Imagine you receive a knock at your door from a local plumber looking for work. You happen you have a blocked drain so engage him to fix it. He spends approximately 1 hour on the job. A week later you receive an invoice for plumbing services totalling 5 hours work. In confusion you call the plumber and ask what the extra 4 hours were for? To which they reply…
“Well we had to knock on doors for 3 hours before we found you. Plus we did 1 hours work for your neighbour last month who didn’t pay us – so we added that to your bill also”
You wouldn’t accept that from your plumber – or any other service provider for that matter (Builder, Doctor, Painter, Solicitor, Accountant, Graphic Designer, etc, etc ). Yet this is exactly what is happening with the traditional real estate industry.
Several years ago in this article Alistair Helm, a respected real estate industry commentator showed that…
“Real estate agents spend over 64% of their working week prospecting for business”
Just to be clear, “Prospecting for business,” does not mean looking for buyers to buy your property, it means looking for and persuading sellers (like you), to sell your property.
Alistair continued …
“The productive time spent on behalf of their clients in facilitating the sale of a house represents less than 25% of their working week. Yet their income from sellers supports their full working week”
So when you think about it … with the traditional real estate model you (as a seller) are effectively paying to support the industry, to spend the majority of it’s time and resources – convincing you to sell.
How do you feel about that? Why should you pay for the time and resources this industry spends trying to find you?
The industry also supports far more salespeople than is needed.
As Alistair also pointed out…
“There are just too many agents tripping over each other, fighting one another, stabbing each other in the back to get a listing and from there to conclude a sale and ultimately earn a commission.”
Have a look just at our local market here in Timaru. There are currently around 59 active salespeople chasing an average of approx 50 sales per month. How can that be? Surely it doesn’t take 59 real estate agents to facilitate 50 transactions? No it doesn’t. However, because the traditional commissions are so high, 59 agents can survive on only 50 sales.
The real estate industry perpetuates this problem by continuing to recruit and build large teams of commission-only agents. Why? Because the path to market share under the traditional industry business model, is what many call “bums on seats”… Take on as many commission-only salespeople as possible… the more salespeople you have running around the bigger market share you will have. It’s not about becoming more efficient or doing a better job for their clients… it’s about being seen as the biggest. Alistair put it this way…
“The Industry… want the inefficiency, they want to have agents fighting each other for listings … The industry protects the model and the consumer pays – heavily”
‘Sellers’ subsidise the work done for ‘non sellers’.
Traditional real estate fees are contingency based. This means that sellers only pay a commission if they choose to actually sell. However, it also means that when you do sell, you have to pay considerably more than the true cost involved in selling just your property. The commission on your sale needs to be high enough to offset the time, effort and money the industry spends working for other people, who then choose not to sell, and therefore pay nothing.
In a nutshell, if you are a genuine seller that presents your property well, prices it realistically and sell relatively easily… that full commisson you pay is effectively subsidising the clients who take a long time to accept the market or choose not to sell at all.
So what is the solution?
At Restate we have developed an entirely new approach. One that is based on a client focussed service culture intead of the traditional self interested ‘commission-only’ sales culture.
One where you only pay for the work done on your behalf, instead of subsidising the industry and other clients for work totally unrelated to your sale.
One that is focussed on being more efficient for our clients intead of increasing our profile.
One that seeks to maximise your profit, by using proven strategies to increase your selling price and reduce your costs.
The benefits are proving to be significant… to date our clients (on average) are banking an extra $4,900 – profit compared to what they would have using the traditional industry approach.