With the real estate industry, it’s often all three.
Let me explain one by one.
(a) If it’s FREE, we are the product.
Think about the business model of radio stations. Or Facebook, as a more recent example. To attract us (as users) it’s free. We get to engage, post and play for nothing.
The platform (Facebook) then sell us – our attention and eyeballs – to paying advertisers. Making us their product.
Real estate portals are similar. Buyers can search and get information about every property for sale in the market. The advertisers (paying the portals) are the home-sellers and real estate agents wanting our attention. As a buyer, we are the product.
I’m not saying there is anything necessarily wrong with this model. With the likes of Facebook, we get value from the exchange. Just understand that it’s not free. Somebody else is funding it. Also, we pay the price of having our feed interrupted with clickbait and advertising (people trying to sell us stuff).
In life, if we don’t want to be ‘sold’ to – we have to pay.
Spotify, for example, disrupted the radio industry by giving us a choice. We can listen to music for free, but put up with advertising. Or pay for a subscription without the advertising.
It’s our choice.
Unlike a more deceptive example in real estate: So-called ‘Agent Finding Services’. If you want to sell, they offer to help you find “the best agent” in your area for FREE.
Of course, it’s not free, and you are not necessarily getting the best agent. They are selling you as a listing lead to whichever agent is prepared to pay them a large share of the commission you pay upon a sale.
The home-seller is the product (being sold to real agents). Which, by the way, contributes to (c) below.
(b) If it’s FREE, we are the target
Imagine a fish blissfully swimming about his day. As luck would have it, dangling front and centre is a juicy free worm…
We all know what happens next. The fish gets hooked and becomes dinner.
‘Free’ is often the bait to hook the target species.
When it comes to real estate, think about ‘Free Market Appraisals’. They’re the bait the salesperson is dangling – to get the chance to hook (sell) you on listing with them. The target species are home sellers.
Again, nothing necessarily wrong with this. Just understand that free bait = a sales pitch.
If we don’t want a pitch and would prefer professional advice – we need to pay.
Think of a Registered Valuer – they’re not there to sell us on them. Instead, we pay for an expert and unbiased professional opinion – without a hidden agenda.
(c) If it’s FREE, we are paying too much.
The classic in the retail industry is “36 months interest-free”. Or “Buy now and get a free set of steak knives”.
It’s not free. Someone has to fund it. The retailers don’t act as our bank out of the goodness of their heart. The cost of the finance or free steak knives must be loaded in somewhere – usually onto the product price.
But what if we don’t want the steak knives?
What if we don’t wish to pay extra for finance and would rather pay for the product up-front?
Often there’s no reduction in the purchase price. Meaning we’re paying more for the product than we need to.
In the real estate industry, this takes the form of contingent commissions – known as ‘No Sale – No Commission’.
Meaning: As a seller, we pay nothing unless we actually sell. In other words: we have no risk. The agent is offering to work and market our property for FREE: (If, for whatever reason, we ultimately choose not to sell).
In which case, agents lose massive amounts of effort and money working for some eventual non-sellers. Therefore, logically, the commissions from those who do sell must be loaded enough to offset the losses from those who don’t.
Effectively: Sellers are paying extra to subsidise the non-sellers, and therefore paying far more than they need to.
Yet again, there’s nothing necessarily wrong with this. It’s just a reality. Paying more than we need to is the price of any free goods and services.
But what if we don’t want to pay more than we need to?
What if we don’t want to subsidise work done for other people?
That’s the problem. Traditionally, our industry doesn’t give sellers a choice. Instead it’s the ‘one size fits all’ commission-only model.
At Restate, we thought it was time that changed. We believe the key to smarter decisions and superior outcomes is transparent choices. While a lack of choice keeps people stuck.
So, as well as the ‘No Sale – No Fee’ option, we also offer ‘Professional Service Fees’ – based on the actual work and outgoing costs needed just on each clients’ behalf.
They’re not paying extra to subsidise non-sellers. The easier their property sells – the less work needed on their behalf – the lower their selling fees. Enabling them to significantly reduce their selling costs – leaving more in their pocket.
There’s no right or wrong — just different strokes for different folks.
Take the free option and pay nothing unless you choose to sell. But you do so understanding you’ll pay a lot more than you need to when you do sell.
Or, engage your agent like you would any other professional, and pay substantially less for the work needed on your behalf.
It’s your choice.