Is Brightsale 'outside the box'?

I hate that phrase. It was used far too often when I worked at previous estate agencies. The new advertising campaign was always 'outside the box', the viewers were always told to think 'outside the box' if there was something that my negotiators blatantly knew was to their dissatisfaction. All in all it became really annoying. Ironically I sit here now nearly a month into my new position realising that I am now genuinely working, thinking and acting 'outside the box'.

Brightsale is an estate agent, it does everything an agent does and yet charges in some cases a quarter of the fee.

Having sat at the desk of a flagship estate agency knowing that my first £100k's worth of fees were just paying the rent, let alone the five negotiators and their continuous bumps in sign written cars that annoyed everyone and also lost that anonymity, that personal service the public desire from someone selling their home. Whilst sat there at that desk in 2007, the realisation dawned on me that hardly anyone came into estate agents anymore, so why did we need this big flash 'starship enterprise' looking office? The public aren't keen on estate agents, fullstop. A house in the window (along with dead flies and an out of focus plasma screen) is spotted by a couple walking past and yet neither of them want to go in, knowing that they will be pounced on by a pack of wolves all commission hungry as if a pound coin coloured full moon were out. Instead they walk back to the comfort of their home and use the internet.

Thats where we come in. Call it 'outside the box' if you will, but instruct us to sell your property and we will advertise it at 0.5% and with no sole agency tie in period. We will appeal to all those estate agent haters and yet carry out the very same job with emphasis put on contacting you with regular updates, figures and statistics for how your property is performing. Viewers will be vetted to weed out timewasters and once an offer is placed the potential purchaser will be financially qualified also. Once a sale is agreed we have experienced sales progressors who will ensure that your property isn't just added to a 'pipeline' of sales going through that are left to boil. (Interesting fact, the average estate agent works out their branch performance by assuming a third of its sales will fall through. IT IS EXPECTED!)

Foxtons’ Class War

Not only are Foxtons in hot water with the OFT with regard to their rental contracts - which the OFT claim can lead to unsuspecting landlords owing Foxtons significant amounts of money far into the length of a contract - but big F are now being targeted by the far left pressure group ‘Class War’.

We understand that Foxtons’ Islington branch on Upper Street is to be the subject of a ‘Class War’ demonstration on Saturday 3rd of March. We are particularly amused by the way Class War are trying to promote attendance at the ‘demo’ – namely by sending out bogus property requests via the www.email4property.com website! Given the general lack of buyers in Foxtons’ traditional haunts of West London we imagine they would have initially been delighted to receive an enquiry.

But unfortunately where the email requests ‘number of bedrooms required?’ the class warriors have written that Foxtons are “the greatest con-men of our time”. If Jon Hunt were still at the helm of Foxtons (he sold his firm to unsuspecting private equity buyers just before the crash in traditional estate agency), we wonder whether he would have taken that as a compliment. Getting vendors to continue to pay 3% fees when high quality online alternatives such as BrightSale offer the same service for 0.5% might not be a ‘con’, but it is certainly is an amazing feat of sales. But in the long run we think that high cost agents like Foxtons will lose the class war with online agencies.

And then perhaps the enemies of capitalism will come looking for BrightSale instead … yet another reason why a bricks and mortar branch network might not be such a good idea in the future!

What is the Smart Money REALLY Telling us about Future UK House Prices?

One of the less desirable aspects of the recent bull market in UK property is the rise of the ‘property expert’. These self-appointed oracles do not have good track records predicting market movements. Almost all of them underestimated the strength of the market during the upswing, predicting a ‘flattening’ of the market year after year.

So what are the ‘property experts’ saying now? Well considering that their impact (and hence market value) is rather less in a bear market than it has been recently, it is not surprising that they are much less bearish than many individuals! The general consensus at the moment is for a period of stagnation in house price inflation at worst. Fionnuala Earley, Nationwide's chief economist, is predicting that growth will drop to 0% by the end of this year. Likewise Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors (RICS), is predicted zero per cent growth for 2008. The pundits on the talk show sofas are generally pushing the same message. A ‘flattening’ but no outright declines.

But what is very striking is that as you get closer to the ‘smart money’ you find a more bearish picture emerging. Goldman Sachs predicts a fall of 5% in prices in 2008 and a further 2% in 2009. And these were the guys betting against US sub prime mortgages before most.

When people really have to put their money where their mouth is, the picture looks even bleaker. There is now a blossoming market in property ‘derivatives’ traded by professional investors. They speculate on the future price of the Halifax Property Index (HPI). The prices they predict make disturbing reading. As of January 2008, they predicted a general price decline of at least 9% over the next year, increasing to 11% over three years. Amazingly, in 5 years time, the market predicts that UK residential property will still be 11% below where it is today. If we assume (very conservatively) retail price inflation of 2% a year that means that UK property will fall by more than 20% in real terms over five years.

These prices can be followed at DTZ’s website in their monthly newsletters.

How can such negative predictions be squared with the prognostications of the ‘experts’? The real answer is that they can’t. There is an old saying that ‘talk is cheap’. Property experts don’t want to be turkeys voting for Christmas, and so they are desperately exhorting people, a la Corporal Jones, not to ‘panic’. But the reality is that none of these commentators are actually betting on it! And those that are, are betting on a pretty bumpy ride for quite some time.

Gazundering - The Purchasers Revenge?

After years of climbing prices and vendors having the upper hand, the mortgage application figures show that the shoe is now firmly on the other foot. Finally, a buyers market....

However, this does pose its own inherent problems. Whereas in a rising market the vendor could ruthlessly raise his price towards the end of the conveyancing process, siting more interest and the fact that the conveyancing had taken four months in which time the price had risen by 10%. Now we are faced with the exact opposite.

The front page of every recession hungry tabloid is laden with doom and gloom stories and purchasers are now using this to their advantage. The difference being however that with Gazumping, the public were somewhat protected. If the purchaser was requiring a mortgage then the lender involved would send a surveyor to the property to give it a value, thus ensuring that even in a rising market the purchaser would not pay 'over the odds' as the lender themselves wouldn't lend the higher amount. With
Gazundering though there is no failsafe for the vendor, the only protection they have is the strength of their agents ability, not only to keep the current purchasers desire high but also to progress the sale swiftly and with professionalism.

Getting in at the bottom

As interested observers of the carnage at Humberts we applaud the choice of the former finance director of Countrywide to be the new CEO (Mr Michael Nower). Following the ill-considered spending spree of the previous management team, he inherits a top heavy business full of high street agents with legacy cash payments still owing on many of the purchases. So Mr Nower clearly has his work cut out.

But we must not forget that Mr Nower was part of the team that sold Countrywide to the private equity firm Apollo right at the top of the marketin March 2007 for the princely sum of £1 billion. Given that Savills stockprice has fallen by more than 55 per cent between then and now, Mr Nower andhis colleagues probably saved at least £500 million for their shareholders at Apollo's expense. Respect due, although don’t forget that the Countrywide management team did also try an MBO before the sale which was (fortunately for them) rejected by shareholders.

Having demonstrated his ability to sell at the top, Mr Nower clearly believes he is getting into Humberts at the bottom - as he is reportedly being paid only in Humberts shares (which is pretty much all that is left right now. But whilst flipping Countrywide at a fat price to a US private equity fund presumably ignorant of the brutality of British property cycles is one thing, turning around a company with a fundamentally flawed business model is something very different.

We will monitor the patient with great interest.

What is going to happen to Tesco and Rightmove?

We read this week that Tesco is planning to revisit the estate agency space in March with a relaunch of the ‘Tesco Property Market’. Readers of our blog will remember Tesco’s very ill-fated first forey into the space with a pure ‘sell it yourself’ offering in July of 2007. After traditional agents rose as one to protest, Tesco quickly dropped the plan – although not after having so badly damaged the reputation of Fish4Homes that this blog believes that Fish4 may now be holed below the water line. Our understanding of the new Tesco venture is that it will be based around individuals located in Tesco stores, providing some personal interaction with a website behind (rather like the TrailFinders in Selfridges in London - except rather less grand!).

So far so much better than what they tried before. But the venture still has some serious difficulties. Clearly the greatest of these is access to portals. It still seems very unlikely that RightMove will allow listings from the new Tesco platform, despite Tesco’s sabre rattling about taking legal action against RightMove (which seems to have gone rather quiet). If so, then the other ‘traditional’ portals will follow suit. So this makes Globrix (www.globrix.com) a potential kingmaker in the future evolution of the market. We firmly believe that Globrix is likely to gain serious market share quickly as soon as it is released from beta testing and feels the full benefit of the News Corp. marketing budget. Although Globrix listings are ‘indexed’ from the web we are uncertain whether or not they will display Tesco’s listings. Our understanding is that at the moment Globrix is leaning against allowing Tesco listings, again for fear of generating bad will amongst traditional agents. In all honesty, we wonder why they are so worried, given that traditional (and online) agents simply cannot wait to have a high quality alternative to RightMove et al which is funded from advertising and not their stretched marketing budgets. But it does seem that Globrix have the power to make or break the new Tesco venture – and what they decide may have serious ramifications for years to come

A bright start to the new year

Today we welcomed our new National Sales Director Jason Cheeseman (16 years estate agency experience) to our team and opened our Southern UK HQ in Chertsey in Surrey. We are more and more confident that 2008 is going to be a breakthrough year for online estate agencies, and we are investing accordingly (we will shortly be making an announcement about additional venture capital funding for BrightSale).

The house price recession is going to hit traditional agencies hard. Through the good years, much like Gordon Brown, they did not husband their resources and now they find themselves with bloated cost structures and inefficient business models. Your Move has announced a significant number of branch closures and Humberts appears to be teetering on the edge of bankruptcy (although the stock has ‘rallied’ to almost 13p today!). We are going to read a lot more stories like these over the course of 2008.

The future in estate agency belongs to those who can provide a great service to customers at a price which represents good value. It is very difficult for many traditional agencies to do that given their reliance on high street branches that no one uses, logoed cars which alienate customers, and commission hungry sales people who often lack experience and training. BrightSale is an alternative, and having worked and invested quietly and diligently over the past 12 months we are now going to push hard to claim a much greater share of a market that has not served the British public well for far too many years.

2008 is going to be a bright year.