With the continuing popularity of reality TV property programs, the media portrayal of the financial opportunities the sale of property offers and the general excitement that the property industry seems to create in people, this is leading some to consider entering the apparently interesting and lucrative world of property by opening their own estate agency.
But is opening your own agency really a good idea?
If you are thinking of starting any business, there will always be an element of risk. When considering opening an estate agency, you need to be realistic about both the opportunities and the limitations the property industry offers.
When considering starting any business that you are new to, thorough research is vital. However you don’t even need to do any research to realise that the housing market remains unpredictable. You will need to be prepared to contend with fluctuating house prices which will directly affect the volume of sales you could hope to achieve. Not only this, but estate agencies typically experience busy and quiet periods throughout the year. The spring and summer months tend to be their busiest period, with school holidays, the winter and particularly December and January generally very quiet periods with fewer buyers/sellers.
During the busy periods, turnover can be very good but expect to work for your money. Due to the limited availability of most buyers and home owners who work during the week, hours tend to be long with frequent evening and weekend work required by agency staff. Fortunately, since you will be involved in appraising properties, conducting viewings, communicating with members of the public and negotiating sales the work is interesting and varied which goes some ways to make up for the long hours.
When considering opening an agency, you need to see if you can identify a suitable area. Ideally, situating an agency close to a residential area will work best as there is an existing customer base, and where property sells quickly and for top prices.
However, almost all the best locations will already have existing estate agents. If you choose to situate an agency here, you will need to keep in mind that you would be setting yourself up against more experienced competition. Buyers are less picky about who they buy through, if they see a house that they are interested in then chances are they will go and view it, regardless of who is marketing it. After all, they don’t pay your commission, the seller does. Sellers however tend to go with who and what they know This frequently means that they will go with the agent that they are most familiar with. They presume that an established agent will have more experience and the local knowledge required to get them a sale.
If you were considering opening an agency in an area with competition, you would need to prepare a strong business strategy that would help you break into the market. This may mean offering lower commission than your competitors, to help encourage sellers to list their property with you. Even then, getting the first listings would be difficult as you would be starting from scratch and relying on sellers willing to trust you with one of their most valuable assets, their home. If you needed to lower your commission to get properties on your books, this would mean that any profit you could hope to achieve when starting the business would be minimal. Only once your agency was established could you begin to gradually increase your fees in line with other local agents.
One way to try and combat the need to reduce your commission (your profit) when you start out would be to see if you could identify an area that only has one or two existing estate agents rather than dozens. Since it is common for sellers to invite two or three agents out to value their properties before selecting one, this would greatly increase your chances of being invited to do this. If you could impress at the appointment, you may find yourself winning instructions without needing to so drastically slash your prices.
Depending on the area of the country, there is no question that estate agencies can be a most lucrative business. If you are considering starting your own agency, you need to be prepared to work hard. The hours are often long and unsociable and there will be quiet periods where you may find it difficult to sell. You will also need to understand that unless you are very lucky, like any business, the initial return the business makes in the first few years may be minimal. However, should you be prepared to put the work in and ride out the low points opening an estate agency can be a very rewarding and profitable business.