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Tuesday Jun 27, 2017

The metamorphosis of the estate agency

Traditional real estate agents are under fire from every angle: attorneys selling property; real estate start-ups helping you save traditional estate agent costs by offering a 1.5% commission rate; website and mobile apps that seek to connect landlords and tenants to an auction mechanism for rentals; fast-moving technology.

But estate agencies say they have stood the test of time and will continue to do so "as long as we continue to evolve and innovate our offerings, both to our clients and our agents".

One of the biggest challenges traditional agencies face - disruptors who have come onto the market offering huge savings to the consumer as far as commissions go - anything from zero to 1.5% as opposed to estate agencies' commissions of up to 7.5% - often cutting out the estate agent.

Ted Frazer, national marketing manager for Seeff, says: "The rate of technological advancement, the 'internet of things', has had and is having, a profound impact on the real estate industry."

He says any estate agency looking to remain competitive and relevant must embrace innovation and "ensure they continue to move at the technological pace demanded by its customers, if not slightly ahead of it".

Globally, over the past decade, the real estate category has seen online property portals become the dominant search destinations of choice for property buyers, practically eclipsing newspapers, which were previously preferred destination for buyers.

Disruptive technology, says Frazer, is leading to the emergence of new online platforms that look to significantly reduce the role and fees, of the traditional real estate agent.

Some platforms are looking to disintermediate the agent altogether ("FSBO" sites - "For Sale By Owner" - that allow home- sellers and buyers to engage and transact directly).

In South Africa, we have seen many emerging players - PropertyFox, JVP Properties, LeadHome, Homebid, Steeple, Shareprop, to name a few - "all of who offer the promise of low to no commissions and reduced agent involvement, substituted with greater online efficiency".

"It is clear that today's customer is more tech-savvy, and will naturally look to engage with brands that are similarly aligned in terms of being technologically agile," says Frazer

"However, locally and internationally, it is equally clear the majority of consumers still prefer to deal through an experienced estate agency brand and agent when looking to engage with the category.

"Locally, this new breed of estate agency may be gaining presence, but look at the number of listings on their websites to see, at this stage, they are still in their infancy.

"This may also point to the nature and culture of the southern African market, which is clearly still strongly favouring the established, traditional estate agency model."

Dr Andrew Golding, chief executive of the Pam Golding Property group, agrees, saying as yet "there are no proven successful non- traditional models".

He says: "It is common cause that newer low- cost ' non- agent' and technology driven models rely on volume and scale for success (namely a more consistent and higher level of service than what has traditionally been offered.

"Selling one's home still requires professional support. We simply argue that it can be done better and for less," says James, adding the new kid on the block has expert negotiating and legal skills available to users via its #Offersdesk headed by a lawyer.

"With our model we have experienced mutual trust, with buyers and sellers often being the reason for homes selling and fair negotiations taking place."

Meyer de Waal, of MDW INC, a conveyancing attorney selling real estate who has also been instrumental in starting a hub for other attorneys doing the same, believes the 5% to 8% commission that estate agents charge could be reviewed and reduced.

"Modern technology can enable an estate agent to work smarter and be more cost efficient. One of the main reasons they have to ask for such high commissions is that their conversion rate in comparison to the time they spend to sell a property to an actual sale, is low.

"Modern property tech tools, such as an online home loan indicator, as well as virtual reality tours, are all available to enable an estate agent to work more efficiently, spend less time on fruitless viewings and homebuyers who may not qualify for a home loan, or may not be interested in the property after proper viewing.

"I believe one of the key elements that remains is the involvement of a person with the required skill to facilitate the closing of a property deal between the two parties.

"The seller and buyer must also raise this question if such services are available when dealing with a low-cost selling agency, or will they be left on their own, as in a DIY concept.

"An attorney appointed by the parties is most likely to be a solution to assist with the drafting of the sale agreement and final negotiations."

  • Old-school commissions: What you get

    An estate agent's commission averages between 5% and 8% of the sales price, and many sellers question having to pay for a service they don't quite understand.

    "An estate agent is not just an area expert in terms of the local property market. They're au fait with all financial and legal transactions inherent in a property sale, are professional negotiators and, occasionally, they are mediators who guide both buyer and seller through one of the largest financial investments they'll make," says Steven van Rooyen, principal of Leapfrog Property Group Sunset Links.

    Kevin Wearing, principal of Leapfrog Property Group Gordons Bay, explains: "I work for 7.5%. For that, you'll get the benefit of my knowledge, experience, database and marketing infrastructure.

    "I bear the cost and risk if the property doesn't sell. If I don't sell in the time frame stipulated by my sole mandate, the owner can give the contract to someone else, so the expense and risk does lie with me, not the seller. If I sell the property, I've earned my commission."

  • Traditional way of doing things

    An estate agent's job is multifaceted, says Steve van Rooyen, principal of Leapfrog Property Group Sunset Links.

    "They evaluate properties to ascertain a reasonable sales price. They can only do this if they're knowledgeable about the area, houses prices, buyer demand and so forth," he says.

    "They then take on all the risk and cost to market the property on online portals, in newspapers, on social media and with brochures.

    "Agents also conduct showhouses, work from a database of qualified buyers looking in the price range and area of the property, and ensure that interested buyers can actually afford the property.

    "Once a willing and able buyer is procured, the negotiation starts between buyer and seller via the agent to make an offer on terms and conditions acceptable to both parties," says Van Rooyen.

    "A professional agent will guide both parties through the process, assisting with recommendations for bond originators and conveyancing attorneys, and helping to obtain the necessary certificates of compliance and more."

  • Questions to ask about a sole mandate

    Before offering an estate agent a sole mandate to sell your property, you should ask them the following questions, says Kevin Wearing, principal of Leapfrog Property Group Gordons Bay:

    1. Are they based in the area (do they have an office there, do they specialise in the area)?

    2. What are their qualifications?

    3. Most importantly, can they provide the seller with a list of properties they've sold in the area?

    "An area expert will be able to show they've been working in the neighbourhood and have successfully sold property there. Naturally, this won't apply to new agents, but in the case of an established agent this should be provided.

    "In the case of a new agent, sellers can ask for a layout of how the property will be marketed (the agent should provide a written marketing plan), and what sort of support the agent will get from his or her franchise," advises Wearing.

    A qualified, professional estate agent can provide invaluable guidance throughout the sales process, ensuring there are no problems with the transaction. Their knowledge of the local property market and their marketing expertise and experience in navigating the complex legal and financial processes involved, make them an essential part of the sale.

    Vivian Warby
    Property
    Weekend Argus (Saturday Edition)

    Independent Property appears every Saturday in the Weekend Argus

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