Are real estate agents trying to establish a “Paywall” for buyers?

by Alistair Helm in ,


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The notion of a paywall is a hot topic in today’s digital media landscape as publishers try and control access to content not only in an effort to monetize the content and thereby offset the switch from paid content in print to notionally free content online; but also at the same time capture ‘subscriber’ information for future marketing.

I am wondering if real estate agents are beginning to question the loss of control they feel in regard to property marketing. The web has finally been seen, somewhat reluctantly by those in the industry, as the true democratisation of the marketing of property. As I stated at a recent speaking engagement without equivocation -

"there is only one task required to market a property today and that is to list it onTrade Me Property, everything else superfluous".

However I fear that as a result of this fact agents are trying to ring-fence buyers before property marketing even begins, in effect forcing them to come in behind a paywall to access the listings of agents and thereby avoid having to acquiesce to the power of the web and in some way take back control of marketing.

Let me explain my thinking and the supporting evidence.

I have this week been mulling over the reporting of the ‘Quick Flick Auction’ that occurred last week and has since been covered extensively in the NZ Herald and on TV3’s Campbell Live.

I have read and listened to the explanations and responses of the real estate agents involved and the Real Estate Institute. I am left with the distinct impression from their response that the overriding issue in their minds is the legal requirements of their role as agents and processes required under the Act; as if in some way their only concern was to compliance under the Real Estate Agents Act. The Real Estate Agents Authority on the other hand when commenting on this specific situation of the ‘Quick Flick Auction’ spoke of their significant concerns in the process, not purely from a legal perspective but from a wider position of asking whether the needs of all parties adequately met.

Now whilst the compliance to the rule of law is important as well as to the principle of professional service under a code of conduct, I have been reflecting more on these comments from within the industry and began to see a different underlying message.

Helen O’Sullivan, the CEO of the Real Estate Institute when commenting on the auction in the NZ Herald article made the statement “the property had been on Barfoot's internal system, available to 1,600 agents, since July 31”. This statement would seem to say to me that she in her role felt the actions of one of her members was acceptable because the property had been accessible to all of Barfoot & Thompson agents for a week and in someway this constituted acceptable marketing of a property before it was openly marketed to the wider buying public on the web.  As if to establish a 'two class' property buying market whereby registration with an agent confers priority and exclusivity.

To support this view as part of the Campbell Live feature on this auction the reporter discovered that the party who placed the initial offer that brought forward the auction to 1 day, had actually been through the property the day before it was listed on the web, before the agent had actually started to market the property.

What these seemingly connected messages are telling me is that the real estate industry wants to send a message to the buyers of NZ – get registered with us and we will tell you what is coming onto the market ahead of any competition.

 

Put another way – sign up to our database and you will be given priority, don't sign up and you will miss out!

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The question needs to be asked, should prospective buyers be forced to sign up with agents - all agents to be a good position to secure the latest listings rather than the method operated for decades of property being advertising openly. How could a buyer know all the agents to sign up with, unless the Real Estate Institute somehow want to become a central clearing agency? 

Now let me be clear here on one aspect of the real estate process, what is colloquially know an 'sleevies' (as in 'keeping property up your sleeve'). This is where an agent takes an instruction to list a property or is aware of a vendor being interested in possibly selling their property and through a database identifes a buyer who they show the property to and who makes an offer before the property is actually listed on the market. If that offer is acceptable to the vendor then the property can be sold prior to open marketing. That is acceptable, the buyer and seller make that decision with full knowledge.

What I have an issue with, is what I think is a subtle variation to this, which is what I think we saw with the ‘Quick Flick Auction’ whereby the agent had a buyer in mind and that buyer made an offer. However at that point one of two things should have taken place:

  1. The offer should have been accepted or possibly negotiated between buyer and vendor before the property even went on the market

  2. The offer should have been placed ‘on the table’ and the property placed on the market for an adequate period of time to allow the property to be marketed to attract a recognition in the market with all potential buyers allowing them the necessary time to undertake due diligence which in today’s market whilst not ideal may be as short as 2 weeks.

What I think is wrong is what might well have happened in this case where the property was not adequately marketed to provide the opportunity for buyers to undertake due diligence.

If a property is to be openly marketed, then it should be marketed for a minimum period of time. When I mean marketed, I mean openly advertised on websites. I think real estate agents need to accept that buyers don’t want to sign up to agent databases to be informed of new listings, they want to be informed through property portals such as Realestate.co.nz and Trade Me Property. By signing up to a property alert email from a property portal they know that their privacy will not be breached and that they will be updated daily on all new listings by all agents. The alternative of buyers having to sign up to all the databases of all the agents is akin to taking the industry back 20 years when the only way to access information of what properties were for sale was to walk into all the offices of all the agents in town.

The web has transformed the marketing of real estate. It has removed a part of the real estate process and massively reduced the costs of marketing. It is in the best interests of the buyers and sellers. However it is not loved by real estate agents because it removes the block form branding so prevalent in print media (12 pages of Barfoot's listing, 15 pages of Ray White listings, 17 pages of Harcourts listing; all of which in no particular oder). The industry cannot be allowed to corral the buyers and sellers and force them to come inside their databases to see the world of property for sale, listings need to be open, they need to be public – it is in the best interests of buyers and sellers and we don’t want agents building paywalls around their listings.

 


Real estate agents fondness for auctions may be their downfall

by Alistair Helm in ,


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There was a time back in 2005 when the real estate industry despite buoyant sales at the time, monetarily feared that their future was in jeopardy as Trade Me started to offer private sellers the opportunity to marketing their homes for sale in a way that could reach as wide an audience as the mainstream print media could do for licensed agents.

Further, home owners found that Trade Me could facilitate online auctions which generated genuine bidders and completed sales. At that time the selection of properties for sale on the site was purely limited to private sellers; as real estate companies saw no interest in what they saw as a “bargain hunting style site” in their view, hardly a credible place to advertise a property for sale by a professional agent.

Trade Me over the next 12 months made a strategic decision that was to lead to their future success and has contributed to the hugely successful listed company that it is today with a market cap fast approaching $2 billion. That decision was to withdraw from its role of endeavouring to reinvent the real estate industry through facilitated private-sale online auctions and instead focus on attracting real estate companies to advertise their listings on the site. A decision that in today’s market generates around $20m a year representing a large part of the $100m or so of marketing spent by the real estate industry each year.

 

Archived page from Trade Me real estate section from January 2005 shows only private sales with bids active for one of them via web.archive.org

Archived page from Trade Me real estate section from January 2005 shows only private sales with bids active for one of them via web.archive.org

What is interesting is that the decision did not in any way hamper the site from becoming the most important marketing platform for all property whether for rent or to sell, for private sellers or licensed real estate agents. And whilst the cost of advertising a single property for sale may have risen from $0 for a private seller back then to close to $400 today there is no doubt that the value for private sellers in having this ‘level playing field’ is immeasurable.

To advertise a property whether it be a private listings or an agent listing achieves the same level of interest on Trade Me as the detail below shows.

 

The 'level playing field' for the marketing of property online has been established, especially as Trade Me dominates the viewing audience with somewhere around 1.8 million unique visitors a month to property online vs. around 450,000 for Realestate.co.nz.

However as I have often stated, to sell privately is not simply about marketing your property online. The sale only occurs when the buyers have been corralled to front up with an offer, and this is where the professional real estate agent trumps private sellers as their experience and skills matched to their ‘thick skinned’ tenacity drives them to bring buyers to the table to sign an agreement.

However that marginal, yet significant point of difference, in my view is being undermined by the very tool agents seem to be in love with these days – the auction.

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Auctions are the preferred method of sale by agents, they have really taken off in the past couple of years amounting to over 40% of Auckland sales and ever and ever shorter auction periods which in my view they are simply getting out of control. Ironically it could be this ‘lemming like’ magnetic attraction to auctions that could ‘level the playing field’ of the selling process to match the ‘levelled playing field' of marketing property created by Trade Me.

Examine for a moment the components of an auction process run by a licensed real estate agent and contrast it with that undertaken by a private seller – because private sellers are turning to auctioning their homes.

  1. The property is advertised on Trade Me Property

  2. The auction date is set and a licensed auctioneer is booked

  3. The open home times are displayed

  4. Open homes are held

  5. Interested prospective buyer details are collected

  6. Interested prospective buyers are contacted (email / phone) to answer questions and remind them of the auction date

  7. Follow up contact is made of prospective buyers close to auction date

  8. The auction day arrives and the auction is held undertaken by a qualified auctioneer

  9. The property sells at auction or is passed in for further negotiation

  10. The legal agreement (the Sale & Purchase Agreement) is signed and the deposit paid

The 10 steps of the process to sell a property at auction. Nowhere in that list of 10 steps is there any difference what-so-ever between what an agent would do and what a private seller would do. There is no extensive facilitation or skilled negotiation, there is no time spent chauffeuring people around open homes or acting as a courier of sale and purchase agreements.

Auctions have been proven by the real estate industry to be an efficient process to sell a house. Auctions though are not the exclusive domain of real estate professionals. Auctioneers are a separately regulated profession governed under the 1928 Auctioneer Act. They oversee many forms of auctions from car auctions to art auctions to industrial materials auctions – all are professionally licensed and could turn their hand to sell a house by auction in exactly the same method as a real estate professional.

In my view the real estate industry has driven itself blindly down an alley that destroys the very essence that is their unique point of difference that distances a professional operation from a private seller; that of facilitating and negotiating the sale of the property. Yes, I can almost hear the cries from within the real estate industry as to the value of market knowledge and market appraisals to guide the seller. However ask the question of an agent of a property going to auction – “so what will it sell for?” – guess the reply… “ah that is what the auction will do, let the market decide, the process will establish the true market value!


Here is a selection of current private sale listings to be auctioned from Trade Me Property

 


More insights on the property market and property buying

by Alistair Helm in , ,


In addition to my articles here on Properazzi I am also working with John Bolton at Squirrel, the property and mortgage experts. I am contributing some regular articles on subjects of interest to property buyers and sellers.

I thought I would highlight my most recent articles which I think are of value especially to buyers at this time and state of the property market: 

 

What does a Real Estate Agent actually do?

Love them or hate them real estate agents are as much a part of the real estate market as lawyers, mortgage brokers and open homes!

Each year around 80,000 properties are transacted in this country by licensed real estate agents as compared to around 9,000 properties being sold by their owner without the assistance of an agent.

The word agent is the colloquial term used to describe a group of professionals, legally known as licensed salespeople (as defined under the 2008 Real Estate Agents Act that governs and regulates the industry). What you and I call an agent, are salespeople who are required to work under the control and administration of a qualified licensee.

Read more.... 

 

Accepting the need to compromise is one of the lessons of property buying

As a prospective home buyer you are probably aware that there are three basic criteria that govern your choice of a house. No it is not the time-honoured and often quoted, Location, Location, Location. It is Price, Location and Size. These three criteria are equally as important in driving your buying decision; yet sadly it is often not possible to optimize for all three at the same time. So dealing with this dilemma is one of the keys to smart property buying.

The driver of location; where to live is often the most important decision for buying a property. This often results from the need to live close to work, or more commonly these days as a function of school zoning. We all naturally want to live in a great suburb or town; a safe environment with great amenities and friendly neighbours. Going on at this rate will make you believe that Wisteria Lane might actually exist and those Desperate Housewives may turn out to be your neighbour!

Read more.... 

 

Making sense of property data to help you know when to buy or sell

Lies, damned lies, and statistics" is a phrase describing the persuasive power of numbers, particularly the use of statistics to bolster weak arguments. That is how Wikipedia speaks to statistics and I sense that it is also a perspective that many people take when it comes to property data.

We seem to be constantly being bombarded with the latest set of data for what we are told is the true picture of the property market in New Zealand, however given the multitude of sources and names attributed to these statistics it is often difficult to know what statistics matter and what measures you should use to tell you when it is a good time to buy or sell.

Read more.... 

 


Extreme property marketing forces buyer to front-up to auction in 33 hours!

by Alistair Helm in ,


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Barely 6 weeks ago I wrote an article entitled “Auctions getting out of control in Auckland” in which I highlighted what I saw as a growing trend to shorter selling periods for properties being marketed as auctions by real estate agents. The examples at the time were of campaigns of just 2 weeks, which I described as “dumb and somewhat illogical” and likely to exclude potential buyers from buying such properties.

So imagine my reaction when yesterday I was notified of a property just listed (Wednesday 7th August) which held its one and only open home last night and will be auctioned this afternoon at 4pm. So let’s see, listed at 7am on Wednesday and being auctioned at 4pm on Thursday, a grand total of 33 hours of marketing!

 

I am not sure to be quite honest what to make of this. My first reaction was to check to see if there was a mistake by the agent. No. The dates are genuine.

I contacted the selling agent by email seeking to confirm that the dates were correct and to get more details. I received an automated response email with the sale documents together with the statement “There has been a pre-auction offer at an acceptable level so the auction will open at that figure”.

I am struggling to understand how there can be a pre-auction offer when the property only came onto the market today? Clearly the agent has been marketing the property within a database of buyers prior to its listing. That is perfectly acceptable, but what eludes me is why the agent should imagine that the only buyer should be within the agent’s database of buyers. I might be interested in the property but the agent does not know me?

I do know of properties that are sold by agents that are never listed on the market. This is a decision the vendor makes, however in this situation having listed the property surely the vendor wishes to see the market respond? 

I am speechless. How can this auction process be in the best interests of the seller? How can the agent with all good consciousness and professional integrity state and demonstrate that they have fully marketed the property to as wide an audience to be in the best interests of the vendor when they are allowing a marketing period of barely a day when most campaigns are 3 weeks? Vendors deserve the opportunity to see what comes of a reasonable marketing campaign especially in today’s market where we are constantly told that demand is high and supply low.

In my judgment it is almost impossible for a prospective buyer to be able to prepare themselves to front up at the auction having done the necessary due diligence of title search, LIM report as well as finance. After the all the property details speak to the property being a great opportunity for a first time buyer.

Speaking of the property marketing the description reads “First home buyers or those looking for a project should move quickly”!! – “move quickly”! – from viewing an email on Wednesday morning to bidding at auction 30 hours later - how quickly does the agent expect the average buyer to act?!

I reiterate my statement that this marketing campaign cannot be in the best interests of the vendor, yet that is the ethical and professional responsibility of the agent. Certainly the vendor may be delighted to hear that there is on day 1 an offer at or above their reserve but why should that be the only buyer and why should that buyer’s offer be judged to be the value of the property in the market?

The real estate industry needs to take a good hard look at this situation and ask the question of itself – is this really how we want to be seen by our customers? Driving a culture of panic and hype such that property sells before it has been fairly offered to the market, or does the industry believe that marketing is irrelevant and all prospective buyers should be forced to registered with agents so agents can save on mainstream marketing and merely send emails to interested parties of relevant properties?

Update

The auction was held at 4pm at the offices of Barfoot & Thompson Ponsonby. There were around 20 people crammed into the reception area. I would say that of that total there would be 8 Barfoot & Thompson agents, the balance being potential bidders together with myself and reporter from TV3 Campbell Live.

The auctioneer introduced the auction and in referencing the agents handling the listing she made the comment "if you have been to the property over the last couple of days.." - seems hardly likely give the fact that the property was only listed yesterday!

The auctioneer then made the statement "the property was due to go to auction on the 28th August, but there has been an early offer on the property; that offer is at a level that is acceptable to the vendor, so that today will be the opening bid, its also the reserve price. So basically from the opening bid the property is on the market today". 

The auctioneer then started the auction proper by stating the offer that she was holding was for $1m, that is the opening bid, that's the reserve price, on the market at $1m. 

The auction then ran on for around 5 minutes during which time two parties competed to buy the property. I believe one of those parties was the party who placed the $1m bid and the other couple were unknown. The property sold for $1,050,000 after 6 bids.  

 

 


Frustration with auction process boils over

by Alistair Helm in ,


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With auctions being the most favoured method of sale by real estate agents and close to 1 in 4 of all Auckland properties being sold by auction, the casual observer would think, that was going on in the Auckland property market was a highly efficient representation of a perfectly functioning market.

That may well be the case with many of these property sales. However as was brought to my attention by a recent communication from a highly frustrated buyer; the process of buying at auction can be so fraught with frustration and concern over professional practices that in the case with this specific buyer, it can lead to a decision that enough was enough and they are not going to attend any more auctions in the search for their new home.

I want to highlight the details shared with me by this buyer to bring to the fore questions about auction practices and give voice to this buyer as a process of informing others. Naturally the buyer in question desires to remain anonymous for as they say “We don't want (to make) enemies when trying to purchase our next home. Whilst you may not agree wit the thoughts and beliefs of this buyer or you may not think their circumstances are representative, I would like to say that I have verified the authenticity of the person. I do recognise that this is but one incident from many hundreds of auctions transacted each month, however from my personal experience and comments from others both from within the industry and outside I don’t feel what is voiced here is a completely unique experience.

My intention in bringing this to light is to hopefully to encourage others to share their experiences in alignment or in contrary position to this buyer.

The Story

The buyer states that they have been active in looking for an Auckland property for the past 9 months and by their own judgment they are exhausted.

They attended an auction recently, not their first such auction as they state that they have attended close to 50 auctions and feel that they are a bit depressing.

This buyer was the only bidder on the property and made the first bid. Without any other bidders the auctioneer entered a vendor bid. A follow up bid was made by our buyer. At that point one of the agents in the room went up to a couple in the corner and spoke to them for about 2 minutes while the auction paused. The next action was that this second couple in the corner placed a bid $25k higher. Our buyer recognised this as a competing bid, but there was a concern that there was something slightly suspicious given the length of the pause in the proceedings. Our buyer responded and raised their bid by 10k and the agent went back to converse with the other couple and got them to raise by another 25k.

Then things got very strange. Suddenly 2 other agents swarmed around our buyer and started ‘in our face non stop pressuring’ to raise their bid by another $25k. Our buyer was prepared to bid again but offered a further $10k, not the $25k. The auctioneer refused the bid stating that the minimum was $25k!!

At this point our buyer decided to back down. The auction was passed-in with the other couple not raising their bid.

The actions of the agents as judged by our buyer had caused, what they felt was undue pressure. They felt that the auction had been staged to bring the other couple into the process just to raise the bidding. They felt that the agent’s actions in applying pressure on them was judged to be highly irritating and tantamount to bullying. The property passed-in with the strange couple being the highest bidders who were not then successful in negotiating.

Our buyer felt that there was no other serious interest in the property apart from themselves and in their opinion the other couple were brought in to artificially hike the price, so that the agent could go back to the market and say there were buyers willing to pay $x to buy the house.

To support this view the buyer states that the day before the auction the agent had said they expected 4 active bidders. On the day of the auction in the morning they said there were 3 active bidders. Moments before the auction just as they were going in our buyer again asked how many bidders there were? The agent was in their words coy about it, stated ‘yourselves’ and we expect to see others come in shortly.

After the auction the buyer states that the agent treated them like "you have served your purpose, you took it up to a stage, now I can negotiate with that as a base to the wider market and don't require you, bye". Not even a single thanks for coming to the auction. Our buyer felt the whole process was more about how much more can the agent can squeeze out of them. The whole thing, atmosphere, behaviour and everything about the event just made them cringe and plagued them for the next day before they wrote to me. As they said “I just cannot get yesterday out of my head, it was just bizarre beyond belief”.

The buyer recognised that they had nothing to back up their suspicion other than a gut feeling and the feeling of something not being totally right about the way the auction went. They definitely felt that in that moment they felt trapped, cornered and under pressure to compete against a bidder whom they had a suspicion was not a real bidder (the only other bidder).

What to do? 

The buyer asked me what should they do?

My response was to state that the industry is governed by the Real Estate Agents Authority (REAA) who spell out on their website the procedures open to you to complain about any person involved in real estate. You could complain to the real estate company who held the auction or the REAA direct.

As I read the REAA code of conduct the agents involved in this auction breached clause 9.2 which states "A licensee must not engage in any conduct that would put a prospective client, client or customer under undue or unfair pressure" Certainly from their description I believe that this buyer was put under pressure. I think also the pressure for them to bid by $25k when the auctioneer had accepted a $10k incremental bid by them just before, again could be interpreted as undue pressure.

I think this situation highlights some concerning aspects of the auction process:

  1. The event of an auction is highly charged and highly pressured. Agents defend this in stating that their role is to represent the vendor and seek the highest price, however I think there should be a professional duty of care to ensure that auctions are not unduly pressured affairs and that ‘breathing time’ be allowed. A normal negotiated sale allows buyers and vendors to consider the process and their offer. The auction process has become so mechanized that agencies try and cram 20 auctions into an hour in a packed auction room – is this fair or appropriate?

  2. The manner of agents “circling” bidders to try and illicit bids and to encourage speedy decisions I think is inappropriate.  A bidder should be allowed space and privacy to reflect and consider. If they choose to have professional help then that is fine but agents (all of whom) are on the side of the vendor hustling buyers is not appropriate.

  3. Vendor bids should be eradicated. The purpose of an auction is to in one place and at one time gather together willing buyers to bid in a public and open manner. The interjection of what is called a vendor bid (even if it is publicly announced) is irrelevant at best and massively confusing at worst. If the competitive bidding by the assembled buyers does not see the bidding reach the reserve then the property should be passed-in (allowing recourse to the vendor) – the auctioneer throwing up vendor bids never changes the outcome.

  4. Bidders at an auction should be required to register and be assigned a visible number through which they bid. This would improve professionalism and ensure that the agents and vendor has the benefit of knowing how many active bidders there are and who they are. This component of due-diligence would instantly remove the doubt created as in the scenario outlined above.

The fact is that auctions can be an effective and valuable process for selling real estate as is demonstrated not only in NZ but around the world, however I think that the whole market of auctions has got ahead of itself and as I wrote recently got out of hand, with a sense of a production line fueled by real estate agents seeking to hype the market. A cool head whilst all around them seems to be in heated turmoil would be good to see within the real estate industry – please!

 


Should a real estate agent be paid $1.5m a year in earnings?

by Alistair Helm in ,


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This week Barfoot & Thompson in celebrating the achievements of their Top 25 salespeople detailed that their top 3 agents collectively sold a total of more than 300 homes in the past year. At an average sale price of $721,000 these sales generated a total transaction value of over $200 million from just the top 3 agents at the largest real estate company in Auckland.

Now to my mind it is not important to know who these people are. They are undoubtedly successful and certainly valuable to Barfoot & Thompson as they accounted for 3% of the total transaction value of the company last year. Three people from a total of over 2,000 who are self employed contractors operating under the licence of Barfoot & Thompson.

Doing a simple calculation based on the commission rates of the company and knowing a little of the commission split between the individual agent and the company leads me to believe that each of the 3 top agents earned around $1,500,000 each last year.

Three of the top agents working for the largest Auckland real estate firm earned an estimated $1,500,000 each last year from selling real estate.

Now I will accept that these agents do employ assistants to help with the work load; after all 100 property sales a year equates to two sales a week and that is far above the average for the industry at large, at just 8 sales in a year. So let’s allow $150,000 of costs for assistants – that still means that these agents are earning around $1,350,000 a year.

That earning power puts them well inside the top 20 pay of CEO’s in NZ as referenced from the 2011 NZ Herald CEO Pay Survey.

 

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  • Earnings of $1,350,000 a year is the same as that earned by Simon MacKenzie  the CEO of Vector, a leading infrastructure company managing electricity, gas and fibre optic networks with over 500,000 domestic and commercial customers, it manages over $5.5bn of assets delivering an operating cashflow of $390m.
  • Earnings of $1,350,000 a year is over $100,000 more than Don Braid the MD of Mainfreight a NZ based global logistics company with sales of over $1.8bn employing 5,000 people. In that financial year the company made $26m in profits.
  • Earnings of $1,350,000 a year is over $350,000 more than Russel Creedy the CEO of Restaurant Brands operating 177 stores with 3,700 employees across NZ with sales of over $300m. In that financial year the company made $26m in profits.

Running a complex multi-million / multi-billion dollar business across NZ and the globe is a challenging and demanding role with the responsibility for thousands of employees, customers and suppliers not to say the accountability to a board and shareholders. Top CEO’s are paid for performance and the demands of the job. They are in demand and have global value.

Selling houses is not, let us be honest that demanding. You have a handful of customers at any one time, you have virtually no suppliers or employees. You don’t have shareholders or a board of directors to report to. Bizarrely the people who monitor your performance share in your success and yet they do not directly contribute to that success, save only for the real estate license that a salesperson at Barfoot & Thompson operates under.

I do not blame these top agents for earning $1,500,000 a year, that is just the fact of the industry. Further I do not lay blame at the feet of Barfoot & Thompson, the same situation exists for a handful of top agents at Harcourts, Ray White, Bayleys and others, each earning well in excess of $1m a year. It is just the way the industry is structured, as self-employed individual agents are incentivised through commissions. The structure of the real estate industry creates this situation.

I think the real estate industry is inefficient, I think it is in need of change. Selling a house is not a unique skill, nor a highly demanding skill. I am convinced that all of the 100 odd houses sold individually by these agents in the past year could just as well have been sold by any other agent. It is just that these agents have created a "marketplace" that they control, not though any illegal means, simply the structure of the industry allows them to be so effective and dominant.

The core fact is that these top 3 agents do not have unique skills that allow them to earn in 7 days what the average agent earns in a year! There is something wrong with this industry when these disparities exist and the consumers of the services of this industry are being stung with this cost structure.

 


Real estate agents endorsing digital media! - the tide has turned

by Alistair Helm in


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Working in the realm of digital media as I have done for over 7 years now, I struggled long and hard to get agents to see the value of online advertising, it was a long and arduous road. Getting agent to embrace digital media and relinquish that decades old love affair with newspapers, that was the objective at Realestate.co.nz and at many property portal around the world.

In many countries the pendulum has firmly swung in favour of online advertising, the US being a prime example where it is rare to see any print media advertising for real estate. In Australia the majority of spend by agents is heading online and Europe is firmly in favour of online. However in other parts of the world the print media and particularly newspapers are still seen as the advertising medium of choice.

So imagine my surprise and delighted when the following video was brought to my attention by Business2 in Australia, the media hub of real estate and technology. The video they profiled on their site was made by a real estate company!.

The video by Philip Webb pulls no punches; stating that the primary function of real estate advertising in newspapers is for the brand profile of the agent or the real estate company, not the property. Buyers go online. Sellers check out the newspaper - after all that is where the agent said they were going to spend the vendors money advertising it!

In NZ it costs less than $700 to do a significant online campaign, a campaign that is working 24hrs a day for a month around the world to an audience of hundreds of thousands. That amount of money would not even buy a single page in a property magazine. A single page that becomes recycle trash within 24hrs and reaches people who have to go to an office to pick it up and sift through thousands of properties that are not sorted in the logical needs of buyers - location and price filtering!

Here's the video from Philip Webb.

Its a brave move by Philip Webb. It's guerrilla marketing. The video is not to be found on their website, clearly they want to kick up a storm and demonstrate a competitive distinction. I would judge that they are achieving this, they are certainly getting media coverage within the industry.

Maybe other smart real estate companies might take their head out of the sand and realise that they could differentiate themselves by endorsing online-only campaigns as 200Square does in NZ.


Open homes – questionable value for sellers so why are they so common?

by Alistair Helm in


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In my recent analysis of the inefficiencies of the real estate industry I estimated that an average real estate agent spent 13% of their working week undertaking and organising open homes – that would amount to around five and a half hours. On reflection I would now like to add this segment of their working week to the 64% of their time spent by prospecting for new business. Why? Because open homes are largely a profiling and prospecting tool benefiting the agent more than the vendor.

Don’t take my word for it – ask a real estate agent. Steve Koerber, a respected and highly professional agent I know wrote in a post a couple of years ago that “The truth about open homes might set you free”. He stated that based on his calculation an open home had about a 5% chance of achieving a sale.

In rereading his post again the other day, I was reminded of a real estate training session I sat through a number of years ago run by a highly charismatic auctioneer and trainer.

He related a similar story although he was much more positive of open homes. His mental imagery for the attendees (largely rookie agents) was to reflect on the fact that that only 1 in 30 visitors to an open home were likely to be a buyer. So rather than get despondent, think of each visitor as coming in the door to give you money! He stated that based on your prospective commission of $12,000 that you as an agent were going to get for selling a house, each open home visitor was actually worth $400 – his imagery was to whisper a mental “Ka-ching” to yourself each time another visitor walked in “Ka-ching $400” - one step closer to 30 people in total!

Despite this inefficiency of hosting open homes, properties for sale still need to be viewed, as I am sure very few buyers would buy sight-unseen. Far more efficient is the process of scheduled private inspections arranged for serious buyers. This is by far and away the most common process for real estate across the globe. Sellers don’t need to waste time and effort for weekend viewings that are for the primary benefit of nosey neighbours and profile seeking agents.

An inspection professionally arranged between a serious buyer and the selling agent adds professionalism to the real estate process.

But hold on, ask yourself, does the agent need to be a part of the inspection process? Why not allow committed buyers to meet committed sellers. Not to usurp the process; but to allow a more relaxed and engaging interaction. Such a system is advocated by 200Square – the innovative real estate company whose approach to selling property is using a licensed real estate agent to facilitate the transaction whilst allowing technology and smart buyers and sellers to undertake the components of the process where the agent really adds little value – inspections and open homes. In that way they can offer a full service licensed real estate solution at a fraction of the cost of traditional agents.

Coincidentally 200Square tweeted today the feedback from one of their buyer clients, demonstrating that removing the agent in the process of the inspection removed pressure and created a relaxed opportunity to view the property guided by the sellers.

Time for a change? time to question the value of some components of the real estate industry process in order to increase efficiency and add value.


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%?


What value do real estate agents add?

by Alistair Helm in


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There is a great line in the excellent book "What Would Google Do?" by insightful author and Professor of Entrepreneurial Journalism at City University of New York - Jeff Jarvis; in reference to how Google might reinvent real estate. He states his "enmity for agents and their oligopolistic fee structure .. it's not personal its financial!", he then goes on to say "I just don't understand the value they bring, but if you must explain your value, its not as great as you think!"

This line has resonated with me for many years. Value in any business needs to be highly visible, not something that needs explaining. Sadly real estate seems to need to justify its value-add rather than having open public advocacy of it. 

So it was with little surprise that I heard this story recounted by a friend last weekend regarding their recent personal experience of real estate service which only added to this questionable view of the value provided by real estate agents.

I do not propose to identify the agent or the company they work for. They know who they are and sadly I fear there may be other agents who may quake a little in their respective boots thinking it is them given the commonality of just such a situation.

My friend owns two properties, both within a small geographical area. They are not a seasoned property investor, merely an ordinary person who for personal circumstances recently down-sized and invested in a rental unit about 6 months ago. With the recent sale and subsequent purchase they had had contact with a few local agents in the area.

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Due to a change in circumstances in the past month they thought about selling the unit which they bought for around $500,000. As one might well do, they decided to contact the agent who facilitated the purchase of the unit for them to see what the market might be for such a unit and whether they would be able to sell quickly. A reasonable request and a useful opportunity for an agent to build a prospective business opportunity.

The agent gave a verbal response and then asked if my friend wanted a full appraisal on the property so as to be ready to market the property, my friend declined as they were unsure if they wanted to sell, it was at this stage just information.

A couple of days later the agent contacted them and said they had a buyer who had written up a conditional offer to buy the unit with the only condition being the desire to physically inspect the property. The price was good and the offer had no other conditions - seems great. However the stinger was the agent fee!

The agent wanted my friend to sign a listing agreement for the full fee of c. $20,000 before they would present the offer.

Now there is nothing wrong in the process undertaken by this agent, they have a willing buyer who they want to introduce to a vendor for which they wish to be compensated, that is fair - but the fee! The commission of c. $20,000 is the full fee - the fee typical of a full service listing with all attendant services of listing, marketing, facilitation, negotiation and completion. A process of upwards of 6 weeks worth of work.

My friend questioned quite rightly how an agent could conceive of charging c. $20,000 for providing so little of value - the response was somewhat as expected "I have to charge what our company stipulates as a fee for successfully selling a property"!

I find this situation (which I know is not uncommon) to be unbelievable on a number of levels.

1. Real estate agents regard themselves as professionals providing a service - the fee should be commensurate with the service - c. $20,000 for even a full days work is not commensurate.

2. My friend had a prior relationship with the agent and the agent knew my friend owned another property surely prospective future business opportunity would have been recognised and reflected in a realistic fee.

3. Does the agent not think that my friend would not share this experience with their friends, acquaintances and colleagues? - as they say you tend to tell one person of a good experience and 10 people of a bad experience.

4. Would not the agent have raised their professional standing and reputation if rather than going back with this one offer, instead gone to my friend with a proposal saying that they had this strong offer and recommending two options. Firstly consider this offer seriously as timing may be of priority, but also secondly why not consider marketing the property given this level of interest. The agent could have presented a full service marketing campaign together with a full appraisal of the property - very easy considering they only sold the self same property barely 6 months ago.

Real estate agents business is based on relationship and reputation and largely relies on referrals. How could anyone consider that proposing such a fee for such little work be conducive to building future relationship and business?

Needless to say my friend chose to decline the offer - their comment to me was that the experience had actually dissuaded them from even selling the property, it had left a bitter taste in their mouth - sadly "tarring all agents with the same brush".


Find My Real Estate Agent - a new service that falls short of expectation

by Alistair Helm in


I have recently shared a couple of posts regarding the process of choosing a real estate agent and also the recommendation to appraise your agent before you get your property appraised.

The common theme has been the recommendation to do your research and uncover who are the right agents in your area to suit your needs. Given this is so important, I therefore would have thought that a new website service with the brand name of Find My Real Estate Agent would have focused on helping people through this difficult process, sadly the website is a big let down.

The site is a purely a directory, no more valuable to be honest than the local yellow pages. The analogy is very appropriate as the site really only has one objective which is to sell agents on buying a profile for $99 a year. There are currently around 10,000 agents in NZ, sadly many have very little grasp of online, but what they lack in knowledge they more than make up for in fear of not being profiled online and this fear is what the site focusses on targeting agents rather than the sellers.

The site has spent money advertising internally within the industry to real estate agents to highlight their service and their ‘low fee’ to be profiled in the selected area where buyers are searching, however the site has yet to advertise its services to the public in general and sellers in particular. The most logical place to raise its profile would be on Trade Me Property or Realestate.co.nz given that is where buyers are, and most buyers are also sellers, however as yet no such advertising has been undertaken.

So having been so scathing, let me be more constructive in my review of the site - here are my personal view of the positives for the site and also the weaknesses.

The site does host a fairly robust portfolio of names and contact numbers of agents – currently 7,800. There are actually 8,800 active agents as detailed on Realestate.co.nz which is the most easily accessible database of agents. Agents are only profiled on Realestate.co.nz when they have an active listing, thereby making the Realestate.co.nz search function a more dynamic and relevant portfolio.

The site makes great play of the random process by which it displays the sequence of agents in an area. Yes this is honest, open and impartial. However as I will go on to highlight the lack of information to evaluate agents means this attribute is a feature, not a benefit.

The site has a simple brand name and a very clear design, although it does seem to be designed for the poorly sighted audience as it seems to like to space out the text and focus on massive amounts of blank space which means information is spread out too widely

So why do I think the site is a big let down?

The only value in the site would be if all the agents had a detailed performance history, this would, to quote the site itself, provide you with a detail of “A local specialist (who) will know the sort of buyers your home will appeal to, give an accurate price indication, and put together a smart local marketing plan”.

However this business faces the same challenge of any two-sided marketplace. What the site needs and distinctly lacks is a comprehensive and deep detail on as many agents as possible coupled with a large audience of sellers. However sellers will not use the site if there is not rich content of relevance and agents will (in theory) not be interested in spending time and money profiling themselves is there is no large audience of sellers as prospective clients.

What the site needs is more information on agents than just contact numbers. Even referrals as testimonials from past clients are not in today's more open online sufficiently credible when they are just plain text. Hard facts and data are, and should be the benchmark for assessing agents - how many listings?, what type of listings?, how many days on the market?, selling price to listing price ratio? I know that the real estate industry is very cautious about such data, but to be truly trusted and justify the commission fees charged agents need to be open to be benchmarked.


Choosing the best real estate agent

by Alistair Helm in


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Buying and selling a home as is so often stated, is one of the most significant financial transactions anyone is every likely to undertake. It is also one of the most infrequent transactions. Most people only every buy half a dozen homes in a lifetime.

For this reason the process of choosing a real estate agent should be viewed as just such a significant decision. However it is likely that most people choose their agent with little more than a cursory evaluation, with minimal research and investigation.

Considering the fees, the seller will likely end up paying the agent in terms of commission alone upwards of $15,000 to $20,000, you would think more effort and critical performance review of individual agents would be undertaken.

Research, primarily by surveys over the years has found that people tend to rely on prior experience to select their agent. Second most common choice is based on referral from a friend. However despite this feedback from surveys; the most likely process undertaken is the subjective assessment of “who has the most presence in my area” – the agent with the high profile demonstrated by For Sale signs and profile adverts in the paper. However as the saying goes “Never judge a book by its cover” – just because you see adverts for an agent all over the neighbourhood may not mean they are the best agent, or the best agent for you. It just means they are likely to be spending the most money on advertising - themselves.

As stated in a prior article, agents are recognising the importance and value of profile advertising on property portals as they appreciate that this is where buyers are spending so much time searching property. The fact is the majority of buyers are also looking to sell their property. So it would make sense for sellers to use the web to undertake more extensive research as to the right agent to act on their behalf to sell their house.

When it comes to choosing an agent, I would recommend you approach the process in the same way you would if recruiting someone to work with you. Do your background research and then interview the chosen shortlist of suitable candidates.

Here would be my advice to choosing the right agent

1. Look online to see what houses are on the market that best match your house (price, location, type) – which agents are selling these? Recent experience of selling a similar property for a similar price in the same area is likely to direct you to an agent that knows that sector of the current market well – look for that match

2. Review the adverts for property online that attract your attention. Follow a logic – if the advert for a property appeals to you, it is likely it appeals to others by the way it has been put together. Agents that focus on online presentation of their clients listings are more likely to be progressive agents that understands the marketing process to maximize impact and visibility to prospective buyers

From these first 2 steps draw up a long list of agents, probably 6 -10 agents

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3. Check out the current listings of these agents from agent pages on Realestate.co.nz – take note of the number of listings each agent has, and how long these properties been on the market, each property shows the listing date. Be aware though that agents with a large number of listings may very well be productive, but on the other hand you may end up being a small fish in a large pond. Equally an agent with fewer listings may be a newbie, or could be may well be highly effective as they sell property quickly, equally they may not be that productive, so try and use the data to establish some performance criteria

4. At this stage you should be starting to narrow the list down to say 4 – 6 agents. You should then do more extensive research on each agent, check out their online profile. See if they have a profile on Realestate.co.nz or on their company website. Review their personal website (if they have one). Read testimonials, but as importantly look to see how they market themselves. If they are good at marketing themselves then they probably have a progressive view of marketing property

5. Don’t forget to do a name search for each of the the shortlist of agent candidates on Google to make sure there are no skeletons in their respective closet

By now you show have a shortlist of two or three, these are the ones who you should invite for an interview to present their proposal on how they would handle the sale of your house

6. Plan to invite them to come round on the same day (it is worth the time). Now I want to propose a somewhat different strategy for meeting agents, the traditional method is getting a group of agents to evaluate the property, my view is evaluate the agent first. Check out my article on evaluating your agent before getting a property appraisal. Trust me the evaluation of the property is best left until you have a chosen agent.

7. Look for the agent to give you a chance to better understand the personal chemistry between the two of you. Look for them to profile some recent marketing campaigns rather than looking for a marketing proposal for your house (that can come later). Ask about process they follow and also their reporting process. The greatest dissatisfaction from vendors after using an agent is very often the lack of reporting and being kept up to date on the process.

8. After this meeting follow up a couple of the testamonials that the favourite agent has provided – these are critical to give you a comfort to support your gut feel.

Then and only then let them carry out an evaluation and provide an current Comparative Marketing Assessment as is required under the REAA requirements. When you are completely satisfied, you have an accurate CMA, you have a detailed marketing plan and you have negotiated the commission or service fee; then and only then sign a listing agreement.

Best of luck in the selling process.


Why you should appraise your agent before getting a property appraisal

by Alistair Helm in


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The real estate industry traditionally encourages sellers to seek a property appraisal from a number of agents as part of the process of listing your property for sale. I believe this is a broken model and needs to be challenged.

I hold the view that you should appraise your agent before you even talk about your property. Why would you choose an agent based on what they think your house is worth, and especially more so because they think your house is worth more than another agent?

Agents have access to extensive property information these days and naturally combine that with their experience and competency to ‘read the market’. Now the reality is, all agents have access to the same base set of property data, extensive as it is; the truth is that the same information is provided to all agents. Now evaluate that fact against the fact that a competent agent based in a local market will have as good a ‘read of the market’ as any other local agent and you should be able to see my point that you should evaluate an agent before they even step into your house.

Surely you want an agent that you can work with, an agent for whom you have a sense of a chemistry, an agent that can show you recent examples of marketing campaigns and satisfied clients; an agent who is more than happy for you to reference check their recent satisfied clients.

So why do people choose agents based on nothing more than a bidding process?

 A bidding process that has nothing to do with outcome (the final sales price / net proceeds after commission) and everything to do with a prospective evaluation of what a property might sell for – no guarantee (sorry!)

Returning to the point made earlier about property information. Real estate agents have two companies in NZ providing property stats to base their Comparative Marketing Assessment (CMA) as required by the regulatory body the REAA. These are Terralink with their Property Guru solution and QV with PropertyIQ service. Both of these solution provide historical details of every property sold in NZ from the government land transfer records, additionally they both (although from different sources) provide details of historical property listings, finally both companies provide an algorithm which creates a valuation estimation for every property – the same valuation system that provides for the electronic valuation you can get from QV and Zoodle respectively. The agent systems do allow some tweaking of the input properties to ensure a weighting is applied to more suitable properties.

So in summation the data set and systems behind every real estate agent is the same, there is interpretation input, which is as much a function of agent competency. Add this to the competency of a local 'sense of the market' and professional presentation and I would argue that you should appraise your agent before getting a property appraisal – don’t be suckered into choosing an agent purely on price.


Online marketing is the new prospecting tool for real estate agents

by Alistair Helm in ,


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The time honoured approach to prospecting for new business by real estate agents has largely consisted of door-to-door leaflets, local business networking, endless coffees and the ubiquitous press adverts comprising smiling faces alongside successful sales results.

Today - more and more the power in prospecting is online and the leading property portals around the world are reaping the rewards as they deliver just what agents want – sellers.

I came across the excellent, simple and highly effective advert from Zillow in the US which succinctly ‘sells’ their Premier Agent service, which provides a profiling of agents as a prospecting tool.

Here in NZ there are just under 9,000 active agents. All of them are self-employed contractors who whilst operating under the banner of their chosen branded company are solely motivated to become the most successful agent in their chosen geographical area. This hyper-competitive environment is what keeps on attracting people into the profession, yet it is also what makes real estate so challenging for new entrants. This has been the rich harvesting ground for the print media for the past decades and now become the cash generating machine for online property portals as the last of the print media for real estate finally dies.

Building a profile is tough as a rookie agent, as is it is for an established agent competing against all the noise of rookies trying to raise their profile.

It reminds me of a piece of advice I heard back in 1995 when I was first investigating this industry and undertook the real estate salesperson course at the time.

I was told that there wer three things you needed to be a real estate salesperson:  (i) the money for the course – c. $1,000 at the time (ii) a car to take people around to see houses and (iii) a house. This last requirement was nothing to do with a home-office, and everything to do with the fact that if you could not generate any leads in the first couple of months, you could always list and sell your own home. Not to save the sales commission fee, but to be able to then showcase that you had a listing – and thereby demonstrate achievement of the first rung on the ladder!

This new online profiling tool is being marketed in NZ on realestate.co.nz as the featured agent service which places an agent advert adjacent to the listing result – spend enough with the company and you also get a photo adjacent to all your listings – why is it that real estate is one of the few industries where everyone is driven by their image, on the business card, online etc?? (a question for a later post I suspect).

In Australia the leading site of realestate.com.au has grown a business nowadays turning over in excess of A$250m from advertising of agents and listings with a company solely focused on online real estate valued in excess of A$2 billion.

It is clear that all types of real estate marketing, albeit property related or agent related is moving online at a pace so clearly it begs the request that the last to advertise in the newspaper, please switch off the machine!


There's something inherently wrong in real estate - a NZ perspective

by Alistair Helm in


I have long been a respectful fan of the US team who run 1000Watt - a specialist consulting services company providing guidance and strategic management to companies in the real estate industry, both in the US and internationally - I have met all of the principles over the years and value their skills and vision for the industry.

Their blog is always pithy and most often challenging and thought provoking. Today's article hits the spot!

I would ask you to read "There's something inherently wrong in real estate" - read it as a consumer, real it as a real estate salesperson, read it as a business owner.

Then perhaps share your thoughts - please feel free to comment on their blog, but also take the time to share a thought / comment here so we can generate a NZ perspective.

As to my view.

I have spent over 6 years working in the real estate industry - not as a salesperson, nor a business owner, but running the leading real estate website for the industry. That role gave me an insight into the industry. Over the years I met many, many people in the industry and discussions often gravitated to where the industry would go in the future, the impact of technology, the changes in legislation - the list goes on.

My view is, as this blog post asserts that there is something inherently wrong in the industry. The lack of a formal apprenticeship is key, the formulaic like adoption of what has worked before, the over resourced nature of the industry with too many people literally fighting each other for the next listing. The lack of appreciation and value of marketing. I could go on. I will go on in a future blog post sharing my opinion, but for now I would like you to read the words of Marc Davison and share your thoughts.


Will the last to advertise in the newspaper please switch off the machine!

by Alistair Helm in


I am not, to be honest too sure as to my reaction to the all too frequent local newspaper that is stuffed into our letter box. To call it a newspaper is challenging that definition as it is by my simple calculation 62% adverts including advertorial and around 15% stories - not the newsworthy type; the balance being adverts from the newspaper itself.

The paper I should also point out is now reduced to just 8 pages - why do they persist in this industry - can it be profitable? I wish to be honest, it wasn't stuffed into our letterbox; after all we do have a prominent "No Junk Mail" sign on it and to my mind, this is junk - equal to a flyer for some restaurant or grocery offer - but don't get me started on junk mail.

Anyway; why I have no idea, but I did scan this thin paper and was stunned to see the classified section at the back still has a Real Estate section. Long gone are the days when this would have had columns and maybe even pages of adverts for property for rent or sale - a very lucrative business in its day. Now that space is taken up with a solitary advert from the publisher, trying to entice a local real estate agent to "profile yourself and your services where it counts - in the papers that service your areas". How many agents have taken up this opportunity? - none!

The writing has been on the wall for years - people looking for property to rent or buy go online. People looking to find an agent go online. The end for newspapers is drawing closer, it's demise started as the classified dollars started their migration online - first it was cars, then jobs and now real estate, there's not much left to support these dinosaurs of a bygone era.