Over the last few months it has become increasingly aware to me that Australia’s largest real estate portals are toying with the idea of playing with their fee structures charged to agents for advertising their vendors listings.
Currently realestate.com.au charges a flat fee and domain.com.au charges fees dependant on your area (city or country) and their so called ‘popularity’ in these areas.
So why would they be doing this? Because they want to make it fairer? Guess again muchumbo, this is all about making more money for their companies/shareholders. You can argue that this is fair enough, as this is what they exist to do. Howeve, they have this opportunity only becuase agents support them and without these agents, they would not attract visitors and therefore 3rd party advertisers like banks and those pathetic what price my house websites.There are some valid arguments for maybe one of these models, but they have to tread very carefully.
So lets look at some current models and possible models or fees.
Area Pricing
Well put simple they charge you a certain fee based on population or region, such as city or country and in some cases their popularity within a region. The reason for this is the thought that city agents turn over much more stock than their country counterparts and therefore make more money. Well, of course this is true, but think a little about it. John and Jill in a country town, also pay a lot less for renting or buying their offices, they pay a lot less for staff, they pay a lot less for advertising and have many cases have much less competition.So that throws that thinking out the window! The only reason Domain do this – is because they can where they have strengths. I do know of many agents that can play a little game with domain against realestate.com.au and get pretty good discounts, so get them to sharpen their pencils. You could tell them that you are thinking of only going with only one portal (tougher times) and get the price down. Yes, Domain.com.au do deals!
Set Monthly Fees
Realestate.com.au currently use this system and it has served them well, everyone pays the same basic rate per month and can list as many properties as they like (obviously franchises get better deals). Prices have increased by around 15% per annum since they started ($150 per month) up to around $400 per month today.
After the debacle of the email problems from a few months ago, realestate.com.au have lost a fair bot of faith from their agents and really have to work hard to gain their trust. The revelation that they wish to gain another 30-40% increase in revenues from agents over the next year will do nothing to help help them win the trust again. I simply cannot see agents accepting en-masse an increase of 30-40% per month without some serious extra benefits. However if they did, I doubt too many agents could do anything about it. My guess is that they will drop the base subscription and try to move everyone up to the next level and introduce another higher level of membership. This will mean all agents will get a logo next to their listings (WOW) and some extra benefits.
I received an email yesterday that told me that they considering a similar model to domain.com.au because they believed it was “fairer”. My guess is whatever they do, it will be to increase revenues, so do not be fooled into thinking you will be any better off under a new subscription offer. Again it will be all about extra $$.
Per Listing Fee
This one is a simpler approach, you pay certain amount of money per listing whether you are in the country or city. The only difference is whether it is a basic listing or a premium listing and the price per property listing will be different depending on your subscription level. I do hate all these different levels of membership, but they are a fact of life – even the free sites are trying to work this in to make some money. This model actually gets rid of problems like agents listing the same property in multiple suburbs and also re-listing properties multiple times. It also creates a more level playing field going forward as many agents are closing multiple offices to lower overheads and doing more from a central office and this must effect REA’s bottom line in some way going forward.
Currently no major portal does this, although I think that this is a better option. It will be a reasonably high price per listing, and agents would have to get their calculators out to make sure it was worth their while. The one problem for a portal choosing this method is that they will be at the mercy of the market and how many listings that come on during different cycles, but with nearly 10 years of data, I am sure they would work it out in their favour.
Free with paid features.
Currently MyHome and Homehound offer free listing website with an option to upgrade your listings to feature listings. I am never a fan of this type of thing, but I do think Agents need to be on these sites at a basic level. Most of these get a fraction of the visitors of the big portals, but by supporting sites like these they will slowly build their visitor numbers as the sites. There are a few more of these around and some have some quite interesting models.
Completely Free
With Properazzi, Google Base, Dothomes coming so Australia sooner rather than later and of course MyHome (now free and gaining quite a few listings) it is not the time to be getting agents offside, so it will have to be a very measured approach to charging more or changing pricing models.
Whichever way portals do go, I think that agents would like to know what effect that it will have on their business and to be able to easily calculate that effect. Many agents across Australia are struggling in these times and whilst some pockets are still strong it is not gong to get any better in the short term being in the middle of the world-wide financial crisis.
Note: Simon Baker (Ex REA) has launched a new website called Property Portal Watch
38 Comments
Greg Vincent
The writing seems to be on the wall Peter. Whenever most major corporations employ a new CEO, they normally put them on an incentive package.
There’s always been 2 easy ways to make more profit. Increase income (agent’s fees) & reduce expenditure (wages, etc).
Most agents I speak with want the leads that REA provide them, but hate the monopoly that they have over their businesses.
Robert Simeon
No doubt the real estate cycle is in a swing. The significant points of difference will be real estate agencies measuring their spends not embarking on increasing overheads – given that across the board consumer sentiment is changing. This will happen in print advertising too. There would not be a real estate agency today that is not in the process of reviewing operations.
Unlike previous markets the position today is certainly one where adopting a prior market mentality could be could possibility accelerate a business demise. We are in an entirely different market space today.
Craig
Google Base have been close to launching in Australia for about 3 years. I just wish they would get on with it and launch.
Mark Illingworth
Remember the good old days – you spend money on a highlight for the month on a property and after a week you sell the property, and then transfer the highlight so you got your 30 days worth. When they took that away it all swung over to the shareholders and the agents did not matter and still dont.
Glenn Batten
They have invested the money in updating their site and keeping it modern and using the latest technology 🙂
2001 – http://web.archive.org/web/20010331100923/http://realestate.com.au/
2002 – http://web.archive.org/web/20020905115241/http://www.realestate.com.au/
2003 – http://web.archive.org/web/20030806032541/www.realestate.com.au/cgi-bin/rsearch?a=bhp&t=res
2004 – http://web.archive.org/web/20040701043012/www.realestate.com.au/cgi-bin/rsearch?a=bhp&t=res
2005 – http://web.archive.org/web/20050205095156/http://www.realestate.com.au/
hmmm.. hardly any changes.. Ok, so they used the money for world domination..!!
Peter the "farmer"
Dear Peter,
I agree with most things you say with one exception, in the country apart from overheads expenses are the same, same wages, same electricity, dearer fuel, dearer groceries (unless you wait for the markets…) we also have a big problem, nobody wants to pay for advertising, the vendors want everything for free and over the years some of the agents have succumbed to the pressure!! In the beginning was only the adds on the local rag, now it’s everywhere…. I will not mention the worst offenders all I know is that silly agents that know nothing about marketing have prostituted themselves and the industry in the hunt for listing when sales where strong, now they are winging that they cannot pay for the “free” advertising anymore…
First Marketing lesson: it’s very easy to discount, much much more harder to put prices up or go back to the original model
Nice Blog!!
Peter Ricci
Hi Peter the Farmer. I can understand your predicament, this is one that agents across Australia do face. However I can assure you that different levels of pricing will not mean it is cheaper for country agents, I think it will be just more expensive for city agents. Good to see you comment and would welcome alot more of the same.
Sal Espro
Hi Peter,
I wonder why Glenn has ignored my comment that http://www.findmeahome.com.au is the type of thing to assist in decreasing the portals’ power (*if* it gets visited). I know it is just a ‘scrape’ of major portals and Google maps app but so what when at least it’s a better offering than the portals. (Remember last year that Property Monitor closed their similar offering down citing RE.com.au threatening legal action – How can that be if they are just searching it and representing it?!)
Whadyou think? Do you know whether this new site is just a vehicle to promote the Residex data reports without much infrastructure so really is just a tech ‘shell’?
Glenn Batten
Sal Espro,
I did not ignore your comment. I checked the site out and wanted to come back to it. It is an interesting concept borrowed pretty heavily from Zillow’s Zestimate but for my mind they miss the mark.
They have spent a fortune in patents on the site and seem to be trying to recoup it all pretty quickly as it is all about ordering reports that cost up to $75. In this regard I don’t think they offer anything better than MyRP and as an alternative a member of the public can access the property sales database at http://www.streetsales.com.au for three hours for $20 and do all their own searches and research on as many properties as they want.
On a point of accuracy I checked out some of our oppositions listings and compared the ratings and many of the applied ratings were not even close. A property that is priced pretty well only got a ranking of 2 and on the flip site other properties were rated well, yet had sat on the market for a year and were well over priced.
Their claim on the homepage inferring they have more properties than realestate.com.au or domain.com.au is a very misleading. Clearly there will be some definition they claim as they use the words “matched” but they dont provide any information to explain it. If I was them I would expect to be getting a letter from the top 2 portals pretty soon if they have not already.
Not providing listing data, property photos etc etc I can seem them compete with the likes of the major portals.. There competition appears to be more the valuation services area that has become so popular in recent years.
No doubt they will send emails out to all the agents telling them how wonderful they are and how much business they will be bringing them, and for all agents to pressure their providers to push their listing data to them. I fear that they will follow the likes of many before them.
Forget your an agent, or a sales pro so to speak.. if you were a consumer looking to buy property…. would you use them ?
stan Edwards
As soon as a true alternative to realestate.com.au arrives, I for one will be there. They have the trafic and thats why I contunue to get screwed every month. I think we will pay close to $900 per month this renewal. Way too much for a small agency.
I resolved to leave telecom as soon as there was an alternative, and did, I resolved to leave RP Data as soon as there was an alternative, and did, Don’t keep me waiting please.
Stan Edwards
Sal Espro
Thanx for your response, Glenn. Wrt your question, I *am* actually in the market at the moment and like this site better than the rest of them. It doesn’t matter to me that they ‘click thru’ to the ‘actual’ data housed on the other sites?
Sal Espro
Craig,
It ain’t gonna happen. Too bad. The race is over and Uncle Rupert’s News Ltd.’s money bags win again! (With the Fairfax bro’s coming in 2nd with Daylight a distant 3rd…..Was Sensis ever in this race?*L*)
Craig
Sal, just because things look difficult doesn’t mean they are impossible. If ever there is a time to start an alternative to the majors it is in the next 12 months. RE.com.au is very strong, but there are cracks. I can name a few cracks.
1. They got rid of their strongest management asset, Simon Baker.
2. They are trying to screw more and more money out of agents.
3. Agents don’t like them. See point 2.
4. The site is pretty rubbish compared to some new ones.
There only benefit is that they get more traffic and therefore generate more leads than the other sites. What needs to happen is for someone to take advantages of the agents grumpyness with them and use that to promote an alternative.
What would happen if a non-profit co-operative was set up (outside of the industry associations) to create a site that could be owned by all agents and promoted by all agents. It can happen, it just takes someone to take the lead and run hard.
Craig
Stan, you say “As soon as a true alternative to realestate.com.au arrives, I for one will be there”. Unfortunately that is the problem. An alternative won’t exist while we are just waiting around for it to appear. What has to happen is for lots of people to be proactive and to ‘make’ something happen.
In fact there is many other alternative real estate sites out there. Why aren’t they a real alternative to RE.com.au? Probably because of lack of the ability to promote themselves like RE.com.au do. This can be changed but it just takes someone to take a leadership position.
Trevor
The problem with the ‘non-profit co-operative’ idea is that agents tend to lose heart once they have to dip into their pockets for a second or third (or more) times. Over the years, we have sen agents who are disgruntled with the print offering in their local area start up their own newspaper, only to fall away as (a) the existing newspaper got their act together and (b) the agents were asked to provide more funds to keep the thing running as well as having to pay for their ads (albeit at a lower rate). Car dealers are another industry group often get involved in similar ventures.
This is not to question the good intentions of those involved in floating the venture – it’s just that history has shown it to be the case. The publications that were successful soon moved away from a real estate dominated model and became excellent local newspapers in their own right.
Whilst web sites have lower operating/production costs than newspapers, the initial funding would be required and, if the revenue wasn’t flowing, some sort of cash-flow or input from the investors needed to cover costs.
Craig
Trevor, I would not envisage a model that requires no funding but it would be much less than the other offerings because the motivations would not be huge profits and international domination. I would say somewhere between $250-500 per annum (good value compared to the $500-1000 per month on RE.com.au). The model would also require a large amount of agent involvement such as in store displays and posters and the agents actively pushing consumers to the site.
I was involved in a similar startup with newsagents (http://www.google.com.au/search?q=findit.com.au+newsagents) but it ultimately failed due to lack of newsagent enthusiasm. But for real estate agents the benefits are much clearer than they were for newsagents.
PaulD
The problem with real estate agents (and I have been one for more than 20 years) is that they have absolutely no idea of the big picture. They can only see into the future as far as next Saturday. And when next Saturday comes, then the following Saturday comes into view.
They will not support (in most cases) any industry owned venture, because they think they are smart and do deals with non industry bodies that do not benefit them in the long run. The non industry bodies love the divide and conquer scenario, because real estate agents are so susceptible to it. As long as they (the agents) think they are getting “one up” on their competitors they will agree to anything – even if it is not in their own best interest.
The agents standing together for their own collective good does happen in very rare cases, however, the bigger the project, the more suspicious they become. When the rare cases do happen, the “what’s in it for me ?” question soon comes out, and weakens their resolve. Shortly after they break ranks and the venture fails, and all they want to do is blame someone else – then they look around for next Saturday.
Sal Espro
Your comments certainly ring true from my (extensive) experience, PaulID. Do you have some experience here?
PaulD
Sal,
The mere passage of time (20+ years) has made me aware of the actions of agents. That, and the fact that I have been involved with the various associations and organisations involved with the real estate industry. Oh, and also, it hasn’t been one year’s experience 20 times over like it is in many cases that I’ve come across. Length of time at something doesn’t guarantee that you know what you’re doing.
Sal Espro
You show good insight, Paul. Experience doesn’t always count, does it. It’s what you are able to make of such experience. However, one thing you can be sure of, you can’t make use of experience unless you have it! 🙂
What do you think of Sell My Castle website?
My thought is that it is a pretty basic, easily understood model but there would need to be a helluva lot of vendor action/enquiry to make it worthwhile for agents to sign-on and pay subscriptions (let alone on a per post-code basis) ?? And if not all agents are signed to such a system, how is it going to validly offer the best agent to its vendor clients?
Perhaps it is successful despite all this. Does anyone know how it is oging please?
SSSR
Sal,
First I have heard of Sellmycastle, but from a consumer perspective, I would prefer to find and deal with an agent directly rather than use an intermediary where I would be concerned that I would pay more for the same service, unless they have access to economies of scale (so to speak). When it comes to an investment like a house I want direct control rather than have a 3rd party allocate my business. I assume that it would build a better relationship between Agent and Vendor to have that direct engagement at the start as well.
If I was an agent, I would rather subscribe to Seth Godin’s purple cow model and create a remarkable branded business. Gecko (imho) stands out as one I have taken particular notice of. But in my opinion, lots of SOLD signs around their area and word of mouth are far better at generating business.
Sal Espro
Godin is selling his books and Gecko is a franchise.
SellMyCastle and others like it are portals trying to get vendors to register so they can sell them to agents. Could be a dry argument over the next few years.
Anyone got any hopes for realestate volumes over the next 4 years?
Scary that the talk has gone past recession!
MICHAEL WEST 8:16am The coming days will tell if the world is headed for a Greater Depression.
Hang-in folks – from an old timer.
SSSR
I have to say that it really frustrates me to read in the main media supposed analysts who predict doom and gloom for the property market. I was watching one analyst on the weekend business show a couple of weeks ago say “if you own property, you have red ink all over you”….. What a load of absolute rubbish. These supposed economists are forgetting the fundamental economic principle of Supply and Demand. I know that not every where in the country is rosy for property, but the fact remains that demand far out strips supply and this reduction in interest rates, backup next month by another likely 50 point reduction, will bring investors and first home buyers back to the market looking for discounted bargains. I just don’t believe that Australia will even get anywhere near depression.
Robert Simeon
What many forget that since the recession that “we had to have” in the early nineties – a few notable changes have evolved since.
Back then we did not have a little thing that today we call the Internet!
As a result the smart agents set up cutting edge online agencies should another economic speed bump arise. At the flick of a switch we can focus our marketing strategies to online simply because we invested in our future.
As the only difference between a mountain and a mole hill depends entirely on how much more dirt you want to throw on the mole hill.
The agencies that made online as a point of difference from competitors will cruise through this. The non-believers will head down Struggle Street and unlikely are to be seen again.
Sal Espro
Mate / SSSR,
Unfortunately, what you think about us getting anywhere near a Depression just doesn’t count in the big scheme of things
.
When dollars aren’t being lent and unemployment rises rapidly and and market sentiment hits rock-bottom so shares become worthless (meaning companies don’t ave collateral to borrow – even if there was money to borrow), it doesn’t matter how tight supply is. Nuttin’ sells – That’s nuttin’ with a zero point zero! People will fit anywhere when times is tuff. e.g. Families share houses. The now salubrious Albert Park area in Melbourne, was once a suburb of rooming houses during the last Depression.
Let’s hope it’s not going to happen but the signs aren’t good. Incitec Pivot supplies fertilizer to farmers and a month ago was close to $200 per share, today it’s $4.54 !!!
SSSR
Sal,
A couple of interesting points in the Eurka Report today.
“with 100 points to play with, Australia
TomS
Incitec Pivot had a 20 for 1 share split. $4.54*20= $90.40. They have been belted but not as bad as $4.54.
Sal Espro
Thanx TomS,
Let me re-phrase that, Incitec Pivot has been belted from around $10 to around $4.54 in less than a month!
And SSR, let’s hope you’re right. Unfortunately, everything is pointing the other way. I’m in the market for a house (and a car) but I ain’t spending ’til I find-out just what’s going to happen.
PaulD
SSSR,
You make it sound like the interest rate drop is the silver bullet and everything is going to be alright. The share market drop has pulled a lot of money out of circulation. You say “It’s all money moving”. The fact is, that there is now not as much money to move.
The upper end of the market rarely gets effected by interest rate rises or falls, but it is this sector of the market that is badly effected by the share price drop, because it is the value of shares in a portfolio that is the basis for the equity in property at the top end in many cases.
In the middle of the market, the sale of property depends on actual personal income. In the last 10 years or so, incomes have not kept up with the value of property. There are therefore two possibilities. Firstly, incomes have to increase dramatically – that won’t happen. The second alternative is that property prices will fall to get back in step with incomes. This is a far more likely scenario, because with the credit situation the way it is, the lending institutions are going to be much harder on eligibility to be able to borrow, so there will be less buyers on the ground out there who actually have finance to buy.
It is a really complex situation, not helped by the international financial panic, which all adds to the local perception. We have people making ridiculous offers on properties, and they say that it will be worse next year. They have heard that from somewhere – normally down at the pub, but nevertheless the negative sentiment is definitely out there.
SSSR
PaulID,
There is definitely two schools of thought on which way this will go. Bottom line is that it is a cycle, albeit a sharper correction than previous cycles, and for some areas in the country, where population forecasts are set for high growth, property prices will inevitably follow.
My view is one of an investor who is seeing opportunities present themselves in both shares and property, but I do take on board comments from yourself and Sal regarding what you are seeing.
My primary point was more about my frustration with ‘tabloid media hype’ and my last post was the alternative point from Eureka, of which I find is a more credible source.
Sal Espro
Let’s see what the property market does this and next week-end, eh? Traditionally, they are near to the epi-centre of Vic property action and Vic is the auction leader.
I’d like to bet that Vic’s current large % drop on this time last year is going to take a massive beating!
Happy bidding SSSR.
Sal Espro
Property market takes another hammering
Here’s something to add to the discussion guys.
“In some suburbs less than half the houses and units listed for auction found a buyer.”
…and, “The jitters easily overshadowed the 1% interest rate cut by the Reserve Bank on Tuesday, and turned many auctions into lonely affairs.”
and,”… not only are they not buying, they are also not even looking, not turning up to open for inspections.”
Clearance rates in the inner city, inner east and the west fell below 50%. In the inner east, the rate dropped to 37% against 53% for the previous weekend.
ANZ chief economist Saul Eslake said he believed prices would only fall significantly if owners began panic selling.”
And the next phase is the real estate sell-off. Hang-on to your hat!
Trevor
No doubt whatsoever that the recovery, when it begins, is going to be long and slow, but articles like this one, making comments like “Clearance rates in the inner city, inner east and the west fell below 50%. In the inner east, the rate dropped to 37% against 53% for the previous weekend.” need to be taken in context or with access to the numbers behind the percentages quoted. Comparing two consecutive weekends in isolation and then making assumptions about market trends is fraught with danger.
How many properties were up for auction on each weekend, for example? It could be that the actual number of clearances was not so different, but the percentages quoted make the situation look worse than it realy was.
And, of course, the opposite could be true. Either way, I think we need more information before we reach a conclusion.
Sal Espro
Do you have a ‘take’ on these figures, Trevor?
e.g. Melbourne’s clearance rate on the week-end ‘fell’ from last year’s 82% to 57% (same week-end both years).
Are you in the ‘game’? Do you disagree that it’s pretty cactus in a lot of regions and heading down in most?
Trevor
Taking your questions in order Sal:
– That difference in clearance rates in worrying, but I’d still rather have more data (just me being conservative maybe). Figures comparing October YoY, for example, would give a more accurate picture.
– No, I’m not in the game. In my first post a couple of months ago I declared my ‘interest’ – I work for Fairfax Community Newspapers in Sydney
– Finally, I don’t dispute for one moment with your statement about things being cactus in some regions etc.
Statistics are great things, but I prefer to collect as much data as possible before drawing conclusions or making assumptions.
Sal Espro
Hi Trevor,
I think we have pretty-well enough data now Trevor. e.g. According to ‘Fairfax’ this week, the Sydney & Melb clearances were less than 40% and less than 50% cf (drops of 30+% ) on same mth last year!
Time to face reality. Your ad columns are going to be even more decimated than they were trending before the crash 🙁
Simon
The sooner agents abandon realestate.coma.au in favour of Google Base, My Home etc the better. Why the hell do we support a portal that keeps charging us for the privilege?? Support the free alternatives and reduce your overheads!
Robert Simeon
Don’t hold back now Simon 🙂