Mark Savill, Director of the successful Novahomes franchise, ponders the plight of the estate agent.

The idea of a queue of 4,000 estate agents at the dole office has led to much comment in the media of late – and frankly most of it is unkind leading to comments along the lines of ‘the only upside to a down swing is that estate agents are now only as well off as the rest of us’.  While we have all come across ‘jack-the lad’ agents, the truth is that there are a lot of very modern, talented agents who may suddenly find, through no fault of their own, that they no longer have a market. So where will they go?

A good many will change careers having only been lured into a buoyant property industry on the back of easy pickings.  We recently had an approach from a potential agent who would have considered himself a failure if he had not lifted a million out of it over 5 years.  No agency experience at all and completely clueless as to how to work a tough market. 

Of those that are left some will have been offered ‘suitable’ alternative employment with their existing companies; maybe they’ll be commuting at their own expense to a lower paid job and accepting it gratefully for the security of a monthly salary.

Others will take this opportunity to become part of the new breed of agents – the ones that are trading from non high street locations with minimal cost bases, offering a high level of personal service for a competitive fee.

Buyer behaviour has changed with the advent of the internet and the dramatic growth of broadband.  Yet even today estate agency is still a largely a high street retail operation.  How many industries can you name that now only operate from a single medium?  If the worlds of retail, banking and insurance have a selection of web-based channels with discounted rates why not estate agency?  In actual fact the question is not why not – it is why not yet! 

For many the issue is how to go about setting up your own business. 
At novahomes we have built a brand centred around a fantastic web presence with a complete list of everything you need to start your own web agency and we have priced it to be competitive.  It is easier, cheaper and quicker to pick up our brand and expertise than to build your own.  You also have the added advantage of trading as part of an experienced network.  The more of us there are the more high profile and profitable we all become!

Estate agency is now set to change more dramatically than ever before.  The truth is that the buyer behaviour changed and it is only a sea change in the market itself that will force agents to change in the same way.  If there is still truth in the old adage that necessity is the mother of invention then it is also true that nothing will force change quicker than change itself!

Mark Savill, Director of the successful UK Franchise Novahomes Ltd, offers his top 10 tips to help you pick the best franchising option for you.

1. Do your research. There are a lot of potential franchises out there to choose from. You need to make sure you are happy that their proposition works. Interview them thoroughly. I have seen one instance where a firm of office based agents is offering a franchise that is non high street and web based – despite the fact they have not tried the model themselves.
2. Check the projected sales numbers carefully. You need to know what other offices in that network are achieving to work out your potential income. If you think the figures are unrealistic then they probably are. As a double check work out a break even analysis – how many completions will you need to do to make sure your business breaks even?
3. Will the franchise work in your town? There are obviously some towns that are better than others and some propositions simply do not work in some areas. Make sure that the one you select is right. If the one you choose requires significant mortgage penetration to achieve success and yours is a rural retirement retreat you may come unstuck.
4. What level of support do you want? Some offer full support and back office admin for your business. Others offer very little. The knack is to pick the one that is right for you. If you like the structure of a large organisation then a fully supported package is the way to go – particularly if you lack experience. If you have the experience and want the freedom to run your business your way there are packages for that too. The advantage is that these should be considerably cheaper!
5. Speaking of costs – what are they charging you? Look at the up front costs and also the monthly costs. Is it value for money? If you don’t need all of the package, why not find a cheaper option that means you are buying only what you actually want.
6. What tie-ins are you signing up to? If the proposition is heavily dependent on you selling the company’s products through your business you need to know you are being fairly remunerated for that. If you think their slice of the money is too big and yours too small look for a package with fewer tie-ins that will allow you to source these extra solicitor and mortgage revenues for yourself.
7. Do you like the people? People buy people. You need to be able to work with a company that you can trust. A lot of that trust will come down to how well you get on with the faces of that company.
8. Read the small print too! You may like them but they are running a business. Make sure that the contract you sign protects you and at the same time means that you have genuine exclusivity in the territory you are buying.
9. Be aware of the changing market place. The old adage is turnover is vanity and profit is sanity. Sometimes a low cost approach – such as a web agent – can be more profitable run as a small business than as a large one. The debate on high street versus out of town will rage but in a tougher market you should look very carefully at all the costs involved.
10. Most importantly look for the simple solution. Too many propositions are too complicated and have too many income streams and bolt-ons to make the business viable. Pick a business that allows you to do the most of what you are best at. Simple really does work best – especially in a tough market where focus is everything.

Mark Savill, Director of Novahomes Ltd, adds a positive note to falling house prices…

Industry signs seem to be getting gloomier by the day. The latest RICS house price survey said 64.1% of surveyors had reported price falls. Amazingly there has been only 1 month worse than this in June of 1990 when 64.5% reported price falls. This is the seventh month in a row that the RICS have reported price falls by their members. The Council of Mortgage Lenders too reports 49% fewer mortgages than in August last year and for lower values – making a 52% reduction in the amount of borrowed money available for housing.

These figures show what the rest of us now know as fact. The housing shortage of 2007 was not really a housing shortage at all. The reality was an over supply of cheap money that artificially stimulated demand and fuelled house prices. Now that the money has gone the house prices are falling again.

The press is portraying this as negative, but this is great news for consumers. If you are a first time buyer falling house prices will enable you to get onto the ladder without having to take out a mortgage that is so large it will be bequeathed to your children. As someone looking to buy a larger house lower prices bring down the differential you will have to pay to move. As a would-be investor you should now be able to secure a property at a price where there is at least the glimmer of a sensible return. And finally the choice now available to buyers means they can choose the house they really want – rather then be pressured into buying the first thing they see – which often happened in 2007 when so little stock was available.

For many agents this is calamitous – for those whose primary motive is to make profit from selling mortgages this market will be undeniably tough. For those agents who are used to selling a house from the first advert these will seem like hard times indeed. For some of us we will see the re-emergence of a market we know and love; a market where the seller who has the best presented house that represents the best value for money attracts the best buyer. A market where good estate agency is what sells houses.

Ironically a lot of established agents predict the demise of web agency in this new market place where us ‘fly-by-nights’ will soon be gone come the tough times. I beg to differ – I would wouldn’t I – but looking at our price strategy and low overheads we are ideally placed to deal with lower turnover than many. In addition, a lot of us franchisees are experienced agents who became disillusioned with life in the High Street. Bring it on I say!