Some further thoughts on the industry reaction to Trade Me Property new pricing

by Alistair Helm in


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Today has been a flurry of calls and chats about this NZ Herald article citing an agent rebellion to the new pricing being implemented by Trade Me Property. I feel I presented a balanced and insightful article earlier and that has been ratified by the calls I have received. 

Those calls have also further reinforced my view and at the same time added some extra thoughts that I thought I would share here.

The article states that there is a belief that agents failing to promote Trade Me Property as part of the marketing campaign for a property will result in less listing on Trade Me Property which will see viewing numbers decline and thereby result in less private sellers. Lets examine this in more detail.

Real estate is a business carried out by c.10,000 self employed contractors who day to day pound the streets prospecting for listings, having secured an appointment to present a proposal competitively pitched against probably 2 other agents, you have to ask yourself which agent is going to dare say in the presentation when asked by the seller how they will market the property “well, you see, we as Company Y do not believe that it is best to advertise your property on Trade Me Property because we think that their decision to increase their fees to us from $1,000 a month for all our listings to $159 per listing is fair!

How do you think sellers are going to react to this statement, here are my view of the optional responses from vendors:

 

Option1 - Your petty squabble with Trade Me is of no interest to me - I just want to be on Trade Me 

 

Option 2 - OK so you don’t think there is value in Trade Me to justify a fee of $159 to advertise my house - yet you want to charge me $17,000 - next agent please!

 

Option3 - OK you can waste your time squabbling amongst yourself and Trade Me over which website to use in the meantime I will with my own credit card list my house tonight on Trade Me and I will simply deduct the $399 from your commission

 

Option 4 - Can I please speak to an intelligent agent who understands that with a daily audience of 120,000 buyers and viewers there is really no logic for not advertising on Trade Me Property - next agent please!

 

Option 5 - the smart agent adds “Now what I have just told you is the corporate line - but I am independent and I am concerned to ensure your property is marketed in the best way and therefore I will make sure your property is on Trade Me Property and I will pay this out of my own pocket” - vendor response - great, you’re the kind of agent I want to have sell my house, where do I sign!

 

The industry in this situation is not in control for as much as the corporate heads of Harcourts and Bayleys, Ray White and Barfoot & Thompson and others believe they can collectively boycott Trade Me. They cannot. The people who pay the fees to Trade Me are the franchisees of the corporates who actually run the offices in the high street and they pay the current subscription, but even they don’t hold the decision, as the real decision rests with those individual agents whose interests are best served when they do not have to overcome objections, especially ones that make no sense and come from “corporate”.

Now just taking this a bit further, the logic that a boycott if effective would diminish listings - could be possible. The problem is that buyers don't actually know what comprehensive listings look like - is it 14 in this suburb or 12 or 18 ?? Add to this the belief that viewers will somehow disappear. Not likely Trade Me remember is the only site with private listings which amount to around 18% of all listings - those listings are not on Realesatate.co.nz (and nor will they ever be!) so Trade Me still retains that relevance to comprehensive content.

My main fear is that this issue is a major distraction to the real estate industry. It does nothing to bolster professional credibility and worse it makes the industry look cheap - justifying commission rates that result in people paying $17,000 to sell a house and at the same time focusing on whether to pay $159!

Related articles:

Agents to boycott Trade Me - I don't think so

Trade Me Property solidifies status as property marketing powerhouse

Trade Me makes radical change to real estate agent fees

 


Will algorithms spell the end of the real estate agent?

by Alistair Helm in


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Recently I have been reading widely on the subject of technology and its likely impact on business. Every such article or book leads me to ask the question, what could the likely impact be of these new technological innovations on the real estate industry?

Writing in Wired magazine, Kevin Kelly estimated that by the end of this century 70% of today’s occupations will be replaced by automation, could this be the case for real estate agents?

In the book by Christopher Steiner “Automate This – How algorithms came to rule our world” he details the way that equity trading has been transformed by automation where over 60% of all trades are made by machines driven by the most complex and sophisticated algorithms, such algorithms are more and more invading all aspects of business and commerce. In the realm of healthcare he believes that the doctor of the future is likely to be driven by (if not wholly operated by) algorithms. A somewhat scary thought, but diagnosis is all about interpreting data and the results speak for themselves.

Anything that requires decisions to be made based on data can be transformed through the power of algorithms that are becoming more and more sophisticated. But what might this mean for real estate?

A number of years ago I heard the quote

Agents will not be replaced by technology, they will be replaced by agents with technology

I have used this quote extensively in presentations to agents; to shake them up to the reality that understanding and leverage the digital technology revolution, to become a smart, more connected, more transparent, more social is a key differentiator. Slowly (for real estate is an industry slow to change) agents are apprecaiting the digital world we all live in and they are beginning to appreciate the power of being found by potential clients prospecting for smart agents rather the time-honoured but grossly inefficient process adopted by most agents to prospect for listings.

However my recent insights as to the power, capability and potential influence of algorithms in real estate makes me wish to revise that original quote, now updated to read:

Agents will not be replaced by technology, they will be replaced by agents with technology, who will then be replaced by algorithms

I really do believe that technology in the form of highly developed algorithms may well in the coming decade radically change the real estate industry.

Now I am not about to suggest that the whole end-to-end process of real estate will be done online with no human intervention, connection or facilitation; but I think the human element will be marginalized to the extent that lawyers are marginalized in the real estate transaction process to the conveyancing and due diligence component. Agents in the future will be the facilitators and negotiators handling the process after a property has been found, that suits the buyers needs and matches the sellers requirements.

What do I mean by this statement “handling the process after a property has been found that suits the buyers needs and matches the sellers requirements” – let’s unbundle it to allow me to share a future scenario.

The property buying and selling process is inefficient, now I don’t make this statement solely in relation to the real estate agent for which I have previously expressed my views very clearly, but in relation to the marketplace of real estate in a wider sense.

 Think about it for a moment, when we decide we want to move house we are given a very narrow shopping list of properties from which to choose. When you apply the filters of location, price and size you will, even in a city the size of Auckland end up with the portfolio of barely 20 houses that are available over a 5 week period that match your criteria. Widen that time period to 10 weeks or 20 weeks and the option list multiplies – wouldn’t we like to have a wider option list. This is where technology can change the very heart of real estate.

Why should it be that we can only buy what is actually on the market? – when the reality is there are probably as many property owners who have not yet put their home on the market but would very happily consider moving right now.

Could it be that the very structure of real estate, this very theatrical process of For Sale signs, open homes and auctions is actually not the best way to facilitate a market for house transactions?

Why could we not leverage technology to be able to allow us to seek out the right house for us right now from all the houses in a given area and price bracket, not just those on the market. Such technology would know what the situation was for all homeowners in an area and be able given inputs by all homeowners identify the propensity of all those property owners prepared to move over a forthcoming time period.

The technology could then align a chain of transactions such that your ideal house could be part of a complete chain whereby the current owner of that house meets their desire to move and so on. The process seems at first very simple, but start to consider all the variables across the 400,000+ homes in Auckland or 1.7million across NZ with all the inter-relational aspects to match the timing, circumstances and needs of all the active property owners likely to move in the coming months.

Such a process would remove the need for all advertising of property, all listing of property and all prospecting by real estate agents. It would though still require the facilitation and negotiation skills of active professional agents. Their services and skills would though be valued on an hourly basis rather than a commission.

Such a system because it is focused on satisfying buyer demand rather than facilitating vendor supply has the capability to radically transform the very form of property transactions, create far more liquidity in the market and also potentially cushion property market price cycles as the efficient satisfaction of a property chain removes the price pressure of the current market.

Maybe this scenario is too far-fetched but remember how dating and personal connections have been revolutionized not so much by the internet as by the algorithms that power personal matching sites – what is so different about the algorithms being applied to property in much the same way?

 


Auctions – the most favoured method of sale or the favourite method of sale by agents?

by Alistair Helm in ,


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Just a month ago I reported with what I described as a mix of disbelief and surprise that auctions had become such a popular method of sale for property in Auckland.

Based on the data at the time, the proportion of all property sales represented by auctions had risen steadily through the final months of last year to represent 39% of Auckland sales in November and 37% in December. Auckland being the nucleus of auctions, accounting for fully 3 out of every 4 auctions in the country.

So you can imagine my surprise to see this new report by released by REINZ showing that in January, Auckland auctions totaled just 330 from a total sales of 1,757 – just 19% - effectively halving the representation of this method of sale in the space of one month.

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So has the real estate industry gone from advocating this form of marketing to rejecting it?  Is that we are to take away from this data. There are many encouraging online articles eloquently advocating auctions as the most preferred method of sale written by agents, yet somehow right before our eyes, auctions seem to have fallen out of favour?

Or could there be another reason?

January is of course a holiday month, blessed with good weather and public holidays-a-plenty. As a function of this there are less agents actively working, less auctioneers available to call auctions, and as a consequence less auctions scheduled.

What is so compelling though is that despite this reduced capacity to facilitate this most recommended method of property sale by auction, property sales did not stop or in any way stumble in the first month of the New Year. In fact despite the lack of auctions in January, total property sales in January in Auckland were up 24% as compared to January last year, this was higher than the 21% year-on-year increase seen in December.

I guess the concrete proof of this hypothesis or the rejection of it; will best be judged in the February stats when released in a month’s time to see if the proportion of auctions in Auckland remains below 20% or powers back up to 40%?