The Estate Agent will still be here for some time.
Real-estate companies may be betting on the imminent death of the estate agent, but the co-founder of a leading SA residential property platform claims estate agents still have a key role to play when it comes to selling property.
As the property tech sector hots up many are wondering whether the rise of online real-estate platforms will mean the death of the cornerstone of the sector — estate agents (see this story).
Last year online estate agency PropertyFox announced that it had acquired fellow Cape Town based property platform Steeple for an undisclosed sum. It follows the announcement in the same year by Pam Golding Properties that it had acquired low commission agency Eazi.com.
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But Leadhome co-founder Marcel du Toit says doing away with estate agents hasn’t worked overseas. He points out that property platform that have done away with estate agents account for just 0.5% of all property sales in the US.
While traditional real estate agencies continue to pay estate agents commission fees for the properties they sell, the Johannesburg startup — which Du Toit, a former investment banker, started in 2015 with property attorney Harry Hattingh — pays them a basic salary, with incentives paid on top of this to estate agents who meet certain outcomes.
Guidance for buyer
Leadhome currently has 120 employees — half of which are estate agents. The startup began operating in Johannesburg and Cape Town and launched to estate agents in Port Elizabeth and Bloemfontein earlier this year. The plan is to add smaller cities like Nelspruit and Pietermaritzburg soon.
Du Toit claims that the startup has about 65% of online sales for SA’s resident market. The estimate, he says is based on the number of active list of home for sale by local internet platforms.
He says when he and Hattingh were setting up their tech platform they initially wanted to create an offering that did away with the estate agent. But he says they quickly came to realise how estate agents still have a key role to play in selling homes — in providing guidance to buyers, with residential property often being an “emotional” sale.
The tech platform — developed and maintained by 20 full-time developers — provides sellers with constant feedback via a dashboard, on things just as the number of enquiries, how many of these convert into viewings and what potential buyers are saying about the property.
Commission equates to 2.2% of sale price
The startup, which Hattingh and Du Toit have thus far self-funded, has been able to compete effectively against traditional property agents, because sellers are charged a flat fee of R39 995 for any sale — no matter what the value of the property is that is sold.
The average sale is about R1.8-million, says Du Toit. This equates to about 2.2% in commission — compared to the 5% or 6% that traditional property agents take. “The traditional estate agent sector hasn’t been right for a long time,” he says.
Like this, it’s easy to understand why many of Leadhome’s competitors aren’t taking it too well.
Du Toit says there’s been a lot of bad mouthing and negativity spread about his startup by competing traditional agents. Some, he says, are even spreading rumours that the startup is owned by an incumbent, which he says is not true.
In the end he believes residential property companies have two options if they are to survive — focus on the one percent of sales with home values of above R10-million in value, or develop a tech option to cut down the cost of commissions paid to estate agents.
The future of estate agents may not look so promising, but for those who develop tech platforms — it looks mighty good.
Author – Stephen Timm
Original Source – VentureBurn
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