Would you consider selling your house yourself in order to save $15-20,000? This question was posed in an Australian publication and the responses came in thick and fast. The majority said: "Absolutely! Real estate agents are lazy and overpaid".
The question was prompted by a newspaper article about two online real estate companies considering a stock exchange listing to raise money for expansion. Both companies are hoping to disintermediate the real estate market, which essentially means removing the middle man, the real estate agent.
BuyMyPlace.com.au and Hello.com.au provide conveyancing, negotiation, auction and other services associated with selling a house, for a fixed fee considerably lower than the traditional agent's commission.
In Australia, real estate commissions are typically 2.5- 3 per cent which translates to $A15,000 or more based on the average house sale price. These two firms charge a fee for their services (from a few hundred dollars up to $A2,000) and then advertise your property on their own website as well as on the bigger property websites, realestate.com.au and domain.com.au.
One respondent noted that if the question about DIY home selling had been asked 10 years ago, there might have been a different response.
If people were asked a decade ago if they'd get into a stranger's car via a mobile app or stay in somebody's house for a holiday, organised online without speaking to the owner, few would have said yes, he pointed out.
But Uber and AirBnb have successfully disintermediated the taxi and accommodation markets, so why shouldn't these companies do the same in real estate?
Others suggested DIY selling is more palatable today because the real estate sales process has changed so significantly. In the 'old days', an agent would show you around a property, and even take you to a variety of houses, highlighting points of interest and discussing price trends in the area. Nowadays it is more common for an agent to simply greet you at a house on open day, hand out a printed flyer and wait for the offers to come in.
The agent also typically used to advertise the property with the cost coming out of their sales commission. Today, vendors pay for their own advertising on top of the agent's fee.
Those who said they'd prefer to use an agent agreed they could perform many of the agent's function themselves - photographing the property, and researching recent sales and valuations. But the real value of an agent was their extensive database of potential buyers, they said. Anybody can hold an open home but a real estate agent can ensure sufficient people attend, thereby creating competitive tension.
The public speaking and negotiation skills of a real estate agent were also cited as reasons to avoid the DIY approach - who would be brave or talented enough to stage an auction and get the best offer from two competing buyers?
It will be interesting to see how effective these and other self-service real estate firms are in the years ahead. While they appear to be a threat to the traditional real estate sales model, the same fate was imagined for travel agents with the advent of online travel companies and retailers with the growth in online shopping.
Some weaker or undistinguished travel agents and retailers have definitely fallen by the wayside but strong, differentiated players have maintained their positions and, in many cases flourished, despite the emergence of online competitors.
Perhaps real estate agents will have to re-visit the service levels of old in order to justify their fees and maintain their relevance. Accurately predicting house price movements? We'd pay for that!
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