Starting An Estate Agency In The UK During Market Volatility
Posted: 8 mths ago
Read time: 10 mins
You have had the urge to start your own estate agency for a while, but you have been a bit hesitant because you are not quite sure whether you will be successful. You are about to take the leap and so you start doing some research. Today, there are quite a few people seeking to get into the estate agency business, with many considering an online estate agency model.
The allure of collecting large commissions on the sale of property, garners much attention, especially when it can be done with lower overheads, and lower upfront costs in the case of an online version. I hate to throw "cold water" on people's aspirations, but years of observing estate agencies have shown that running an agency is no walk in the park. Successful entrepreneurs in this industry usually master multiple skills across a wide array of areas. In addition, one should also not be too quick to assume that running an online estate agency is a lot easier or more profitable than a traditional one. Before taking the plunge you should consider first whether you have the skills. Typically some of the traits of good estate agents are:
Before we dig into the intricacies, let's take a look at what estate agencies do in general. The work that estate agencies do can be divided into commercial and residential, both of which can be further subdivided into lettings and sales. Commercial estate agents handle the sale or letting of property used by businesses for a range of purposes. These purposes include but are not limited to shops - from high street stores to village stores - office space, warehouses, factories, and even land. The residential activity involves the letting or sale of property that is used for the purpose of living. Lettings involve the pay for use of a property for a fixed term. Estate agents are usually asked to manage the property on behalf of the owner and deal with all aspects of the let, including selecting tenants, collecting rent, communicating with tenants, handling routine problems, and liaising with third-party service providers - solicitors, plumbers, and cleaners. A sale involves the search for and the transfer of ownership of a property from one entity to another. Each of these 4 categories requires a different combination of skills, and one should focus on the area or areas where he/she has the most competence.
No formal education is required to operate successfully in this field but you must have some degree of know how, which can be acquired from prior experience or a professional training institute - such as the National Association of Estate Agents (NAEA). Individuals with a background in business, marketing, surveying, or engineering may have an edge. As explained before, the actual skills required are based on your area of focus. In both commercial and residential, the most important skill is the ability to connect with and understand the desires of people from various backgrounds. This skill is even more important when finding a new home or leasing a new flat for a person, as this often involves a fairly substantial financial and emotional commitment. On the commercial side, fewer emotions are involved because businesses are generally more concerned about function, cost, and government regulations. While commercial requires less of a personal touch, the needs of the client are more nuanced, and as such you may need domain expertise in planning law, and tenant law as an example.
Top-notch negotiation skills are a must. You must be able to get a good deal for your client whether it be in price and or terms. The client, whether commercial or residential, is likely to feel well served if you are able to add value to him/her. With this, you are likely to get a repeat customer or a better reputation via word of mouth. In recent times, with the rise in the online model, estate agents have been playing more of a facilitator role with the client doing a substantial part of the work. While this may sound great for you because it is less work, online estate agents have been known to compete on price which means you may have lower margins.
Property prices, rental rates, and transaction volumes vary based on location, size, style, economic environment, and interest rates. As an estate agent, you should have your finger on the pulse of whichever market you are specialising in. You must have a sense of where prices are relative to where they are coming from, and where they are going. You must know what types of properties are hot and what are not, and how to pitch different types of properties to increase the chances of getting a deal.
In order to stand-up and operate an estate agency you will have to deal with a few important issues right out of the blocks.
You'll need to decide on what areas you will focus the brunt of your efforts on. Presumably, you will start small and so you may not have the resources to do both commercial and residential, or even both sales and lettings. It is typically best to choose a configuration that will allow you to differentiate yourself from the competition. You also may need to focus on specific geographies as a means to leverage your local market expertise.
The primary operating costs fall into one of four categories:
Property technology (Proptech) is a fundamental aspect of the operation of the modern estate agency whether you choose an online model or a traditional one. Technologies such as electronic signatures impact every dimension of your business including the ability to get your properties sold or rented, attract new customers, retain customers, manage taxes, manage bank accounts, administer properties, and more. At the very least you should have a website that provides important information about your business, and your property listings, and a reliable means of contact - whether through chat, email, direct mail, or telephone. You will likely need a customer relationship management system (CRM) for managing leads and contacts, and communicating with potential clients. With social media a key part of your clients' daily lives, you'll also need a high-quality digital camera and photo/video editing software to get eyeballs on your service offerings.
Staying competitive with the other players in the market is very critical and as such, you'll need to keep your cost low while keeping service quality very high. Whether you are doing sales or lettings, a good electronic signature partner will help you to do just that. Almost every estate agent uses electronic signatures today as their go-to strategy to get tenancy agreements signed quickly and easily, as well as to collect the documents needed (such as IDs, proof of address, and Bank Account Details ) to initiate other processes on the back-end. Certain types of electronic signatures are also now being used to transfer property, albeit a recent phenomena made possible during COVID-19. Some e-signature platforms can connect directly with your CRM, and your cloud storage to facilitate quick and easy dispatch of contracts to anyone in your client list. The more advanced electronic signature platforms also allow your clients to make direct payments to your bank account to cover any miscellaneous fees.
Once you have registered your estate agency, setup your office and make the necessary investments into your operations there are certain legal issues that you have to consider before you begin servicing your clients. Some of these legislation include:
The legislations provided are an overview of the most important laws that estate agents must consider as they look to start a new business. This list is only a sample of the regulations and does not constitute legal advice. Please seek out the expertise of a lawyer who would be best able to provide more reliable coverage of all the laws that you need to factor into your decisions.
Estate agents must also keep in mind that they must operate with the highest level of professionalism and care with their customers. In certain situations where mistakes are made due to a lack of understanding of your responsibilities, or a lack of communication with your clients, the costs that clients face as a result that of the may become your cost. For example, if you do not properly vet a tenant before he/she is allowed to rent a property and the tenant ends up costing the property owner significant damages, the estate agency may be legally required to cover the client's damages. This cost can become quite significant, especially if insurance doesn't cover the event which led to the damages. Insurance companies can also refuse to make payouts if they feel that you didn't do your job with a reasonable degree of proficiency.
Starting a new business can be daunting, but with proper planning and execution, the chances of being successful will be maximised. When launching, think clearly about what differentiates you from your competitors. As you go to market you should find the best way to communicate your advantages to your clientele. Operationally you should seek to keep your cost low and strive for efficiency, especially if the economic environment is challenging. The best way to build operational efficiency in your business is to use technology to simplify and streamline processes. Using electronic signatures allows you to speed up your letting and selling workflows, and using a CRM allows you to better manage your customers and leads. Of course, there are many other areas that technology impacts. Finally, keep yourself abreast of all relevant laws and don't be afraid to ask for help.