manufacturing and agriculture to entertainment and healthcare. We have come to expect online services which streamline previously cumbersome processes, allowing us greater flexibility and efficiency in our daily lives.
While Ireland’s property industry has lagged other sectors, we are starting to see the increasing benefit of technology. Compare this with the UK, where we have already witnessed widespread change. “PropTech” has become a popular buzzword and the arrival of the online estate agent and other online services underscore how outdated the Irish model has become. One needs only compare the decline in value of British estate agency giant, Countrywide, with the rapidly increasing value of Purplebricks, a business that has yet to turn a profit.
However, technology alone will not create the efficiencies required to establish a more durable and profitable business model. The introduction of a tiered fee structure; making contracts available online prior to marketing a property; and enforcing binding timelines for the closing of a sale once an offer is accepted are some of the changes that will bring real improvements to existing processes. This will require greater co-operation from all stakeholders and should be pivotal to any industry forum intent on delivering meaningful change.
It is time the stakeholders within the residential estate agency sector worked together to allow the business model to evolve. By embracing technology we can establish viable, sustainable, profitable and client-centric practices. We should not view the arrival of the online agent as a threat but as an opportunity.
As business owners we should be mindful of value creation and future business succession. Those firms that will not only survive but thrive in the future will be those who embrace ‘real-estate self-service’, ensuring real and value-driven changes to their business model.
The Government may lack joined-up thinking in regard to housing policy, but we would do well to consider just how joined-up our own strategy is. The existing estate agency model and sales process has quite simply run its course.
Eunan O’Carroll is chief commercial officer at Space Property Group