Supermarket's estate agency move is set to change the game

The supermarket giant has teamed up with estate agent Spicerhaart to launch iSold.com, an amalgamation of a traditional estate agent and an online estate agent offering home-selling packages from 999. Tesco, which was forced to abandon a short-lived 199 DIY estate agency service in 2007, will promote the service to its customers and the operation will be run by Spicerhaart.

The service is currently available only in England, with the initial Bristol roll-out to be followed up in areas including London, Manchester and Birmingham. No service is being launched north of the Border yet, but that is likely to change.

A spokeswoman for Spicerhaart said that, while the company recognised that the differences in Scottish buying and selling model, it would look at launching in Scotland once it is established south of the Border.

The move followed a recent Office of Fair Trading (OFT) report calling for more competition in the estate agency market. The OFT wants the buying and selling market opened up to more new entrants, including supermarkets and the likes of Google, while it also urged sellers to negotiate more on estate agent charges. The iSold launch is the first sign that the OFT will get its wish and sellers stand to benefit if competition drives down prices.

Robert Carroll, solicitor and managing director of MOV8 Real Estate in Edinburgh, said: "It remains to be seen whether increased numbers of buyers in the marketplace will see the property market return to the way that it was a few years ago. However, if the cost of selling a property is deterring people from putting their property on the market then initiatives like this might just be what is needed to kick start the market back into life."

iSold promotes three packages with costs ranging between 999 and 1,299. The basic service pays for a visit from a local valuer, a For Sale sign and listings on property websites. Sellers will have responsibility for supervising viewings, although the extra services include open house viewings by a Spicerhaart estate agent and home information packs (the England and Wales version of home reports)

Yet iSold would struggle to penetrate the Scottish market, claimed Mark Hordern, head of marketing at Glasgow Solicitors Property Centre. The iSold website compares its costs to typical estate agent fees of between 1.5 per cent and 2 per cent. But 1.5 per cent is the upper end of the charge scale in Scotland, where most solicitors and estate agents charge a typical percentage fee of between 0.75 and 1.5 per cent of the sale price.

Hordern said: "iSold would find the market in Scotland more competitive, with fees lower than in the rest of the UK. It would have to benchmark prices at 0.75 per cent of the property value so the savings would not be that huge, and house prices are lower too, so a fee of 1 per cent would be cheaper than a fixed fee in some parts of Scotland."

The biggest savings are therefore on offer to sellers at the higher end of the market. At a fee of 0.75 per cent, a seller securing 100,000 for their property would pay 881 including VAT, while a 500,000 property would incur a charge of 4,406.

But Carroll said it was unfair that someone selling a 500,000 property had to pay five times as much as a seller with a 100,000 home.

"More expensive properties don't necessarily take more work to sell," said Carroll. "What differs is the additional services that property sellers request and more often people who are selling more expensive properties want additional services, such as custom-designed property particulars, accompanied viewings or floor plans."

Most Scottish firms already offering flat fees do so as part of a menu of charging options, with the charge decided on a client-by-client basis. For example, MOV8 Real Estate charges a fixed price of 600 including VAT for listing and selling a property. Extras such as floor plans, ESPC listings and printed schedules are added to the basic cost, if required.

Carroll said: "Many property sellers resent having to pay a solicitor/estate agent thousands of pounds for what they perceive as being little more than placing some adverts."

Hordern believes most sellers will continue to choose estate agents or solicitors on the basis of who can get the best deal for their most valuable asset, as long as the price is competitive. He added that around a third of home sellers choose estate agents on the basis of recommendations, while a quarter are influenced mainly by the individual they first meet.

But with Google rumoured to launching a free online estate agency initiative that may capitalise on its Streetview service, traditional solicitors/estate agents face a fresh challenge as buyers and sellers take advantage of new competition in the market.