Vendors no longer prepared to pay ‘excessive and unnecessary’ commissions

Are your commissions under threat? That’s the view of a “disruptive” commission-free real estate company that claims Australians aren’t willing to pay agents’ high fees.

ASX-listed commission-free real estate company buyMyPlace has reported a 55 per cent increase in revenue from its listings in March to 30 June 2016, compared with the prior corresponding period.

The company, whose tag line is “No Commission! Lots of help!”, has also seen record month-on-month and quarterly growth, with Q4 FY16 revenue up 44 per cent on the prior quarter and total listings up 22 per cent in the same period.

Perhaps most alarming for traditional agents is the 220 per cent surge in inquiries on the back of the group’s expansion in marketing activity which began with TV in Queensland and Western Australia, before rolling out nationally from April. This was accompanied by an expansion in online marketing.

byMyplace CEO Paul Heath has a stark warning for agents, saying the company’s growth and ongoing success is a sign that the traditional model is losing traction with buyers and sellers.

“The consistent growth in both revenue and listings demonstrates the commission-free real estate model is resonating with many Australians who are no longer prepared to pay excessive and unnecessary commissions to agents,” Mr Heath said.

Earlier this week, the UK’s flat fee real estate agency Purplebricks launched in Australia. Purplebricks co-founder and CEO Michael Bruce pledged to disrupt what he termed the unfair, broken and high-cost commission model favoured by agents.

buyMyplace contends it is now a “significant real estate company in Australia” with $1.5 billion in property sales since it commenced business.

The group offers three new packages – at $895, $995 and $1,295 – which it says has resulted in “enhanced choice for consumers”, enabling them to dictate the level of support and marketing they require.

The “disruptive” company conceded that despite its $1,176,992 in revenue, it incurred a $4.6 million loss in the 2016 financial year, which it says was a “result of the reverse acquisition of Killara Resources”, undertaken as part of its listing on the ASX, adding that it was “predominately a non-cash loss”.

Mr Heath said in July that many traditional agents were struggling to secure new listings. He said buyMyPlace was succeeding because “the opportunity for vendors to save around $20,000 in fees and commissions is compelling and our growth in listings is testament to that”.

In response, Mark Kentwell of PRDnationwide, REB’s 58th-ranked agent in the Top 100 Agents, said the theoretical $20,000 figure did not take into account the potential losses vendors would experience without having an experienced marketer, negotiator and professional on their side in the form of a commission-taking agent.

“In every marketplace, there are examples of vendors losing $20,000 to $40,000 this way and on upper market sales it can be $100,000, $200,000 or more. Plus, [there is] the added stress of having to handle the process themselves and time away from their primary employment activity if applicable,” Mr Kentwell said.

“It’s expensive enough choosing the wrong agent, let alone not using one at all.”

Back in May when buyMyPlace reported another surge in listings, Karen Hutton, “Australia’s number one real estate copywriter” contended that the company’s success was a poor reflection of the industry and lambasted realestate.com.au for allowing “these ‘market value merchants’ to use their portal”.

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