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 ‘terrific’ – 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.

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