Asymmetrical Information Barriers (they know stuff you don't)
Online estate agents and the power of the internet are destroying the asymmetrical information barriers that allow high street estate agents to charge 2% (plus vat of course) commission on house prices.
You may be wondering, what exactly is an asymmetrical information barrier? And with good reason as it’s a pretty wordy way of saying one side knows more than the other.
In this instance the estate agent is offering his or her expert opinion and charges you for this – to the extent of 2% of the sale of your property price. They claim that their local knowledge is vital to selling your property, that they know the ins and outs of their local market and there is no way that you can replace their valued knowledge.
Is that still the case though?
2015 and the rise of information
We live in the information era and the internet is eroding these asymmetries in all sorts of markets. Life insurance, car insurance, holidays – all of these used to be shrouded in doubt - did I get the best quote, have I been stung on my holiday purchase? They would require hundreds of phone calls to receive a good quote but the internet has removed these barriers.
For the last five or ten years we have all been able to receive hundreds of quotes at the click of a button. This removes the asymmetry of information and ensures consumers receive the best possible deal. We have also seen the internet power new ways of delivering services in a clear and transparent way that makes everything easier for the consumer.
They have a hold on you!
Some industries and markets have been very slow to change with many erecting barriers to prevent the power of the internet and the spread of freedom of information. Real Estate is one of these. Agents add mystery and intrigue around a process that should be transparent and straightforward. They advertise properties in estate agent language and speak to clients in their own estate agent language about the local area. These barriers have continued to be successful because most people will only sell a property once or twice in their life and are always left on one side of the asymmetrical divide.
Power of the Portals
With Rightmove and Zoopla displaying all property data from the last ten, twenty years, anyone can find out what these agents know. Any vendor can investigate local trends, national trends, look up comparable properties in their area, see how many people are searching for a two bed in their area and all at the click of a mouse. You can discover planning proposals for the area, new infrastructure expenditure in the area and anything else that might affect your price. This is here, this is real and still estate agents charge 2% (plus vat of course).
It's not all bad
Now, don’t get us wrong, there are hundreds of individual estate agents out there who are worth every penny, they have lived and breathed their patch for years, know everything there is to know about the industry as a whole and to these people we doff our internet hats. To the rest, who defend their high prices with memorised sales pitches and aggressive sales tactics, we are coming for you.
Online estate agents are here to stay and it’s about time that high street estate agents wake up to what vendors and buyers want: a streamlined, cost effective and fully transparent way to buy and sell properties at the market price. If that sounds revolutionary, it really shouldn’t, it’s the least we expect in every other market and we should all be demanding it of our estate agents.
Here’s to the next generation, here’s to the rise of online estate agents.