Tesco goes into real estate – now that is a BIG play

By July 5, 2007Real estate

I read at the weekend that Tesco is going into the real estate market with a low cost service that aims to replace estate agents in the house selling process – turns out that this is not new news (this BBC article is dated May 17) – but if they can get it to work it is BIG news for the industry.

I posted a rant about the role of agents in the UK generally back in December – my general view is that they are a drag on innovation and I think that is particularly true in real estate.  For that reason alone I welcome this move from Tescos.

On a personal level I’d love to avoid paying estate agents commissions and whilst that has always been possible up to now it has always been a bit risky and time consuming for me.  This development might just change that.

I also like the disruptive nature of it, and the way, if successful, it will change the way houses are sold and marketed in the UK.  In particular it will be good news for property mashups (Nestoria, Extate, OnOneMap and Zoomf) as sites like these stand a good chance of becoming the place that people go to manage their search for a new house.  At the moment the role of estate agents makes that kind of difficult, but the more they are out of the loop the more you can control everything online.

There have been startups trying to get into this space for a while (e.g. PropertyBroker.co.uk), but none have made great headway.  I have put this down to the stranglehold that agents have on the value chain – I guess the hope is that Tesco will have the muscle to break in and take a decent share of the market.

The Tesco service will have a flat fee of £50 and guide you through the sale process – measuring up your house, putting up for sale boards etc. etc.

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  • With this major turnaround, a major setback could happen to many real estate sellers in your place. The same thing happens here in the Philippines where the big time investors carry out all the big time sales while the low profiled real estate agents compete at selling the low income properties selling schemes.

  • With this major turnaround, a major setback could happen to many real estate sellers in your place. The same thing happens here in the Philippines where the big time investors carry out all the big time sales while the low profiled real estate agents compete at selling the low income properties selling schemes.

  • Dom W

    If out of principle you object to paying conventional Estate Agency fees, you will find an alternative in virtually every town. The laws of competitions will dictate that there will always be a cut price EA charging 1% or less with a shop front and internet access. Coupled with a ‘no sale no fee’ policy, why bother paying possible lost money upfront and attempting to do it yourself?

  • Dom W

    If out of principle you object to paying conventional Estate Agency fees, you will find an alternative in virtually every town. The laws of competitions will dictate that there will always be a cut price EA charging 1% or less with a shop front and internet access. Coupled with a ‘no sale no fee’ policy, why bother paying possible lost money upfront and attempting to do it yourself?

  • Thats a good move from Tesco. I wonder how the companies in real estate will react? I assume they are preparing for when Tesco actually goes into this market.

  • Thats a good move from Tesco. I wonder how the companies in real estate will react? I assume they are preparing for when Tesco actually goes into this market.

  • nic

    Thanks for the comments guys.

    Dom – the £50-200 that Tesco charge is MUCH less than 1% on an average house of say £250k. There is considerable money to be made and saved here.

    Search Engine Cardiff – estate agents will either not react at all or they will learn to use the web better in order to maintain their position in the market. Either way the consumer wins – either by Tesco winning or estate agents upping their game.

  • nic

    Thanks for the comments guys.

    Dom – the £50-200 that Tesco charge is MUCH less than 1% on an average house of say £250k. There is considerable money to be made and saved here.

    Search Engine Cardiff – estate agents will either not react at all or they will learn to use the web better in order to maintain their position in the market. Either way the consumer wins – either by Tesco winning or estate agents upping their game.

  • Dom W

    Yes I agree but in all probability the agent would probably agree a £2k fee & only payable on completion or no fee at all. Whereas £200 is lost money with tesco’s if you don’t sell. I appreciate were looking at x 10 the amount but with this comes a more comprehesive service and the ability to pay out of sale proceeds. In the scheme of things 2k isn’t a big deal at such a stressful time of ones life. As an example, many people are currently paying this type of money in redemption fees simply to get a new fixed rate mortgage.

  • Dom W

    Yes I agree but in all probability the agent would probably agree a £2k fee & only payable on completion or no fee at all. Whereas £200 is lost money with tesco’s if you don’t sell. I appreciate were looking at x 10 the amount but with this comes a more comprehesive service and the ability to pay out of sale proceeds. In the scheme of things 2k isn’t a big deal at such a stressful time of ones life. As an example, many people are currently paying this type of money in redemption fees simply to get a new fixed rate mortgage.

  • Anything that gets rid of estate agents Nic is a brilliant thing but I do wonder if people are really THAT motivated to do the whole process themselves. It’ll come down to shear laziness.

    Going through the process myself right now and you would have to:

    -take good photos of the property
    -draw up the floor plans
    -get the property listed on as many search aggregators as possible (some only take ones through estate agents directly)
    -work out a value
    -take incoming calls from potential buyers and handle questions
    -set up viewings for the house
    -take people round the house
    -do follow up calls with them
    -manage the offer process
    -liaise with surveyors and solicitors

    This is on top of you doing all the things to find yourself a new home (viewings, calls, offers, dealing with sellers estate agents..)

    So all in all, my time is actually worth more than the £5k fees I’ll probably end up paying for 8-10 weeks work..

    Thoughts?

  • Anything that gets rid of estate agents Nic is a brilliant thing but I do wonder if people are really THAT motivated to do the whole process themselves. It’ll come down to shear laziness.

    Going through the process myself right now and you would have to:

    -take good photos of the property
    -draw up the floor plans
    -get the property listed on as many search aggregators as possible (some only take ones through estate agents directly)
    -work out a value
    -take incoming calls from potential buyers and handle questions
    -set up viewings for the house
    -take people round the house
    -do follow up calls with them
    -manage the offer process
    -liaise with surveyors and solicitors

    This is on top of you doing all the things to find yourself a new home (viewings, calls, offers, dealing with sellers estate agents..)

    So all in all, my time is actually worth more than the £5k fees I’ll probably end up paying for 8-10 weeks work..

    Thoughts?

  • nic

    Good point Phil. It will be quite a lot of hassle. I guess Tesco could have costed extras for the photos, floor plans, and property listings which would be easy for them in volume but painful for us as individuals.

    The other stuff needs to be done yourself. I’m never sure how much effort the estate agent is putting in though.

  • nic

    Good point Phil. It will be quite a lot of hassle. I guess Tesco could have costed extras for the photos, floor plans, and property listings which would be easy for them in volume but painful for us as individuals.

    The other stuff needs to be done yourself. I’m never sure how much effort the estate agent is putting in though.

  • If they are my estate agents – then the answer is very little 🙂

  • If they are my estate agents – then the answer is very little 🙂

  • These will really produce a major impact in the market.. Real estate agents will have major problem with this..

  • These will really produce a major impact in the market.. Real estate agents will have major problem with this..

  • The easiest way to capture more leads and at the same time segment your incoming leads by “hot button” personality types is to run multiple competing headlines, ads, or call-capture boxes. For example, if http://www.zillow.com you run “Sell your home for 17% more money by applying these 3 secret techniques – box 123″ and “The dirty trick that Scammed Seller

  • LOL thats great that Tesco goes into real estate

  • Yes,

    that’s nice to hear that Tesco goes into real estate –

    now that is a BIG play

  • I will be out of the office until November 1st. I will check email intermittently, but If you need to get hold of me urgently before then please call on 07990 567 993. thanks, Nic

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  • These will really produce a major impact in the market.

  • These will really produce a major impact in the market.

  • Thank you very much, I will certainly come back to visit often and definitely tell some of my internet-inclined friends to visit this site.