A New Zealand real estate agency has closed the doors of its real-world office and opened up as a discount online real estate agency.”We found we had two businesses that competed with each other.
We had to make a choice, and we have decided our future in real estate lies with Jet Agent and the web,” owner John Bradley told New Zealand Property Investor.Bradley had run both Totally Kiwi Real Estate in the town of Paraparaumu and Jet Agent at www.jetagent.co.nz. He claimed Totally Kiwi had about 50 exclusive listings on its books at the point of closure but said that poor market conditions made the outlook bad.”
The market will recover in time, but by then the internet will have impacted on real estate and the industry will never be the same again,” Bradley told the magazine.Replacing agents?On its website, Jet Agent calls itself “the agent you use when you don’t want to use an agent.” It is a “licensed real estate agent and a member of the REINZ” and says “we are trying to allow you to personally carry out the expensive, yet simple elements of the agent’s role.”Buyers register for free but sellers pay $20 to list a property and then a commission of 0.35% when a property is sold.
Even if you use a live agent, too, and the live agent brings in a buyer, Jet Agent’s fee still has to be paid while your listing is on the website.On a $500,000 home, the commission would be $1,750, if my math is right.I invite Jet Agent to make their case in the comments section if they disagree with me. But to me, Jet Agent misses the mark.They’ve gotten rid of all the good things an agent does for sellers but kept the commission, albeit in reduced form. Yet, they don’t offer any new benefits to earn this commission.
They don’t even seem to have any web traffic to speak of.The proposition to vendors is downright unattractive. I (the consumer) pay you (Jet Agent) $1,750 (on a $500,000 home) so that you can list my property on a website where no one will see it.I think Jet Agent has gotten ahead of itself. I’d rather use a traditional agent, who I can hold accountable to apply effort and expertise in earning his or her fee.To me, the future seems to belong to those actual human agents who effectively use technology, rather than sites that seek to get rid of human agents. What do you think?
2nd May 2008
Hi Dave, good article. I think we will see this happen more and more over the coming years. I do think the commission is very steep for what is essentially an advertising online agency (push marketer).
28th May 2008
Hi David
I reviewed your comments with interest.
The points you have made can be summarised in two groups. The first is to do with value for money and the second is to do with traffic.
In regard to traffic, sure we have low volumes. That is inevitable with start ups. However, we do expect traffic to increase as our marketing kicks in and I invite you to have another look at the site. I note your comments were published on 2 May. At that time we held around 30 listings. Today, less than a month later we have topped 200. So things have started to move for us.
I would like to point out also that these are listings. Not advertising placements. We can sell these properties just like a real estate agent and collect a success fee (out of the deposit). After all that’s what Jet Agent is. A licensed real estate agent. So it is unrealistic to compare us with (for example) your website. Jet Agent is actually one of your customers because we advertise our listings on your website. This way it is your traffic that helps build ours just as it generates business to traditional agents.
With your second point in regard to value for service and whether people would prefer to use a traditional agent, at this stage, we are so new it is too soon to say whether the market agrees with you or not. Although the feedback we are getting is very positive. While I appreciate your comments and welcome feedback from anyone else in the industry, the real test is what prospective sellers think and that of course that will decide our fate.
In regard to our service we have clearly cut out a lot. But on the other hand we have also cut out a lot of costs and can offer much lower fees. For example we don’t appraise property and we don’t host open homes. What we offer is a mix of private selling with licensed agent support. People can list online, buyers and sellers can talk to each other through secure mail and buyers can make offers online. There is a negotiating engine built into the site so that buyers and sellers can send offers back an forth until they reach agreement. We are just another agent with a quite different business model.
I am aware that most agents believe that what they do is so complex that it can’t be replicated with computer coding, but that’s would be missing the point. It is not our objective to take people out of the process. It is still a people-to-people process, it’s just that the seller and buyer do a lot more for themselves. Anyone who uses our service is more inclined to ask “would an agent do a better job than I can do myself?” in addition to “how much do they charge?” This is a more complete value for service question.
Of course many people will still prefer to use an agent. Just like a lot of people still prefer to use a bank teller and a travel agent. Personally, I like to do most of my banking and make most of my travel arrangements online.
So here’s the real question. What is so difficult about buying and selling property that it can’t be done online, without ever meeting an agent face to face?
28th May 2008
John, thanks very much for your comments. Very informative and very interesting.
You raise a good question in your last paragraph. And the fact that you have 200 listings gives some real credibility to what you are doing.
Some people believe it’s either/or. That is, either you’ll have services like your that cut services and cots, or services like traditional agents–but not both in the same market.
I believe there will be room for both in the market. The success of a model like yours wouldn’t mean the end of traditional agents. It would just mean their are more options on table.
It will be interesting to see how things play out. Would you update us over time on how your business is doing? It will be interesting to watch.
28th May 2008
Sure David. Will do. I don’t disagree with your latest comments.
For example, if you were planning a one month trip around South America you would probably use a travel agent. However, to book an intercity airline trip & a rental car you are more likely to use the net.
I can see that similar principles are likely to be used with online real estate. Already we recognise that many of our listings are property investors and builders who don’t need an agent’s negotiating skills and prefer to do the deal themselves. They just need a wider market and a bit of backup.
In other words, our initial market is those people who were unlikely to use an agent anyway. You could say that we’re just bringing them back into the fold.
We have a long way to go but some of the early adopters are telling us its a cool idea.
20th July 2008
Your initial comments seem right on the mark, according to the Trade Me message boards the company owes both pay and holiday pay to his staff from “Totally Kiwi” which closed it’s door on the 14th April when that one went under AND also Jet agent staff. Sounds like the company is being pretty economical with the trust to put it nicely when on their site which I went to when checking a listing on Trade Me it clearly said on their site they were seeking a million in investment funds and email us for a prospectus when they didn’t have the necessary legal requirements for having a share float at all.
Jet Agent For Sale On Trade Me
Thursday, 10 July 2008, 9:50 am
Jet Agent the virtual licensed real estate agent has put its website up for sale on Trade Me. Jet Agent was launched by its founders John and Andrea Bradley around Christmas last year and its goal has been to virtualise the role of a real estate agent and provide an online platform for home sellers to sell their home at much lower fees. It is claimed by Jet Agent that the business model is consistent with other developments overseas and the overall trend toward the Internet in general.
However, the company is now struggling financially due to a lack of working capital and as a final resort to keep the concept alive the website itself has been offered for sale.
During the past months the owners have not been idle in their attempts to attract additional equity and Mr Bradley said that they had put their energies into preparing a public offer but now this appears to have been the wrong option. “Jet Agent is a start up and was always going to take a year or two before it broke even and we always knew we would have to attract additional capital from outside investors,” said Mr Bradley, “but I didn’t imagine for a minute that obtaining a prospectus was going to be such a nightmare.” Mr Bradley said that the Company has been working on preparing a prospectus and investment statement since February but is still not close to obtaining one.
In order to invite investment from the public, Companies have to comply with the Securities Act which is administered by the Companies Office. “The rules are that we are not allowed to ask people to invest without a prospectus and after five months work using two lawyers, two accountants and an auditor we have been unable to obtain one,” said Mr Bradley. “It’s fairly apparent that the guidelines used by the Companies Office are such that it is virtually impossible for a start up company like ours to use the public to attract equity. So we have to take drastic action.”
Information about Jet Agent is available on the Jet Agent website and information about the sale is available on Trade Me.
http://www.scoop.co.nz/stories/BU0807/S00181.htm
21st July 2008
Very interesting, Michelle. Thanks for the update.