Direct sales between home sellers and buyers are flourishing. Many people are avoiding estate agents, whom they regard as expensive, devious or ineffective - or a combination of these.
Private Property Listings is a company that enables home sellers to bypass estate agents and avoid high commissions. CEO Justin Clarke claims his website - www.privateproperty.co.za - is the most popular property site in SA.
Sellers registered more than 800 homes on the site in June at between R1,000 and R2,500 a time, and sold 220. (The fee does not guarantee a sale.) The site has 117,000 registered buyers. Private Property also earned commissions on R100m in mortgages they arranged in June for clients.
Clarke is reticent about his exact earnings. "But it is enough to be profitable if we were not spending so much on advertising and promotion to build up the business," he says. An average of R2 000 a listing and 1% mortgage origination commission would have brought in R2,5m in July, R30m annualised. This is equal to a large regional agency.
Organisations around the world have been trying to devise ways to bypass agents. But they have made few inroads into the traditional estate agency model.
Private Property's website makes no bones about its main attraction. It sports a smiling couple with the caption: "We saved R100,000 in commission."
The biggest argument against private sales is that the buyer and seller founder without support from agents, which includes market and price knowledge, negotiations, and processing documents. But Clarke says he has most of these services in the mortgage origination business. "Our consultants visit clients, arrange photographs, give them a pack that includes advice on preparing their property for sale, sale agreements and other documents, and research on the latest prices," he adds.
Ironically, Clarke's success comes as agents' commissions are falling. There is competition for sellers and top agencies are improving their service standards and methods, building trust.
Pam Golding COO Ronald Ennik says the company's Gauteng office has been "smashing" budgets with a 30-point process that brings it closer to its sellers. July sales were R350m, well above the budgeted R270m. "This is coming at a time when agents' turnovers are down because of high prices," adds Ennik.
Ennik says one of the key skills his agents have after intensive training is "price counselling" that ensures successful conclusion of sales. Private sellers lack these skills.
PA Group chairman Jan le Roux agrees. "It's little help saving R100,000 in commission when you underprice your property by R200,000, " he says.
Clarke, however, disagrees: "Sellers are astute these days and not all agents have pricing skills."
Ennik and Le Roux do agree that estate agents' poor image in SA has given Clarke his opportunity. Yet they think Private Property will not be successful. "I haven't seen one of these businesses last ," says Ennik. "They do well in the good times but they can't survive the eventual downturn."
Financial Mail
Publisher: I-Net Bridge
Source: I-Net Bridge
