As we welcome feedback, engagement and open discussion around Changing Real Estate, I was excited to receive an excellent comment on our opening article from an experienced agent struggling to see the advantages of what we are doing.
It was an opportunity to give readers further insight into our thinking, so I enthusiastically dived into writing her a reply. However, it was simply too long to fit into the comments section. She has graciously agreed for her comments and my reply to be posted as a new article – thank you.
“I fail to see your reasoning around commission rates Carl. In Auckland, people are sometimes making $100,000 to $200,000 more than their expected price and reserve by exposing their property to the market via the auction process. I doubt they will be too concerned about the commission they pay.
With the REAA, agents are absolutely answerable as attested to by huge fines some get landed with – sometimes at the whim of a disgruntled client using the REAA vindictively. Agents pay huge fees in REAA licensing, ACC levies, compulsory on-going training, petrol, cell phone, computers….We are one of the only professions who work completely at our own cost (free to the client) until we get a result – or not.
Also if a client needs advice about valuation they can pay to get a registered valuation. I fail to see how your service offers anything advantageous. In my experience, schemes like yours don’t work as you don’t have the manpower to offer the client the wide market exposure they need to get top dollar for their property. They may save in commission – but lose on the price they receive so actually disadvantage themselves. No offense intended.”
No offence taken and thanks for your input.
As you say, we are one of the only professions (Not sure we can truly call ourselves a “Profession” yet – but thats a different discussion) who work completely at our own cost (risk). And that is exactly why commissions need to be so high. The client only pays a fee if they achieve their desired result. So you (the agent) takes all the risk of working without any guarantee of being paid.
It is basic economics… High Risk demands High Return
It appears that you have been in real estate for some time, so you will know that as a quality agent, you can definitely affect the outcome and get a better result than a poor agent… you can do a great job, excellent marketing, be a highly skilled negotiator and get your client the best possible offer from the market.
However, you cannot control the outcome, the client ultimately decides if they will accept the best current market price and therefore sell or not.
You will have had plenty of clients over the years, where you have worked long and hard, spent time and money (marketing, petrol, etc etc) and for what ever reason they have decided not to sell at the end of the day. For those clients you lost time, effort and money for no return. Other clients will have been easy to deal with and sold relatively quickly… you need their fees to be high in order to offset the other clients you lost on. The easy sales effectively subsidise the time effort and money you spend on other clients who don’t sell. Im not saying it’s right or wrong – just simply thats the way the model works.
Now, take your real estate agents hat off for a moment and think like a genuine home seller. You have your property well presented, you are realistic in your price expectations, are definitely selling and are prepared to accept what the market will pay. Your property will most likely sell relatively quickly and easily.
Why should you pay a high fee to subsidise the industry for all the work they do for other clients who pay nothing?
If there was an alternative model that was more efficient, did not compromise on quality of service, your marketing and exposure were exactly the same, your sale price was still the absolute highest possible, yet your fee was considerably reduced… would you want to know about it? Would you at least want the ability to choose which model you believe was best for you?
If you were one of those sellers in Auckland you mentioned, would you be concerned about paying an extra $10,000 in fees that you really didn’t need to? Surely you would rather keep that in your pocket?
That’s where we are coming from. We are simply giving clients transparent choices rather than the ‘one way fits all’ mentality of our traditional industry.
I believe your final comment regarding a “scheme” relates to agents who try to discount the existing traditional model. Yes, I agree whole heartedly, they often don’t work, have to compromise on quality of service and price achieved for the client, and usually go broke.
What we are doing however is not a discount on the traditional model, it is a fundamentally different model. In fact we (as agents) are no worse off. So it’s a win / win for us and the client.
Regarding quality of service, our new model is actually statistically out performing the traditional model hands down. Our list to sell ratio is higher, our clients sale prices achieved are higher than the rest of the industry in our area, our average time on market is considerably lower, and our clients average savings in fees is around $5000. Most importantly, our testimonial and satisfaction rate from clients under the new model is over 95%. If there is another real estate model in New Zealand that has better KPI’s than that, I’d love to meet them.
Again thanks for your input and opportunity to explain further.