Agent commission too high
News > news - 29 Oct 2007
 

Consumer responses in South Africa to the recent launch of Help-U-Sell Real Estate ® echo the sentiments expressed by potential home sellers and buyers in the US regarding residential real estate services.

 

The Independent Inman study recently conducted in the US revealed that the average homeowner felt that the hefty fees paid to real estate agents could not be justified. When asked, “What do you think about the current commission structure for real estate agents?” more than 95% of participants indicated that they would make use of alternatives to the traditional real estate agents when making their next real estate transaction, thus indicating an increasing demand for benefits and value in service delivery.

 

The US study revealed a sentiment not uncommon in the South African context or indeed the global real estate market. “The property boom of recent years, combined with low interest rates and a strong rand, saw an increase in participants in the property market, particularly in the second home and buy-to-rent arenas,” explains Robert Stevens, Director of Help-U-Sell South Africa.

 

“These same property investors see a large portion of their equity poured down the drain when selling their property holdings as a result of the exorbitant commission structure due to real estate agents. However, Help-U-Sell’s pricing structure is based on charging a fair price for services rendered rather than a commission based on the value of the property,” Stevens explains.

 

“The South African property market has seen record growth over the past five years, achieving the highest return on investment worldwide based on a three year historical average. In 2006 alone, South African property growth was second only to New Zealand,” explains Stevens. However, South African salaries have not increased proportionally and as a result properties have become unaffordable. With less bang for your buck, there are fewer new homeowners entering the market and while current homeowners may well have seen a substantial increase in the value of their property, this increase is still not sufficient to trade up to a bigger home or a better area.  He concludes, “without a natural correction in the market, South Africans could expect an erosion of living standards and an increase in affordable housing projects such as Cosmo City.”

 

Despite the softening in the South African property market however, Help-U-Sell believes that its timing in launching in South Africa places Help-U-Sell in the best position to capture market share and build the Help-U-Sell brand. Sellers are still looking for 30% appreciation on their property investment and with Help-U-Sell, are able to achieve a better return on investment without losing a large percentage of their equity when selling.

 

Help-U-Sell levies a fixed fee in the region of R20 000 as opposed to the traditional 6% commission commonly charged by real estate agents. This means that on a R1 million property, homeowners can expect to save in the region of R40 000 in agents’ commissions, preserving a large portion of their equity that normally would have been lost in commissions.

 

In addition, homeowners are able to regain a sense of control over the process through the ability to customise the service, based on the varying degrees of skills, knowledge and experience in the purchasing and sale of property. As such, the seller may elect to host their own show days to reduce the fees paid to the agent while the agent still handles the negotiation of terms of sale as well as the associated paperwork. Busy executives may however elect to have all aspects of the sale handled by the agent at an additional cost, while still achieving a cost reduction when compared to the traditional transaction.

 

“Interest rate hikes and record high fuel prices in 2006, combined with a consumer debt to income ratio exceeding 64% means that cash-strapped home-owners face hard times in the short term,” says Bernard Fourie, of Bezuidenhout Van Zyl and Associates.

 

The real estate market of the future however, looks very positive, with promising capital growth of approximately 10% for 2007 and between 12% to 16% capital growth for 2008 and 2009, while landlords can expect even better returns as rental income increases towards the end of 2007. GDP growth is expected to increase from 5% upwards and combined with 5% to 6% inflation, owners can expect nominal growth of 11% per annum.

 

Johnnie Louw, Conveyancer and owner for six Help-U-Sell operations in Gauteng concludes, “In the next three to four years, thousands of new property millionaires will emerge as the market improves and a shortage of well-located, medium priced homes drive demand, and therefore price, upwards. They will be helped along by the 2010 infrastructure and development drive which will provide jobs and unlock a new generation of potential home owners in the market.”

 

Uncontested by other players in the market, the launch of Help-U-Sell in South Africa has been well received in the real estate industry and especially by the South African public. To date, 34 franchises have been sold in major centres around South Africa and one in Namibia, with 27 currently operational while the remainder expected to open in the next three months. Key franchises already in operation have received as many as 70 to 80 calls per week, listed ten houses in one week and sold over ten properties in a month with just three staff, proving the mettle of the lean, streamlined Help-U-Sell process.

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