Yesterday was the half yearly meeting of the REAA Residential Advisory Group, a small team of 8 agents selected from across the country who meet a couple of times a year to review and discuss the big issues facing the industry. I’m lucky enough to be on the group and it’s a privilege to be involved in industry decision-making.
A couple of things came up in the meeting which got me super excited. The first was an impromptu discussion raised by the REAA about high commission fees, particularly in relation to the Auckland market.
The REAA put forwards the view that the Auckland market has increased significantly in the past 5 years, netting agents a significant increase in commission fees, while their overheads have stayed roughly the same.
The other was the cost of print and press media being charged to clients.
It was interesting to see the defence from the traditional agencies to these points. Feedback around the table included the increase in the cost of training and professional indemnity insurance which is probably a fair point. Our insurance is a good couple of grand so no doubt the mainstream agencies are paying big money for their cover.
They also pointed out that most agencies are discounting their fees to win listings in a short market so the full whack isn’t being charged anyway and many agencies refund some of their marketing costs on sale.
Which begs the question, if you’re discounting your fees and not refunding marketing, why don’t you just charge a fairer commission fee and a reasonable rate card for marketing in the first place? I blogged about the high cost of commission fees a couple of weeks ago (read the post here.) It seems extraordinary that Kiwis are content with being charged up to double the commission fees of other countries like Australia. My view is that commission fees in NZ are unnecessarily high because real estate agencies have not invested in efficient ways to run their business, there are too many salespeople in the industry for the number of transactions per year and agencies shoulder too much risk for the stock they sell. In short, the consumer is paying for inefficiencies in the industry and in the system of transacting properties.
Coincidentally, the REAA team were of the same view and over the course of the discussion, most of the other parties around the table acknowledged these points had merit. Most people eventually admitted they felt the commission-only system of payment for salespeople encouraged selling out of ‘desperation’ (as one agent put it) rather than good quality service and that as an industry we should raise the bar on the entry level qualifications (currently set at School Cert level) to create a higher calibre of skills and to make it harder for agencies to sell the dream of selling real estate to any Tom, Dick or Harry.
All of this I found hugely encouraging. Any Kiwi over the age of 25 can tell you the real estate industry bears the scars of start-ups who tried and failed to change the model so most agencies and some consumers support the view that it can’t be done. Personally I refute this. No doubt Henry Ford heard all manner of objections when he tried telling people it was possible to mass-produce motor cars and the same goes for any entrepreneur who is going against the grain.
In my view the time is right for a new model in real estate. Why? Because the trading environment is changing and meetings like the one we had yesterday is a great example. Our Government regulatory body isn’t about to start regulating commission fees but it’s interesting to see them focus on consumers and how the industry can serve their best interests. While they can’t dictate fees, the REAA can start to guide consumers on how to get a fair deal and I don’t think it will be long before they start to do exactly that.
And that, my friends, will mark the start of a new era in real estate.
About Antonia Baker
Antonia spent over a decade in the advertising industry running blue chip accounts for Saatchi & Saatchi, Draft FCB and ColensoBBDO.
Antonia’s expertise and business nous enable her to provide a customised experience and unrivalled marketing and service for home owners. She is a member of the Real Estate Agents Authority (REAA) Residential Advisory Group, a panel of eight agents selected from across the country. She is a full licensee real estate agent, achieving the highest industry qualification (National Diploma in Real Estate) in the shortest possible timeframe.
About The Property Market
The Property Market is a full service real estate agency built to deliver a better experience for buyers and sellers. Think real estate, only reinvented.
– Our real estate agents operate within a 20 minute radius of Freemans Bay.
– Our real estate agent commission rates are innovative and competitive.
– Our focus on customer service is second-to-none.
– We offer a range of clever online marketing solutions, including a mobile-friendly, personalised website for your property.