KEY POINTS:
The real estate industry cannot afford to insist on the traditional model of selling property, an academic and former real estate agent says.
Dr Susan Flint-Hartle, a senior lecturer in property studies at Massey University's College of Business, attacked high marketing fees to sell houses.
She also questioned whether there was any partnership or risk sharing between house vendor and real estate agents when people were being asked to pay $5000 cash to market a sale which might fail. The former Auckland real estate agent went back to study 10 years ago.
"She has just completed a doctoral thesis on real estate franchises," Massey News said. "She says the industry cannot afford to dismiss innovation in the way property is sold - regardless of the reasons for the recent collapse of the Joneses real estate agency." The first report on the Joneses is due out from Meltzer Mason Heath this week.
A handful of licensed agents are selling properties for less. Russell Malcolm, of Kiwi Real at Orewa, is charging $6900, Jeff Brill, of Rental Homes, on the North Shore wants $5000, Diane Astle Realty of Ferrymead in Christchurch charges only 1 per cent plus marketing fees and the Go Gecko chain can sell for only $5950. Green Door sells a house for $995 or 1.3 per cent of the value of the house. Home Sell is also charging low fees.
Traditionally, licensed agents sell houses for 4 per cent of the value of the house up to $300,000 and 2 per cent after that. Peter Hammond, co-owner of Green Door in Palmerston North, said he knew of 130 companies and licensed agents selling houses at cut-rates. "A year ago, there were only 25 to 30 doing it, but it's increased fast."
Dr Flint-Hartle said the cost of selling real estate by the traditional method was not well understood.
"Vendors expect to get high prices because they factor in marketing costs and high commissions. Not only are commission rates among the highest around, but vendors are forced to pay massive marketing fees - say $5000 for the anticipated sale of a $700,000 property; where is the partnership and risk sharing in this?
"Although the current model of selling real estate places increasing financial burden on sellers by adding considerable marketing costs on to already high commission rates, the majority of vendors still don't want to step outside the system endorsed by the Real Estate Institute.
"Participants in the market are largely caught within the system and ... in many cases people cannot see value for money."
Massey News said new real estate agencies such as Go Gecko and Green Door offered different selling methods, indicating real demand for price-driven alternatives.
"It is a narrow view to suggest only the best salespeople work for commission-based agencies because some actually prefer a team-based and salaried approach ... It is time for the real estate world to ... provide real choice for the public."
