When Estate Agent Targets are the Wrong Targets

Usually when BBC Panorama declare a major expose and in this instance on the estate agency sector, those in the industry start to squirm. However not on this occasion.

What unfolded was that Connells were found to be conditionally selling products to buyers and Purplebricks were overvaluing properties in order to win business, but then incentivising staff to get guide prices reduced. The remainder of the estate agency industry shrugged their shoulders and carried on, as we’ve all known these dubious practices have been happening for years. However this raises further questions about how some estate agents are being run and managed.

Conditional Selling

Firstly let’s tackle conditional selling. This is where Connells were pushing buyers to take their in-house mortgage or legal services, which they would make money on the back of. As a result, they would endorse to greater effect, buyers who used their services and sidelined buyers who were not, even if they offered more money. This resulted in vendors potentially losing out on better offers.

Overvaluing

The next issue was overvaluing. This practice is arguably more commonplace, as agents vie to get an owners instructions to sell, by granting them the stars. However the next step by Purplebricks was more dubious, as they then directly incentivised staff to get the guide price down with the owner having secured the business.

Whose best interests?

Aside from breaking various codes of conduct and the law, practices by these firms are unethical, lack moral fibre, but most importantly do not looking in their clients’ best interests, which is what estate agency is all about. However I do not blame the individual frontline estate agents, as they were only following orders from on high. They were simply the result of estate agency businesses being too focussed on targets and key performance indicators (KPI’s).

Targets

When you introduce a business target to highly motivated sales agents, they will push the whole way to make it happen. However this then means that you are often no longer looking in client best interests nor motivated to do so, as your office and personal targets take precedence, especially when there is a financial incentive involved. The other issue is that when your estate agency brand offers a cheap service, they have to make up the shortfall in figures elsewhere – what exactly did people expect?

How can it be done?

For example, Purplebricks offer to sell your home for free. They make up this deficit by getting money from buyers and sellers for using a range of in-house services linked to mortgages, conveyancing, energy suppliers and even comparing broadband deals. So Purplebricks are less of an estate agency and more of a financial referral operator, but often at the expense of the public.

The Connells Group is the largest estate agency in the UK and everything an individual estate agent does is closely monitored by those in head office who read spreadsheets all day. No better example of how estate agents get it wrong is when Alison Platt became CEO of Countrywide Group in 2014.

She bombed the share price to an all time low, because she wanted to make estate agency more retail. But it’s not and never will be. The group then collapsed and was purchased by Connells Group.

Risky measure

I feel that targets are a very hazardous route in estate agency, primarily because so many factors are beyond an individual estate agents’ control. Solicitors, surveyors, lenders, councils and chains to name the key ones. Sometimes you are unable to short circuit these, as you are relying on third parties. Trying to then push for a target that is equally unrealistic from the outset, will only lead to figures (financial incentives in this instance) getting skewed.

Estate agency is a people business and we deal in emotions, not spreadsheets. However I would like to thank Connells Group and Purplebricks for making the rest of us look so good.