We appeared in an article in today’s Herald on Sunday (lead feature in the Business section) and it’s thrown up a few things I thought were interesting to touch on. Overall the article is incredibly positive and supportive and it puts forward the thought that the time is right for a new type of real estate agency, one whose fee is determined by its business metrics.
This for me is a key point.
Unlike other low cost models that have gone before us (like The Joneses) our fee is simply a reflection of our business model rather than our whole story. It costs less than the net revenue from one sale to run our office every month and of course as we grow this could change, but the ratio between income and overheads will always remain my major focus because it’s a fundamental part of our story.
Our fee is also a reflection of how our role as salespeople has changed. As I mention in the article, the internet has changed the way people buy and sell. Buyers can now be as up to date with market movements as salespeople – they’re on the ground talking to salespeople, going to auctions and seeing the prices property fetch. Within an hour of putting up a sold sticker I can usually guarantee a buyer will call to find out what price it sold for as part of their research.
Of course our primary role is and always has been to get the best possible sale price for our clients. My belief again is that the internet has created a fundamental shift in how we do this – the vast majority of properties can be promoted online so our role these days is to market a property to its best potential, bring the resulting buyers to the vendor and provide recommendations that create the right outcome for both parties.
Our secondary role is to act as the mediator who knits buyer and seller together and guides the transaction safely over the line. So much can go wrong in transacting property – from title details, to odd things on LIMs and discrepancies in building reports – that it often takes an intermediary to sit between both parties and negotiate to bring them together.
Another viewpoint the article puts forward is that it’s best to go with an established agent in an area in order to get the best possible sale price, either because they know the maximum possible sale price for a property or because they have the buyers. Again, in my view the internet has changed this rule of thumb. Gone are the days of salespeople owning buyers – buyers are loyal only to TradeMe, Realestate.co and other trusted sources of property data like QV – and every one of our sale prices has been in line with the recent market data. In fact in a few cases we’ve achieved some of the best sale prices on a street so I can’t help but think that being a fresh pair of eyes in an area is a good thing!
The reality is that selling a property is a process and the process is the same every time. Sure you need to understand the intricate benefits of a particular area (school zones, rush hour traffic movements, local amenities and events etc) but we make it our business to get up to speed with this information pretty quickly.
My view is that previous low cost business models have failed for simple and logical reasons. Either the service they provided wasn’t particularly good or in the case of The Joneses, they appear to have over-capitalized by launching with four regional offices and huge staff costs (including an in-house production studio and salespeople on big salaries.) Who’s to say that if The Joneses had started smaller they wouldn’t still be around today? If the idea had worked, they would have changed the real estate model forever.
Sales roles in any other industry are based around a remuneration structure that appeals to both the client and the salesperson. My ambition is to make real estate a credible profession that buyers and sellers see value in. To do this, I aim to grow a model which employs intelligent, well trained salespeople on a base salary and a commission bonus when they make a sale.
What we do is hugely significant in the lives of our buyers and sellers. To use James Eivers (my first salaried Account Manager) words when he started working at The Property Market, “Short of delivering people’s babies, selling their homes should be the most honourable profession around.”