Why commission-based agents won’t disappear

Oct 18, 2018 | Features, Local Property

With little or even negative house price growth, this is a good time to buy property.

Commission-based estate agencies the world over find themselves more and more having to defend why clients should pay the higher commission rates when set-fee agencies promise to offer the same service for less money. The proof lies in the pudding says traditional property leaders – a commission-based agent worth his salt still offers the consumer best value for money.

In South Africa it is the financial pressure on households because of the sluggish economy that is putting the most pressure on commission rates says Gerhard Kotzé, managing director of RealNet estate agency group. He explains in an environment where wages and salaries are not keeping up with the rising cost of living due to the VAT increase, record-breaking fuel price hikes, rising cost of electricity and fuel – consumers are looking where they can save in terms of rands and cents rather than percentages.

“This has created a larger demand for cheaper ‘private seller’ property marketing options, low commission agencies and fixed fee alternatives,” says Manja Kritzinger, Realtors international principal.

“More traditional agencies have inevitably lost out on mandates purely due to the cost of selling, and candidate estate agent training providers have recorded their highest number of drop-outs due to new inexperienced agents not being able to compete with the lower costing options,” she continues.

However, says Kritzinger: “more established agents and agencies, known for their service delivery have been able to maintain their sales figures as clients are able to recognise the value offered by these professionals based on past experience.”

An estate agent worth his salt offers value for money – that’s the crux of the matter.

Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty, says her grandmother Aida Geffen (South Africa’s original real estate doyen who turned one small agency into a multi-million rand exchange-listed company) had many wise sayings but this one has always stuck with her: “you get what you pay for”.

“Technology is always a double-edged sword and it’s only as effective as the people behind it, so as a seller how are you going to realise maximum return on investment? Is it by uploading phone snaps onto a listings website and hoping it’s seen by the right buyers, or by working with a team of professionals with a marketing plan and the right budgets, reach and exposure to target buyers in the relevant demographics. Which is more likely to realise the best outcome for clients? You have to marry technology with expertise for it to be effective,” explains Geffen.

With little or even negative house price growth, this is a good time to buy property. This means to get the best price for their property, a seller needs a skilled estate agent “who has a full array of marketing tools” to get the best price for the property, says Richard Gray, CEO of Harcourts.

“Often sellers, who are attracted by low commission, end up getting a lot less for their home than they expected. The difference in commission is often far less than the difference in the price realised from the sale. You pay for what you get,” Gray ends.

What should that ‘full array of marketing tools’ include?

Access to technology – Technology should never be brought in with the goal to replace the agent but should enable the agent to improve his service to the consumer says Berry Everitt, CEO of Chas Everitt International. The right innovative technology enables agents to “quickly access more knowledge and deliver a perceptibly better, faster and more ‘valuable’ personal service to real estate consumers,” he says.

Strong digital platform – The agency’s technological offering must include a strong digital platform that support both the internal systems and marketing says Geffen. This is essential to back up the brand name she says.

Strong brand presence – Geffen says a strong brand presence “that is consistently professional and trusted among consumers, with a track record of achieving outstanding results presence” is among the most valuable tools for an estate agent.

Relevant training programmes – All property experts agree ongoing market-related training to keep agents up to date with today’s fast-changing world is a must.

Community/networks – “Companies and agents who are embedded and vested in their communities and providing the best possible business networks to both staff and clients” are equally important to ongoing training programmes says Geffen. Gray says they do regular follow-ups with past and present clients to gain perspective on what the client expects. “In that way we stay competitive and focused on primary goals.”

Presentation packs – Geffen says knowledge is power. “Agents need presentation packs for prospective sellers that explain clearly and unequivocally the service array, levels of service, marketing platforms and reach that are covered in the commission fee and the potential pitfalls of cutting corners in such a large transaction. In a nutshell, going the cheap route could well end up costing you dearly and since property is the most expensive investment most people will ever make, it simply does not make sense not to seek the best professional help to do this”, she ends.

Personal service – The most important ‘tool’ of a commission-based agent. Kritzinger says their surveys indicate clients still value the personal service with results they receive from commission-based agents that they have come to know personally and built strong relationships with. That’s why Everitt says for them the agent will always be at the centre of the real estate transaction even while staying up to date with the latest technological developments. Says Everitt: “For now, research clearly shows that higher prices and faster sales are achieved by full-service agents, and we need to build on that.”

What do you think? Will the commission-based estate agent still be around in 5 to 10 years’ time or will he go the way of the switchboard operator and the VCR repairman? Send your comments to editor@propertyprofessional.co.za.