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Use an agent and still save money – thanks to Disruption

Properties can be seen in the Sydney suburb of Enmore, Australia, September 5, 2016. Picture taken September 5, 2016. REUTERS/David Gray

By Michael Yardney

The well-worn course to selling a property has hit a crossroads.

Discount do-it-yourself selling schemes are emerging, and with them, a whole new way to offload property without a real estate agent taking a huge slice off your profit.

Digital self-selling companies like Purplebricks and BuyMyHouse are based on the idea that vendors can do a lot of the work themselves, and therefore pay a small flat fee for other services, such as professional photos and online listings.


That’s all well and good, but it’s not necessarily a better way to sell your property.

You miss out on the expertise of an agent, their negotiation skills, their understanding of the market and how to play your property to its strength.

And there’s also a big giveaway in their business model that should tell you something: you pay less, because they do less… meaning you are doing all the work.

The truth about leverage

Purplebricks is giving sellers some leverage – but it’s not in the form of discounted fees.

Rather, these discount companies have given us the gift of disruption.

We have enough change happening in the industry that sellers have the opportunity to wield some extra negotiation power with real estate agents, who are watching startups like Purplebricks take an increasingly bigger pieces of the pie.

The truth of the matter is this: real estate agents know how to market your property well and how to negotiate a better price for you from potential purchasers.

This means paying their commission is a well worth the investment.

But for years, agents have been able to rest on their laurels somewhat.

In some instances, when the market is geared in their favour, they may do little work for their significant commissions, and historically vendors have had very little real choice when selling their home – until now.

Agents risk becoming taxi drivers in an Uber economy

Now, disruptors like Purplebricks are giving consumers a real alternative to the traditional real estate agent model – and agents must lift their game in response, or risk becoming like taxi drivers in an Uber economy.

Now more than even before, real estate agents must find their unique point of difference in such a competitive market.

This might be amazing customer service; fantastic knowledge and leverage of social media in sales campaigns; an aggressive pricing structure; or a combination of the above.

The bottom line is that they need to evolve with the times.

The real estate industry, which has many good professionals within, but also some tardy ones, needs to change.

Namely, it must increase its level of service and transparency to ensure it remains relevant in these changing times.

Real estate agents will increasingly need to leverage digital marketing solutions, get creative in their marketing strategies and really start to push the envelope so they can get strong results, and therefore demonstrate their value.

Consumers in the driver’s seat

Of course, while all of this disruption is taking place in the background, as the consumer selling a property you are in the driver’s seat.

You can take charge of this evolving climate by negotiating smartly with your agent.

By this, I don’t mean demanding a discount; I mean incentivising them in a more strategic way.

A huge part of an agent’s value proposition is the price they can achieve for your property sale.

It’s often debated about how ‘incentivised’ real estate agents really are; after all, a $10,000 increase in price is a big deal to you, but a 2.5 per cent commission it translates to just $250 to them.

Some wonder: Are agents really going to work that hard to get the sale price up, when the reward is so small?

Let’s say you’re selling a $750,000 property. If the agent’s commission is 2.5 per cent +GST, he or she will earn $18,750 from the sale.

In this new world economy, on a sliding scale commission, as a vendor you might offer 1.5 per cent commission on the sale up to $750,000 and then a 10 per cent commission on every dollar more.

Suddenly, the agent has an extremely vested interest in pushing up your sale price.

This is just one idea, and it doesn’t suit all markets or all situations.

However, I think these types of sliding scale commission structures and other creative approaches will begin to become more commonplace as the industry evolves.

Remember that while DIY services serve a very niche market, ultimately, real estate agents are there to work for you – they want to achieve a great result for you as much as you want them to sell your property.

There may be opportunities to leverage the client-agent relationship even further to drive a better outcome for all parties – without having to do all of the work yourself.

But remember…the cheapest agent is the one that gets you the highest price.

Michael Yardney is a director of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog.