Do flat fee real estate firms work? The latest model
"This model will go the way of Real, Go Gecko, Green Door, Jonsese. 100 sales in two years tells me so, because that's about one sale a week."Featured comment
Every so often a real estate agency pops up in the market to threaten the big boys, citing a flashy new agency model.
Real Estate Institute of New Zealand chief executive Helen O’Sullivan says there are a number of pricing models in the market and with more than 75,000 transactions in the market last year, variety is good.
Fixed-fee firms haven't had much success on Kiwi shores, the most high profile fixed rate failure was the Jonese, which collapsed within 18 months.
Real estate company 200 Square is giving flat fees a go and says its point of difference is that it is an online real estate company.
The company is over two years old and has sold well over 100 houses, totaling more than $50 million worth in residential properties.
The company – which includes Lance Wiggs as an investor - charges homeowners a flat commission rate of $4,500 a property compared to the average industry norm of $20,000.
200 Square chief executive Grant Wakelin says real estate agents fees should always be fixed and not tied to the home because fees should be relevant to the service agents provide.
While still using licensed real estate agents, Mr Wakelin says costs are stripped out of the traditional real estate model as the agency does not have fancy premises, does not drive clients around and makes clients host their own open homes.
Instead the agents specialise in particular areas such as giving advice, doing negotiations or marketing, which makes the organizational structure different. The agency has three licensed agents and another eight to ten contracted staff.
While the company is online-based, it still books ads for properties in print media.
Ms O’Sullivan says the model is interesting because the real estate market has come online.
“Prospective buyers get more information online, we find people will look at the Property Press but still go online to list their information because a print ad is only focused on a picture and a little bit of information.”
She says one of the issues with do-it-yourself open homes is that homeowners are not bound by the same disclosure rules as real estate agents. For example if a home is leaky a home owner is not obliged to say so during an open home, similar to the position for private sales.
Ms O’Sullivan says she would expect licensed real estate agents to take responsibility, and in any event, the Real Estate Agents Authority disciplinary body generally comes down on the side of the consumer.
Creating new leads
The inside secret of the property industry, Mr Wakelin says, is that agents hold viewings to get new listings rather than just show off the home.
Two thirds of real estate agent’s time is spent chasing new listings – whether it be wining and dining, dropping pamphlets or community events - a minimal sales force limits that.
However 200 Square has been using one-day sale website GrabOne to discount its commission and gain new leads.
While the company only advertises online, Mr Wakelin says clients are the best advocates for what they do.