Emoov enters administration following merger as it fails to compete with rivals
Emoov went into administration this week just months after merging with Tepilo and Urban.co.uk to form the second largest online estate agent in the UK.
The merger in May 2018 saw Emoov valued at £100m with founder Russell Quirk claiming to have “a war-chest of £15m in new cash and media power”. But just six months later Quirk was on an ultimately fruitless search for a buyer for the company that, back in 2010 when it opened its virtual doors, he promised would disrupt the traditional estate agent model.
So, what went wrong?
John Charcol senior technical director Ray Boulger wasn’t surprised by Emoov’s demise. “One issue is that although all online agents have spent a lot of money on marketing, I don’t think any have made a profit yet,” he says. “But online agents with low fees have challenged the high street and driven down fees which is good for consumers.”
Typically, high street agents offer ‘no sale, no fee’ contracts while online agents charge a lower fee for a listing, whether a property sells or not. While this model might work when times are booming, it’s a different story in a slower market.
Buying agent Henry Pryor says: “Just 50 per cent of homes that are put on the market actually sell and whilst it’s never been clear whether so-called online agents have a better strike rate than their no-sale-no-fee high street cousins, there will always be some friction when home sellers find this out for themselves. In a difficult market it may be that no sale, no fee is actually more attractive for many sellers than a lower upfront fee when the chances of selling are the equivalent of tossing a coin.”
On Twitter, Emoov didn’t attract a great deal of sympathy from other estate agents with many immediately trying to sign up Emoov customers left in the lurch. Others criticised the business model.
Robert May, a Devon-based agent who plans to launch a property search platform next year, tweeted: “Estate agency can’t be disrupted by whacking property on the internet. Unless listing agents do what local agents do, every home they sell will be a forced sale and that means the price will most likely be lower than asking a local agent to achieve. The lesson is over now.”
However, London estate agent and former RICS chairman Jeremy Leaf was more pragmatic than many. He says: “I was surprised that Emoov has gone into administration. Emoov generated plenty of support from investors for a time but lacked sufficient marketing resources to build brand awareness nationally and compete with Purplebricks.
“Many mistakenly believe high street agents do not work very hard for their commission, especially when demand considerably exceeds supply for certain properties.
“A CEBR/Post Office report carried out in November revealed 50 per cent of sellers withdraw within three months, which would cost them nothing if listed with a traditional agent. Otherwise, they would have paid for a very expensive listing service, which is why 19 out of 20 sellers still put their faith in high street, rather than online, agents.”
Traditional estate agents have long questioned the online estate agent business model and Emoov isn’t the first digital agent to shut its doors this year. September saw Connells-owned Hatched close, with the parent company describing the online-only business model as “fundamentally flawed”.
Market leader Purplebricks, alongside HouseSimple, Yopa and some smaller online agents, are still in business, but online agents still only account for 6 or 7 per cent of market share.
But Arnold & Baldwin Chartered Surveyors managing director Joe Arnold points out that it’s not just online estate agents struggling – Countrywide, Foxtons and other traditional agents all have lower share prices than at the start of the year.
“With the low transactional levels, the marketing spend of main rivals PurpleBricks, and future potential regulation of estate agents, the landscape moving into 2019 looks as though it may favour the traditional model of agency, cleaned up by government reforms of the house buying and selling process,” he says.
“But, this is all underpinned by a low transactional market. Once Brexit is sorted and we move back towards business as usual perhaps the future for both traditional and online agents will be stronger.
“Hybrid is likely to be the best method. Top-notch estate agents and proptech combining to offer a great service to consumers.”