This is the age of disruption, and real estate agents are about to cop it.
There’s an ad for one of the big banks doing the rounds at the moment. I’m not going to name names, but it’s the blue one.
(Think branding and advertising don’t influence you?)
This bank just just launched a new app that gives you an estimate of a property’s value.
I’m surprised they could sell this as a feature. A dozen different websites offer similar estimates for free, but I guess if you’re new to the whole property game, you might believe that only this bank can offer that service.
What’s interesting though is the way they set up the commercial. Here we have Mr and Mrs Average trying to talk to a real estate agent. They want to know how much its worth, and he’s a total weasel – umming and ahhing. But then, pow, they pull out the app and now they have the upper hand.
A triumph for ordinary citizens everywhere.
(Try pulling that kind of business on a real estate agent this Saturday and see how many shocked looks you get. See how many just laugh in your face.)
But what I find interesting is the way the real estate agent is portrayed. It’s almost a trope – a smarmy, weasel, shiny-suit shyster.
Hit the streets and there’s not a lot of love for real estate agents. In Roy Morgan’s “Image of Professions” survey, real estate agents are continually seen as the least ethical and honest, down the bottom of the list with advertising people and car salesmen.
Most people won’t be sorry to see them go.
But they’re being shown the door. Disruption to the industry is coming.
This is one of the few cases where disruption has taken a lot longer to take hold than I thought. Personally, I’m still surprised real estate agents exist.
For a few years now we’ve had platforms on the market that help DIY home sellers do it themselves. Things like Buy My Place and For Sale By Owner.
And they’ve been growing steadily, but the take up hasn’t been amazing.
But that might be all about to change. Because last week PurpleBricks launched.
PurpleBricks is just like every other DIY platform, although they’re a little more hybrid – giving you access to real estate ‘experts’ to help you along the way. But the difference is that they’ve got pockets. Deep, deep pockets.
Because they’ve come fresh from a successful UK launch. And when I say successful, I mean successful. They went from zero to the third largest real estate agency in the country, in just two years.
Think about that for a sec. Imagine you wanted to build a real estate empire to take on McGrath and LJ Hooker. How long would that take you in a bricks and mortar world?
Think about the dynamics in play that mean you could go toe to toe with the big boys in just two years. Or float out of nowhere with a market value of more than $500m!
This is the age of disruption. And real estate agents are about to be disrupted in a big way.
PurpleBricks launched with 50 experts last week, but they have plans in place to recruit a further 250. They have a marketing budget of $17.2m.
They’re serious.
And like all stories of disruption, this is a story of technological change. Most real estate work has gone on line. Even the papers are struggling. If you’re waiting til Saturday to find out what properties are on the market, you could be too late.
And agents used to be able to offer local expertise and market knowledge, but even that’s online now. As our bank reminds us, there’s an app for that.
And by trimming the fat associated with shop fronts and so on, and letting sellers do their own inspections and negotiations, there’s a lot of money to be saved.
PurpleBricks charges a flat fee of $4500. This includes professional photographs. On the median house in Sydney, that’s a saving of $11,500.
As the CEO says, they’re pushing on an open door.
Personally I will be a little sorry to see them go. I’ve got good relationships with a few real estate agents, and they’ve given me an inside running into some of the best deals I’ve had.
That said, I would rather negotiate directly with the seller any day of the week. Then you can really get creative with solutions that are win-win for everyone. I’ve sometimes found it tricky to bring agents to the table on that one (partly because they’re only incentivised by sale price).
So for me, it’s kind of exciting. It really opens up the field for what it might be possible to achieve in negotiations.
But make no mistake. Disruption has landed.
What opportunities do you see this opening up for you?
Indy says
There will always be room for “someone” to put a sale together. Some buyers and sellers just haven’t a clue how to negotiate, they’re either embarrassed or they just cave in. There are also the same buyers and sellers who will just try an scew the agent who at the end of the day is just trying to make a sale. So its a double edge sword. I came from real estae in the eastern suburbs of Sydney but left about 12 months ago, worn out, to the Gold Coast. Real estate became a Sat morning sport. The aim of the game is to tell whatever it takes to get the listing. Why? Because the next agent that comes in will reduce his comm to get the listing (and the sellers know this) You try and do the right thing, spend time and create a logical report only to find out later that your competition sold the place and charged them 0.8% comm. Since the competition got the listing, with the open house there is potential to get other listings promising that the new sellers are in with a chance. And so the cycle repeats itself. So an agent becomes this professional juggler and master of spin. No wonder they don’t get dinner invites. The market is driven by the media, the Dr…… who paints a picture of desperation. At the height of the boom last year, there was a disease in Sydney called Fear Of Missing Out caught by young couples going over the top with their budgets by as much as 10 to 15%. Wait till there is an adjustment and the bank rings up and says they have to keep the banks 80:20 ratio, please throw in an extra $20k. And with so much turmoil going on in the work place, I feel that there will be people out there who will get caught. I read a couple of weeks ago an article about the jobs/career that are most likely to disappear in the next 5 years. R E agents were second on the list of most likely. But hey, where else are we going to get a good cappaccino but in front of an open house sponsored by…….
Stuart says
Anyone see the article in The Australian yesterday about RE Agents? At Ray White over the last financial year, there were 45 agents who took home more than one million bucks in commission!
And 270-something agents made between $500k and $1m. They didn’t mention what their total # of agents was to get an idea of what % of agents were earning that. And they admitted it was a bumper year.
However it will be interesting to see if that is still the case in 5-10 years, although I assume that to earn that sort of commission, those agents are selling high-end property which I imagine is a portion of the market that is unlikely to go for DIY real estate sales kits for a few grand.
Brendan says
Direct negotiations with the sellers for extra terms, reasonable offers, v/f deals and maybe the odd option for the right development property are just the beginning. Very exciting times to be in the property game!
ron goddard says
jonno, dear man, it is very naughty of you to bag any industry ..no matter what you personally think. to be sure many people have had bad experiences with real estate reps. and agents…but we also have bad experiences with doctors, dentists, policemen, car sales people, politicians and braggers who make lotsa dosh doing great real estate deals and then try to teach their ‘world’ how to do it. to the dismay of young couples who have to pay the price of the bragger’s indulgence in higher costs; just to 10% own a ‘home’.Bank 90%) and spend the rest of their lives slaving to keep it.
moreover..i do not like to bracketed as ‘smarmy’ r/e guy. i have been in my business for 46 years and have never been called ‘smarmy’. i have been called many things : even patriotic! i killed that idea straight away. now to your contention about the demise of r/e agents. as you possibly haven’t had an opportunity to actually sell real estate as a rep. you may not know about the problem most private sellers have : the ability of the buyers to actually negotiate with the seller! in 99.99999recurring% of the time buyers hate meeting the seller. they would rather billie jones over at abc realty do the hard slog. its purely rationale gone haywire. gone is the assertiveness..now we have a mental problem talking about a $1m purchase if you don’t mind. so they get somebody else do it. why do i know..cos i have seen it a hundred times. with regard to the anz bank. banks in the past have always called us guys for info about houses which have sold recently. we have obliged of course. ..but now they can stick it. all of their info at hand now will be useless because of the variations within any particular ;’sale’. also a sale is never a sale until it is settled. and that could be over a period of months. so then the market could have changed..dramatically..and will very soon. ok maybe a lot of reps will head for the door..voluntarily or shoved. but the challenge of overcoming bank interference will be great..i mean wonderful. when the going gets tough the tough get going..as you well know jonno. and i love a fight. at 78 years i can still fish,fight and ‘frig’ with the best of them. in ending i can say that you have rather exposed yourself jonno anyway cheers ron.
Mark Evans says
I doubt this is the end of Real Estate agents. I’m a real estate photographer and deal with over 200 agents and I can say emphatically that they earn their commission, especially the good ones. I can’t tell you the amount of times I’ve had to shoot a house where a vendor has tried to sell the house themselves and it’s sat on the market for 6 to 12 months without an offer and so they have turned to a professional seller to do the job. Buying and selling a home to live in as opposed to investing is an emotional thing and a vendor is to close to the deal to be effective. I’ve watched the really good agents use all their techniques and psychology to get the best deal for the vendor but still being realistic with the price which most home owners are unable to to. But hey maybe I’m wrong, maybe a guy who thinks his 3×1 in the far flung suburbs is the same as a McMansion in a blue ribbon area will be effective in negotiating the best price for their home. Maybe their Gumtree style photos taken on their iphone to save a few dollars will capture the hearts of dozens on couples browsing on realestate.com.au so they can use all of the tricks they read about on a real estate blog to run an effective home open. What do real estate agents do really other than open a door on Saturday and hand out some forms?
They probably will end up the same as paperback books being replaced by digital books (who buys books anymore) or the cinema being replaced by TV and video. Advances in technology don’t always replace human interaction in the most effective way. Just look at how companies that really value good customer service have backed away from using automated phone systems and overseas call centres. If you want to succeed in business you need to provide the best product and have the best staff serving your customers. You often spout the advice that the best way to attain wealth is to surround yourself with the best people. Why would you choose a person who has the sales experience of selling 1 or 2 houses in their life over someone who sells a house a week. It’s the biggest financial investment most people make in their life. Why would you do that to yourself just to maybe save a few thousand in commission. As the Millenials would say “That’s cra cra Jon!”