In the second of three interview pieces, we asked Phil Priest of 4Corners Property to give his thoughts on how estate agents can generate more profit in a difficult housing market.
Phil Priest is the co-founder of 4Corners Property, and he is well-known in the property and legal sector as one of the leading advocates for making property transactions move more quickly.
4Corners Property is a smart quotation platform that allows estate agents and mortgage advisors to generate quotes from solicitors, a service where buyers and sellers can get oversight as to the best conveyancing package for them, with a panel of local solicitors ready to be instructed instantly.
Andrew: Phil we are nearly one quarter through 2023, and the housing market is difficult, what should agents be doing differently?
Phil: Great question, so let’s break it down. It is unlikely that estate agents will agree on more sales this year compared to 2022. With only some help with SDLT, zero to pay up to a £250,000 purchase, and the phasing out of help to buy – plus lending rates over 4.0%, up from 0.1% – this means for many that a £400 a month hike in their mortgage payments is a little grim.
On average, a typical agent sells 100 properties a year, and maybe this year slightly less. When those sales complete, that is cash in for the agent plus revenue from mortgage and other related services, utility switching, etc.
The big problem for agencies is their fixed costs. Whatever the market conditions their break-even point every month stays constantly high, and as we know sales typically take 28 weeks to go through, which means a property listed in January becomes cash flow nearly seven months later.
So if they agree even fewer sales, this will really cause problems?
It is not all doom and gloom there are ways that agents can help their cashflow situation and do more completions each year.
I don’t see how because the agents seem backed into a corner…
The solution is shortening the timeframe from sending out a memorandum of sale at the point the sale is agreed to getting cash on completion from the solicitor.
But aren’t all the delays baked into the sales process?
No, 4Corners Property has been working alongside agencies for years and we know that if they change their operational approach just slightly they can get sales through quicker and reduce fall throughs.
So they get more fee and it gets paid in sooner from selling the same amount of property
Exactly, it is great for agents setting huge targets for sales in 2023, but as we saw with Purplebricks, it has gone from listing 60,000 properties to 40,000 in a year. Less inventory is coming on, so fewer sales. Preserving and nurturing the sales agents agree has to be an agent’s priority.
There is a lot of talk of upfront information, the resurrection of Home information packs, basically ways of getting all the data around a property ready in one place so that when a buyer comes, things can happen quickly.
Until the government mandates some type of change I think little will change so agents need to work with what we have, and the first way to speed a sale is to get good solicitors and conveyancers to act on their sales and build up great relationships with them.
The second thing agents need to do is to lock in both the vendor and the buyer and get them to instruct their conveyancer to act, ideally within two days.
The third thing, and remember that 28-week sale-to-completion timescale, agents can shave off five weeks of time by ensuring the buyer pays for and instructs for the searches to be done, this avoids buyer’s remorse and allows their conveyancer to actually raise some meaningful enquiries.
Agents are great at agreeing on sales, then once that sold board goes up things seem to slow down, agents can influence things greatly if they explain what buyers and vendors need to do, ensure searches are ordered day one, and the buyer, if they do not have a conveyancer, gets a competent one that the agency gets along with.
Looking back at that example of the average agent, if their usual fee was £3400, what difference would your approach make?
Well, 100 sales at £3,400 per sale is £340,000 of potential cashflow to the agent, take off 28% – the standard cancellation rate you get – and that amounts to £244,800. And it is taking seven months to convert the pipeline of instructions to cash.
If the agent is more in control of who is doing the conveyancing, the buyer is more committed and the vendor if buying on is guided by the agent to use a competent solicitor and all searches are applied immediately then the cancellation rate becomes 20% or less.
So the agent banks £272,000, or an extra £27,200 of fee from the same amount of sales, simply by changing the process around agreeing on a sale.
I know I am going to regret asking this Phil, but I assume you know all of this because it is the problem that you set out to solve?
Without trying to be too salesy, any agency can use my advice, but we built 4Corners Property as it is a one-stop solution for busy agents. Buyers who need to shop around for solicitors and so delay sales being instructed and get those all-important searches from day one.
Our 4Moving Pack can be accessed by estate agents on behalf of their clients. Plus, our easy quotation tool allows them to tap into our pool of trusted conveyancing solicitors at a local level and quickly generate a conveyancing quote for clients within hours of the offer being accepted. Also, local searches are immediately triggered and there are many business opportunities for trusted partners to work with other partners in their local area.
We are not reinventing the wheel, but it is like Uber – people want a car to get from A to B still. Although taxis used to do it, if the operation is replumbed everything works faster and more efficiently.
With that layer of technology we have built, things can be so much easier for agents while generating extra income.
Stay tuned for the third and final part of our interview with Phil Priest.
Andrew Stanton is the founder and CEO of Proptech-PR, a consultancy for Founders of Proptechs looking to grow and exit, using his influence from decades of industry experience. Separately he is a consultant to some of the biggest names in global real estate, advising on sales and acquisitions, market positioning, and operations. He is also the founder and editor of Proptech-X Proptech & Property News, where his insights, connections and detailed analysis and commentary on proptech and real estate are second to none.