The biggest threat facing the traditional “list and sell” model of real estate isn’t Purplebricks, but a much larger force that is already 4 times the size and one of the fastest-growing large agency models in Australia.
The assisted “vendor DIY model” was relatively small 5 years ago, however almost overnight agencies that provide vendors the ability to self-list on Realestate.com.au have exploded onto the real estate scene, eclipsing the well-marketed Purplebricks agency.
According to data obtained by Real Estate News Group, in 2017 and 2018, vendor DIY agencies listed over 6,500 homes, 4 times more than Purplebricks’ 1,500 in the same period.
Example agencies include BuyMyPlace.com & No Agent Property – however there exist far more “agent-free” options found online, and many have fewer than 10 employees, servicing hundreds of listings.
At $700, Agents Can’t Compete on Fees
The business model for DIY’s is fairly straightforward – a small upfront fee of usually around $700 is charged to list the property and receive a corflute signboard that the vendor erects themselves. Larger packages with higher upfront fees are also available, and usually include photography, floorplans and brochures. Some even offer a “qualified agent to step into negotiations on your behalf.”
Many of the extras (such as brochures and photography) are sold to the vendor at a premium which is often twice the cost price, marked-up for “administrative purposes.” It is reasonable to assume these agencies are comparable in quality to REA salesmen.
With commissions starting at around 10 times this figure, before marketing fees, there is no possibility for a traditional agent to consider competing on fee.
The One Major Flaw That May Be DIY’s Complete Undoing
However, despite the huge popularity with vendors disgruntled with the traditional model, the $700 fee carries significant, and possibly crippling, unseen costs.
According to the data obtained by the Real Estate News Group, of the 6,500 listings, 50% failed to sell, and those that did took over 300 days to achieve an outcome.
Taking into account the costs of holding a property beyond the industry’s 45 day average and potential losses due to vendor discounting, agents have a strong case to argue that a commission is well worth the expense.