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This weeks guest article is from Michael Atwell
It is no secret that the internet has changed the face of how we do business. For most industries the buying (or selling) process has been simplified – streamlined in a cost-effective way to deliver greater value. But who is getting the value?
If you look at the travel industry, internet sales have simplified the process for airline companies, accommodation providers and car hire companies amongst others. Cutting out the middle man. The agent, has enabled these industries to deliver cheaper prices to customers while better managing costs and growing the scale of their business. It’s a win-win situation for the buyer and the seller.
Even TV stations are considering an automated approach to how television advertising space is bought and sold. The automated process would allow for more cost-effective management of the buying process – another win-win situation for the advertising space buyer, and seller.
It seems a logical step that the same cost-effective approach apply to the Real Estate industry. Why should all of the benefit of the internet fall into the laps of the agents – surely our vendors and buyers are entitled to a slice of the savings the internet brings?
With the amount of information that is now freely available for the consumers, the sale is now largely made prior to the physical inspection.
As it stands, Real Estate is the only consumer industry that manages to command percentage fees on selling prices. In an era where average agents will gradually be squeezed out by the internet, it’s a wonder the most costly agents have not been first on the chopping block!
A typical real estate transaction takes between 4-10 productive hours to complete and generates a return before advertising costs of say $12,000 (based on 3% commission on a $400,000 property). That’s $1200 per hour! Surely those numbers are unsustainable in any modern consumer-based industry?
Of course, traditional agents will maintain that they spend endless hours marketing themselves and the properties they sell and that cost has to be factored in. Marketing costs are successfully factored in to prices in every other industry without charging percentage commission fees so why should Real Estate get special treatment?
The reality is agents spend most of their time prospecting for new clients and they show considerable favouritism to purchasers who are also resellers simply because of the commission value. Relying entirely on the commission structure also means agents don’t get paid until the sale is made – which can lead to less scrupulous agents pressuring vendors when an offer is made. This pressurized, cherry-picking approach demonstrates that a commission only based fee structure has many real estate agents aiming to deliver value to themselves first and not the property seller.
Surely now is the time for the internet to deliver value to property owners and buyers by facilitating a process whereby properties can be bought and sold in the same way travel accommodation or flight seats or even used cars are bought and sold – a fixed price or fee for service and let our customers determine the level of service they require like other true professions.
Michael has been a real estate agent for nearly 20 years for both residential and commercial agencies. He currently owns property related businesses real estate development, traditional real estate agency practice, discount online real estate agent, www.forsaleforlease.com.au and a holiday accommodation business. Although new to the online space is now fascinated with how to apply new technologies to his businesses and ad value for his customers.