Been meaning to have a rant about Estate Agents for a while. This article on the BBC News site could spell the end of the High Street Estate Agent. Couldn’t happen to a nicer group of the population.
According to The Grocer magazine, Tesco are looking to set up a website where homeowners can advertise their houses for a flat fee of £50. This is slightly less than the £4000 that the local estate agent expects for taking some photos, taking a couple of rough measurements that they won’t be legally bound to, and then putting it onto his website. Oh and the estate agent charges VAT on top of the fee – something that isn’t really made clear unless you read the small print, knocking the fee up another £500.
Estate agents have traditionally taken a percentage of the sale as a fee. But as house prices have increased, so has the chunk that the estate agent has taken.
I was talking to, my estate agent and he said that he just couldn’t afford to drop the fee as it just wouldn’t be worth doing the job. That was after telling me that the company he works for shifts, on average, 120 houses per month across their six offices. So that’s at least half a million pound per month turnover (plus VAT of course) if the houses are all like mine which I’d say is average for the area.
Each office has the following people working there:
- Office manager/director circa £60k
- One or maybe two senior salesmen circa £40k
- One or maybe two junior tea boys circa £18k
So an average office will be spending approximately £150k per annum on wages. Then there’s the costs of the high street office, telephones, internet and colour photocopying. So maybe an extra £25k per year. That’s £175k times 6 across the group which is more or less a million pounds each year in expeneses, or (and this is the good bit) the equivalent of two months in turnover.
Now with a turnover of half a million per month… There’s 10 months profit totalling £5 million. Lets say that they forget to sell any houses for four months to allow for seasonal variation and any overheads I’ve not included. That drops the profit down to a paultry £3 million per year. Now what was that salesman saying about not being able to drop their fees as it wouldn’t be worth doing the job?
So they can afford to drop their fees. But that’s going to be too little, too late if Tesco decide to flex their corporate muscle. The average High Street is going to change again.
The frightening part is just how much of the consumer market Tesco is dipping into.