But what does the emergence of these sites mean for agents? Will the major portals follow suit? Is this the future of real estate?
Revealing data
There’s no doubt the low cost of self-selling can be enticing for some vendors. The chance to save thousands of dollars in agent fees is enough to turn heads. If an agent’s fee is 2 per cent, the chance to save up to $20,000 on a million-dollar sale can sound like good value. But is it?
I decided to put this ‘value’ to the test by analysing a random selection of data sourced from both real estate agencies and self-selling websites. Examining areas across New South Wales, I soon discovered that self-sales were only a very small percentage of overall sales – less than 0.1 per cent in the most active region of Sydney. In fact, of the 500,000 homes sold in Australia in the year to November 2015, only just more than 5300 were sold without an agent.* The most active areas for self-selling were lower income areas.
The data showed that vendors who used an agent sold their property for a higher price than self-selling vendors. This trend was consistent across different suburbs, property types and property features, with agents securing between $55,000 to $250,000 more than self-sellers for similar properties. While these results may be due to different factors, such as self-selling vendors being motivated to sell quickly due to financial stress or their general inexperience, the data is telling.
What a good agent can do
In real estate, as in so many other areas of life, it pays to work with an expert.
According to Brett Hunter, Principal of Raine & Horne Terrigal – Avoca Beach and REINSW Deputy President, agents have particular expertise when it comes to achieving the best price.“Vendors don’t sell multiple homes week in, week out,” Mr Hunter said. “Agents do. They have the benefit of experience when it comes to pricing, marketing and negotiation.
“What many owners don’t realise is that selling a house is about more than finding one purchaser.
“Yes, you can run an auction with a single registered bidder, but a higher sale price will inevitably be achieved when multiple bidders are vying against each other. Bringing multiple potential purchasers into the mix helps push the ultimate purchaser into an emotional price bracket. This is what a skilled agent does well.”
Mr Hunter added that vendors also find that the ‘arm’s length’ relationship between the agent and purchaser can help reduce the stress of the situation. This can facilitate the process of selling at a higher price.
“Understanding what purchasers are looking for, knowing how to present a property, creating a targeted marketing campaign and negotiating effectively are also benefits of working with an agent rather than self-selling. It all comes together to achieve a higher sale price.”
Selling property is not about saving money, but rather maximising the sale price, Mr Hunter explained.
“A slight saving on agent fees just doesn’t stack up against a sale price that’s potentially 10 or 15 per cent higher,” he said. “Having a database of potential purchasers who are keen to move quickly is something an agent can bring to the table, which self-selling vendors can’t.”
Evidencing value with data
It’s only fair for vendors to question if they’re receiving value from their agent – but it can be difficult to identify what that value is. I know. I’ve been there myself.
Back in 2015, when my wife and I were selling our home, we interviewed three agents. Each pitched in exactly the same way and presented almost identical sales reports. We wanted to make our decision based upon intelligent analysis, but we honestly couldn’t tell them apart.
In the end, we chose the agent who seemed a bit more enthusiastic than the others. I was left wondering why none of them could differentiate themselves from the others and why they were unable to explain the value they could provide.Where was their data? Asking myself this one simple question led to the creation of Real Insights – a software tool that equips agents with the data they need to evidence their value. Through the segmentation and analysis of sales data, agents can differentiate themselves from their competitors in a multitude of ways. It’s all about equipping agents with compelling data about their comparative performance and sales track record. And presented with this critical data, vendors can choose an agent with superior negotiation skills who will bring them an above-market sale. They can make a truly informed choice.
While there’s a lot of talk right now about big data and data science, there’s not a lot of understanding as to what it actually is and what it can do for agents. I believe harnessing the true power of data will be the biggest innovation the real estate industry experiences in the coming years.
Future threat?
Most vendors know, at least on some level, they don’t have the appropriate skills to sell their own property, nor do they have the time. This much is reflected in the data. While it may initially be tempting to save money on an agent’s fee, most people don’t want to take a gamble with their most valuable asset and possibly end up with a poor sale price. And vendors who have previously worked with a skilled and well-trained agent know how hard they work to deliver a great result.
At the end of the day, consumers will decide how self-selling models work in the market and how they compare to the value proposition of real estate agents. While an easily commoditised, transactional industry can be quickly replaced by technology, it must be remembered that real estate is not a commodity. If the real estate industry operates at a highly professional level, produces a top result and focuses on service, its value will easily be buffered from ‘uber-isation’.Self-selling websites may continue to grab headlines in the short term, but I believe people will continue to overwhelmingly favour a skilled agent’s experience and expertise, and will be willing to pay for it – providing agents can empirically demonstrate their value.
* Source: whichrealestateagent.com.au