Battle of the disrupters - No agent v cheap agent

The traditional real estate agent is under attack from the left and the right. On the one hand, companies such as Buy My Place are teaching consumers how to sell without a real estate agent. On the other, UK outfit Purple Bricks hit Sydney in recent times to offer home sellers a real estate agent whose total fees are under $6000.

The traditional full service, full fee agent is coming to realise the real estate office next door and down the road is not their only competition.

Removing the traditional agent from the equation, it does set up a very interesting discussion. Are consumers better off giving their listing to a cheap agent or doing it themselves and no paying no fees?

Selling with a cheap agent

The main benefit in dealing with a cheap agent is you save on the commission. However, consumers must first and foremost decide if they are getting value for money in their $6000. If the agent undersells the home, the commission savings are simply transferred to loss in sale price. It is completely in correct to suggest Purple Bricks are the Uber of real estate. It sounds catchy, but the facts don’t support it.

Uber is an automated web transaction that competes in service and cost with the humble taxi driver. The risk for a consumer is essentially zero. Conversely, Purple Bricks take their fee upfront regardless of the result. If you drive the car from west from Balmain on Victoria Rd you will get to Drummoyne, guaranteed. If you list your house on the market, it may or may not sell for a price that you are happy with. Last year in a boom, the auction clearance rate was 80%. That means 1 in 5 failed. There are no guarantees in selling anything. Ask a fruit shop. So the risk is $6000 before the starters gun has gone off.

Finally, good real estate agents don’t work for $6000 a sale. If you are selling a home, its nice to think you will get a high level service for $6000, but you won’t.

Selling without an agent

A great way to look at the difference between selling without an agent v a cheap agent is to run the maths. On the one hand, you have a self acting, self interested home seller looking to save $20,000 to $50,000 in commission. Aside from the sale proceeds, that is the reward if the owner achieves a sale.

On the other hand, you have a real estate agent that will get about 35 to 40% of the $6000 fee in their hand after the costs and split with their boss.

A self-acting owner is saving $20,000 to $50,000 in commission and acting from self interest aligned with the sale.

The cheap agent is relying on a low fee with high turnover in a small time frame.

Time will tell whether Australians adopt the sell without an agent strategy. The cheap agent strategy has been tried many times and failed miserably.