Leadhome drops fixed-fee model

Leadhome drops fixed-fee model

MAIN IMAGE: Marcél du Toit, CEO of Leadhome; Barry Davies, COO of Chas Everitt International Property Group

Another nail in the coffin of the fixed-fee model? Leadhome, one of SA’s pioneer hybrid disruptors that punted the fixed-fee model has quietly dropped the latter for a ‘negotiable fee’ approach.

A flat commission of R39 995, regardless of whether a home was valued at R100 000 or R10 million, was the proposition with which Leadhome was launched onto the South African property scene in 2015. “That’s because it takes the same amount of work to sell a R100 000 home as a R10 million home,” the co-founder Marcél du Toit said in an interview with Moneyweb last September.

From the start Leadhome has followed an aggressive marketing campaign not hesitating to discredit traditional estate agencies as mostly ‘over-priced’ and ‘inefficient’ due to many agents not having ‘the necessary knowledge or experience’.

Earlier this year John Murray, Leadhome’s COO, still highlighted the success of the hybrid model in a comparison with the traditional model and low-cost online agencies. Murray mentioned the ‘terrific success’ of international hybrids such as Purplebricks (UK) and Redfin (US).

At the time, though, Purplebricks was not doing so ‘terrically’ – they were closing down their offices in Australia citing ‘challenging conditions’ and ‘expanding too fast’ as the reasons. Soon afterwards the UK-based hybrid announced their withdrawal from the US. Purplebricks charged sellers an upfront fee that had to be paid regardless of whether the property sold or not but have since indicated that they will be revisiting their pricing model.

Leadhome has since also paid a ‘visit’ to their pricing model and has dropped the flat commission rate in favour of a fee based on their own valuation of the client’s home. Sellers can set up an obligation free appointment with one of their agents who will determine the commission structure based on the location of the home, valuation of the property etc.

When asked why they changed their pricing model, Leadhome declined to comment but according to one of their consultants they adopted the ‘variable percentage-based fee structure’ after feedback from their clients.

Chas Everitt International Property Group COO Barry Davies says he believes Leadhome is seemingly now discovering, like many other fixed-fee agencies, that technology can enable and empower agents to do a better job, but it cannot replace them or displace them in the home sales process.

“In order to actually get deals done, there is simply no substitute for the in-depth local knowledge or the marketing, sales and negotiation expertise that a really professional agent brings to the table.

“But unfortunately, the fixed-fee model does not cover the provision of such human expertise. It relies on technologies or systems that have proven to be incapable of delivering sufficient sales to please clients and /or sustain the company – and that was exactly what Purple Bricks discovered in both the US and Australia, and why it has had to bring more traditional agents into its operations in the UK now.

“Consequently, we are not really surprised that despite all the negative things that Leadhome has said and posted about how traditional agents and agencies work, it would appear to also be moving towards a more traditional way of operating, including the introduction of a sliding or negotiable fee (in other words, a commission) per transaction.”

Send your comment on the best model for SA, fixed-fee or commission-based or a combination, to editor@propertyprofessional.co.za.

Showing 11 comments
  • Liz Ellice
    Reply

    I have been in real estate for many years I have learned that building relationships and earning trust is a major key to success.
    Together with expertise and strong negotiating skills, keeping both parties happy. A WIN WIN for all.

  • leon jackson
    Reply

    As a fellow property practitioner in the industry, i believe in the method of building face to face relationships with clients. The values of honesty,integrity and service delivery cannot be compromised when dealing with clients most valued assets and in an effort to build long lasting business relationships.

    Clients still prefer personal hands on expertise and with the use of technology we as agents have a platform to be more innovative in how we derive and achieve results, thats beneficial to our customers all the time and every time.

    A lesson can be learnt, and all to often people and organizations get it wrong.

    I still believe, one should slowly go about one’s business without passing judgement and publicly making negative comments, and let success be one’s noise. This way if all else fails at least you can still show face. Hard Lessons …

  • Michael Black
    Reply

    I think before they move into the same real estate industry that they Ren down to build their brand, they should make a formal apology to the entire real estate industry for their destructive entrance into the industry.

  • Leigh Brodie
    Reply

    I see a place for both technology-based agents, as well as traditional agents.
    God speed to all.

  • Fatima
    Reply

    If you love people….you going to love this industry.

  • Jc
    Reply

    Cheap has never been better

  • Adele
    Reply

    Computers cant think out the box…. something agents have to do on a regular basis.
    Computers cant advise you. Professional agents are well worth their fee. And it doesnt take the same amount of work for every deal….. high or low….not true.
    Each deal is completely different and you never know what to expect. You have to be ready for anything…. pretty much 24/7.

  • Adriaan
    Reply

    Driving high volume in a slow market to justify set fees was always going to be difficult. PurpleBricks in UK and Canada still going strong, they strangely used a different model in new markets in the US and AUS. Time will tell if investors will keep supporting them. Have a look at Realogy (US) and Countrywide (UK) stock prices – some traditional models are suffering more.

  • Ann Sinclair Blue Lily Properties
    Reply

    I still feel after many years of being in this industry that personal contact and trust is not just safer but see throug, its like any other work were you get rewarded for the quality and time you spend on a job well done

  • Dieter Konieczny
    Reply

    After all that was said, I feel that a ” Gentleman ” would apologise!
    But I wouldn’t bet on that to happen!!

  • John Fuller
    Reply

    Most of the bottom feeders who have recently entered the industry openly slander and denigrate professional estate agents; and greedy sellers who support them lap up false information and believe by listing with them they will save money.

    The truth is:
    1. Low fees don’t sell property! Professionals negotiate better selling prices that far exceed a few thousand rand saving in fees.
    2. Professionals have an expansive data base and large referral network.
    3. Professionals have strong brand awareness which is attractive to buyers.
    3. The real estate industry has been offering all the technology benefits, and much more, to buyers and sellers for years, plus many years of expertise, knowledge and other value added solutions.
    4. The “technology” companies merely jump on the bandwagon, subscribing to technology that the traditional proffessionals have developed over many years. They have not developed or added any industry beneficial techno systems themselves.
    5. Traditional agencies market property; and advertise real estate across a very wide spectrum of websites and portals locally and internationally. Their branded websites are highly ranked. The bottom feeders merely advertise on some property portals and hope for a lead.
    6. Do an internet search and see how many of these wizzkid businesses are ranked on the first few pages of the Internet?

    I am looking forward to the next year. The current economic slump will sort the men out from the boys!

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