Estate agent
Introduction
So you've decided you want to run an estate agency business. Maybe you want to turn an interest in property into a commercial enterprise, or perhaps you've been working in someone else's property business for a while and feel the time is right to go it alone. Whatever the reason, this guide will take you through the issues you need to consider and give you practical pointers on getting started.
Sector trends
For many years estate agency suffered from a dubious reputation, brought about by the activities of a minority of unscrupulous 'cowboys'. Things came to a head during the 'boom' that happened at the end of the 1980s and legislation - the Property Misdescriptions Act - was introduced in 1991 to prevent estate agents from making outlandish claims about the properties that they sell.
The situation was improved further with the launch of the Ombudsman for Estate Agents scheme (now the Property Ombudsman) in 1998. Although only voluntary, it offers peace of mind and a means of redress to people who use a participating agent. Nevertheless, the Office of Fair Trading was prompted to investigate the profession in 2002.
The mid and late 2000s saw the introduction of new and tougher powers to regulate estate agents, including a requirement for most of them to belong to an approved redress scheme.
The OFT took another look at the estate agency sector in 2009 and concluded that, while competition in the market was weak, the industry was in the main adequately regulated. However, it did suggest that certain aspects of the law, including rules to cover commission payments from financial services providers, could be tightened up to protect consumers.
The growth of the Internet has been a particularly exciting event for the estate agency sector. A number of specialist property sites now exist, while many existing agents have launched their own online property services. Initially it was thought that the Internet might eventually 'cut out the middle man' and put estate agents out of business - but it now seems more likely to continue to be a powerful marketing tool rather than a threat. Nevertheless, 'DIY' house sales are gradually on the up, with most of them involving the internet in some way - often a website specially designed to accommodate DIY property sellers.
Turbulent market conditions during the late 2000s prompted many estate agents to take a fresh look at the way they operate. Some scrapped their commission charges in favour of a flat fee, while others set up 'matchmaking' schemes to help property owners swap homes. Many looked closely at their costs, with some moving away from expensive property marketing websites and others working as 'virtual' agencies with no offices. Some estate agents moved into the residential lettings market.
The leading industry body for estate agents is the National Association of Estate Agents. The Association's website contains a wealth of information for both homebuyers and estate agents.
1.1 The property market
The 1980s and most of the 1990s saw two decades of 'boom then bust' cycles in the property market. The late 1990s and early 2000s saw greater stability in both house prices and demand. However, the price inflation of the early 2000s proved unsustainable and the market experienced a very sharp downturn in 2008. Things were little better during most of 2009, although there were small improvements in some areas. Although 2010 saw a bit of brightness in the market, the economy stayed very weak and the housing market saw nothing resembling a recovery. Obviously this has hit estate agents throughout the country very hard. The prospects for the housing market don't currently look very bright.
Issues like 'gazumping', the number of sales falling through and the slow speed of transactions have long been concerns. In 2000 the government announced its intention to reform the house buying process and, after years of pilot schemes and heated debate - settled on compulsory home information packs (HIPs) as an answer to the problems. The idea wasn't very popular with the industry though, and HIPs were watered down before they were even launched - when the home condition report (HCR) was made optional - and then at the last minute they were postponed for several months. In what many described as a fiasco, mandatory HIPs were finally introduced in August 2007 - but only for houses with four bedrooms or more. September 2007 saw HIPs introduced for three bedroom houses, and the requirement was finally introduced for all homes in in England and Wales mid December 2007. Even so, it was April 2009 before the scheme was fully implemented and home owners had to get a HIP ready before they put their property on the market.
However, the then newly-elected coalition government scrapped HIPs with immediate effect in May 2010, keeping only the energy performance certificate as a requirement for domestic property sellers. While most estate agents welcomed this move - even though it did away with a potential source of extra income - the HIP provider industry was effectively wiped out.
