As the economy declines, we see a rise in new real estate operators offering sellers all sorts of ‘new’ incentives to secure their business. Often styled as disruptors, these range from low commission to fixed fees or a combination, all aimed at enabling a DIY (do it yourself) or For Sale By Owner solution (FSBO) of sorts.
Samuel Seeff, chairman of the Seeff Property Group, who has been at the forefront of the property sector for 30 years (Seeff company for 50+ years), warns sellers against ‘gimmicks’.
There might be the odd sale, but Seeff says these are rare and insignificant in the market. A study has also just been released in America that provides irrefutable empirical evidence that FSBO (for sale by owner) and low-commission models aimed at ‘saving’ the seller money, actually costs the seller at the end of the day, he says.
Collateral Analytics (developer of real estate analytic products for financial institutions, investors and capital markets) undertook a major study in conjunction with San Diego University Real Estate Professor, Norman Miller.
They looked at more than 200,000 FSBO (for sale by owner) sales and one million MLS sales across hundreds of markets in 2016 and 2017. It found that on average, FSBO listings sold for about 5.5 percent less than comparable sales through MLS. FSBO listings also tended to sell for less than their automated valuations while MLS listings sold for more, enough to offset the commission.
The study highlights that FSBOs have a low probability of selling, and if they do, are likely to net the same or less after closing issues. They are also likely to face issues of disclosures and potential lawsuits after the fact.
Seeff says that sellers need to remember that the buyer decides what property to buy based on a range of considerations such as the location and how it meets their needs. The process is largely a factor of price and personal preference. The low commission factor is of no interest to the buyer whatsoever.
In fact, Seeff says that it is in all likelihood off-putting. Potential buyers would assume that a low commission property should offer some kind of price discount. In today’s real estate world, buyers have access to information and are quite aware of prevailing prices. If they see no bargain, they will simply walk away.
“Unless you can offer access to buyers, you are wasting the seller’s time. It does not help a seller to think they can save on commission when their property is not going to catch the attention of potential buyers. Buyers go where they can find access to a whole host of listings”, says Seeff.
Over the years, many new start-ups have tried to ‘disrupt’ the industry without grasping how it works and most have not gained much ground. Homebid for example launched two years ago with a 2% commission offering, lowering it since to 1.95% when Property Fox entered late last year with a 1.5% model. Both only have around 350 property listings compared to mid-sized agencies of around 6 000-12 000 listing and top brands such as Seeff and Pam Golding at around 25 000-30 000 (based on listings on a major property portal) and a significant national footprint, reach and stature that these small operators simply cannot match.
‘The best advice to serious sellers, is to go with an agency that can offer you the widest possible access to buyers, preferably an agency with a strong footprint and presence”, says Seeff.
“Multiple listings is another favourite when the market bites. Granting an open mandate to multiple agencies does not mean that they are all going to roll up their sleeves and work like mad to get your property sold, quite the contrary in fact. Multi listings are off-putting to buyers and unlikely to get your property sold faster or for a better price. A sole mandate is a contract with the seller to deliver a particular level of service”, says Seeff.
“Selling a property is not a simple process of just dealing with bricks and mortar, there are many intricacies, disclosures and a number of property laws that needs to be understood and adhered to in various property transactions. It has been recognised at a high skills level and estate agents have to undertake a period of internship and pass qualifying exams. For agency principals, the requirements are even more stringent”, concludes Seeff.