Pay Upfront, Pay Twice – Online Agency


Fly to Marseille for £2.99 – I suspect that I’m not the only person that has been suckered into a slick, headline deal offering something that rarely reflects reality. The trusted service industry works largely on a model whereby a customer pays for a service once it has been delivered. Many of the new online agents take lump payment upfront in return for offering a ‘saving’, but does this really represent value for money?

It is reassuring to know that when we employ professionals to undertake large transactions or works, they are confident enough in their skills that they will accept payment once the job has been completed. This approach applies across a range of industries and trades including your solicitor, architect, accountant, builder and plumber. If for any reason the service delivered does not meet expectations, the price paid can be renegotiated… although generally because these professionals pride themselves on the quality of their service, this is rarely required.

Nowhere is this mechanism more important than in the sales industry, where financial incentives, targets and commission pay a significant role in motivating sales people to deliver.  It would seem perverse therefore to agree to pay a sales person or estate agent to sell a property upfront when there is no guarantee or indeed incentive for them to follow-through on this promise once they have received payment. Analysts at global investment bank Jefferies agree and commented on this model, “With no reward for actually selling a home, all eyes are focused on winning instructions”.

With a significant proportion of vendors choosing to switch estate agents and around 36% of sales agreed falling through prior to completion, the case for paying up-front fees would appear ill conceived.

Huge national marketing budgets have been spent on prime-time television and print media campaigns, but underlying it all is an uncomfortable truth. Whilst a vendor’s financial interests and those of a traditional estate agent remain aligned throughout the sales process, the same cannot be said for agents where upfront payments are required.

A similar model focusing exclusively on headline budget fees has been used before in the airline industry.  Of course the reality is almost always different and the public are now wise to these marketing tactics.

In recent months we have had a number of vendors approach us to discuss remarketing their properties originally listed through ‘budget’ online agents. In the most recent instance a property had been listed for almost 5 months before we agreed a sale within 72 hours of marketing.