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A leading industry CEO fears that agent fees and margins will continue to erode and potentially reduce the need for agents altogether, as more property portals move to close the gap in the real estate cycle and engage with sellers directly.
Douglas Driscoll, CEO of award-winning real estate group Starr Partners, has put the industry on notice to consider what might eventuate from openly embracing third-party lead generators, particularly in the wake of REA’s recently launched concierge service.
“This is certainly not a cheap shot at REA, more so an advisory note of caution to our industry, because we saw a shift in the dynamic about five, ten years ago when we started to become overly reliant on the portals for buyer enquiries,” Mr Driscoll said.
“Now, these portals have buyer leads sewn up, and as they venture more into the seller arena, we could be stood at the top of a very slippery slope.”
Mr Driscoll said that these portals will soon become a one-stop shop for consumers, cautioning that they have already diversified by offering utility connections and mortgages.
"Agents may be drawn to these services by introductory deals, not realising that by doing so, they are helping build a bigger monster they will become further reliant on, that may ultimately make them redundant," the CEO said.
“I’m optimistic by nature, but I can’t help but be pessimistic about the future of our industry sometimes. The writing is on the wall for us if we don’t wake up, and stand up."
Mr Driscoll said that agents might be offered a good deal while the introduction service is in its infancy, but they will eventually be expected to pay "through the nose" for it.
"These portals are already charging us exorbitant fees, so what happens when we start being charged at both ends for buyer and seller leads? Not to mention the fact that they are now liaising with sellers directly. If I was being cynical, I would go as far as saying that this could be a Trojan horse.”
Shareholders
Mr Driscoll also argued that some portals have the appearance of helping agents, but the reality is that they are being forced to look at other revenue streams to please their shareholders.
“The greater good for them is not necessarily happy home buyers and sellers and agents, it’s happy shareholders," Mr Driscoll said.
"Historically, these platforms have been fairly one-dimensional. However, if they want to continue to grow and meet shareholder expectations, they must continue to diversify and expand their offering across the property value chain.”
Mr Driscoll feels that the solution isn’t as difficult as agents might think believing, ironically, that agents should be taking self-promotion lessons from the portals.
“Credit where credit is due, these portals certainly know how to market themselves," the CEO said.
"Even the new wave of referral sites have been able to set up shop in less than three years and grow a significant audience and take a slice of the pie. Admittedly, our budgets are minuscule by comparison, but it’s time we really started focusing on our marketing and really assess what we are spending money on and why. If we don’t invest a lot more into our own businesses and continue to be overly reliant on third parties, it could very well be Goodnight Vienna for us.”
He said that a "good rule of thumb" is to reinvest a minimum of 10 per cent of your income into the marketing and promotion of the business.
"Instead of just simply handing over our earnings to these platforms, we should be spending more money on demonstrating the tangible value we add to the sales process and looking to further support the communities we serve.”
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