Let’s look at current-day estate agents as being rather similar to scores of fishermen trawling for their daily catch.
Secondly, consider the housing market in which they work to be like a giant sea, the size of the whole U.K..
Basically, knowing there are always buyers (the fish) swimming in the sea, estate agents simply take properties that their vendor clients wish to sell, bate them up a bit (or write glowingly about them), then advertise them colourfully, before placing them for sale in the sea of buyers swimming around.
Some of the buyers, spying these attractive looking ‘houses’, which appear to be of the type they want and in a good location, will decide to home-in and view!
Unlike most fish in the sea, house buyers are quite familiar with the fact that most good looking houses may have ‘hooks’, tied to one particular estate agent and, just as a tasty morsel is to a fish, they may well have to negotiate a safe way round the hook if they decide to home-in for a closer look, or even consider buying.
The problem with this way of selling, for houses, is:- buyers aren’t actually matched with all the best houses that may be available for them to view because the selling agent only knows about the houses that his particular clients are selling.
The other problem is that the current-day estate agent is only in business to close the sale on each property on their books and is not actually in business to serve each buyer that happens to saunter past their offices.
Estate agents as a whole seem to see the whole pool of houses currently on their ‘collective books’ as representing the housing market but in reality they are only actually offering the houses they have instructions to sell, not the rest! This is a serious flaw in their business model.
In this analogy, the order of the four distinctive market parameters should simply be re-ordered thus:
A. The sea of houses available – The housing market. This becomes C
B. Fish – All the buyers. They become A
C. Houses – the bait – the product being sold. This becomes D
D. Agents – someone earning a living by selling property. They become B
Below is a link to the Home Owners Alliance; with a story uncovering a similar aspect and explaining the flaws within estate agency.
Having worked in the property industry for decades, and in estate agency too, I have realised exactly how all the flaws may simply and finally be resolved. By doing this the whole business of moving house would be made massively more efficient.
All that is needed is to re-order the four market parameters into the correct order for their proper and efficient function – i.e. slightly changing the arrangements in the above fisherman’s analogy!
The new order would then be:
A. The buyers: (still the fish.)
The buyers (are still represented by the fish), but they will know that there isn’t a nasty barb hidden in each tasty morsel, (the houses) to be viewed.
More confidence will automatically be generated in all buyers this way.
They will see the house more in the true light of day, without the downsides being hidden (all too often surreptitiously by vendor-centric estate agents).
B. The buyer-agents: (the main change is the type of agent used.)
Buyer agents – people earning a living by helping buyers to find the best property for their requirements, not the houses individual agents happened to have on their books at the time and were enthusiastically trying to push!
If instead, the agents were now acting for buyers and were out there looking in the whole locality where the buyer wants them to, many more properties would come up as matching the buyers’ requirements. The buyer would have the maximum choice as to which houses they preferred the most. This could be achieved without the buyer having to go registering with loads of different agents (as generally happens at present), because the buyer-agents would be doing that locally for them already.
They would do this by comparing the requirements each buying client has with the local properties which all registered buyers have of the houses other buyers simultaneously wish to sell.
The houses currently available for sale will be the local area in which the buyer is choosing to move to, not anywhere the agent has a house to sell !
C. The housing market – (still the housing market but focused more locally.)
D. The houses – (still the products being bought.) These houses would be the ones the buyer really wanted to view, not, as I have already explained, the ones individual agents happened to have on their books at the time, and which they were most enthusiastically trying to sell!
Once again, the following link describes some of estate agents’ tricks – currently!
Link to the Home Owners Alliance Estate agents’ tricks
The remedy or solution for this obvious lack of efficiency within all housing markets, especially those across England and Wales is to change the way these markets are operated by making them far more efficient than currently. Unless the housing marketplace as a whole works efficiently, prices will keep drifting up beyond those which would exist in a perfect marketplace, in accordance with well-established economic theory. The eventual and inescapable result of such inefficiency is stagnation – which is exactly what we are seeing in the housing marketplace at present.
The House Price Virtuoso Solution is the only current proposal for resolving this problem for the benefit, both of estate agents and also, and most importantly, for first-time buyers.
For more information about what it is that I am advocating must be done, please see:
Posted by: Peter Hendry, Housing Valuation Consultant
Author:– The House Price Virtuoso Solution
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