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An emerging group which aims to massively undercut agents could be vulnerable to a concerted industry fightback, potential investors have been warned.
Hello Real Estate, a multi-state business which has sold about 80 properties in its brief history, is at “particular risk” of lobbying from the industry, according to a report aimed at potential investors.
The report was prepared by Minrex Resources, an ASX-listed company that wants shareholders to approve its proposed acquisition of Hello Real Estate.
The deal is actually a reverse takeover designed to give Hello Real Estate a back-door entry to the ASX. If the deal is approved, Minrex will change its name to Hello Property Group and exit the mining business.
Minrex has advised its shareholders to accept the deal, but has acknowledged that it involves risk.
“There is a particular risk that the real estate industry may lobby against Hello’s licence-based real estate model,” the report said.
“Given the focus of Hello is to disrupt the real estate industry, there is a strong risk that Hello will be targeted by incumbent real estate agents, groups and industry associations looking to tarnish the Hello reputation and brand.”
Hello Real Estate, which has 12 licensees in three states, has positioned itself as a “high-tech, high-touch alternative to the traditional real estate agent”, according to Minrex.
Vendors are charged a flat fee of $9,990 for metro area sales and $7,990 for regional area sales, which reportedly provides them with savings of between 33 per cent and 70 per cent.
The fee includes a building inspection, a comparative sales report, professional valuation, conveyancing, styling, photography, print and digital marketing, wi-fi-enabled signboards and access to an online auction platform.
These services are provided in conjunction with service providers CoreLogic RP Data, BidRhino, Jim’s Building Inspections, BG Property Styling, Think Conveyancing and Open2View.
Licensees receive 44 per cent of the fee for each sale, which equates to $4,400 for metro sales and $3,500 for regional sales.
Minrex told shareholders that other risks of the reverse takeover are that Hello, which started operating in 2012, is a fledgling business in a “highly competitive” industry.
“Hello is of interest to its major partners due to the disruptive business model and national coverage. If either of these were not to occur, Hello would not be able to attract major partners or competitive pricing on their products and services,” the report said.
“It is also difficult to evaluate the risks frequently encountered by early-stage companies using new and unproven business models and entering new and rapidly evolving markets,” it said.
The independent expert has valued the merged company at between $7.4 million and $9.5 million. Shareholders will vote on the deal at Minrex’s AGM on 23 November.
[Related: Hello Real Estate unveils proximity marketing initiative]
- <p>Mmmmm here in Perth a midland based real estate agent is offering 1 % sale fee which equates to on average $4500 total com.<br>By conducting itself along these lines will eventually cause this well known agency to close its doors.<br>Not a wise business decision at all one might say not a "plus" at at😉</p>0
- <p>now that is a clever comment....<br>it is funny how every property boom a new magic business model appears , partnerships form, media and industry comment..yet we all bear similar cost points each month to operate an agency business. The vendors have not been too focused on fees , it is the result and skill set of the agent they focus on...same core vendor values since 78' ..just my thoughts..gp</p>0
- <p>Absolutely. It's a fine line between smart and desperate in this instance.</p>0
- <p>Smart of them to share the exposure and negative news reviews from RE industry by partnering with some well know names (CoreLogic RP Data, BidRhino, Jim’s Building Inspections, BG Property Styling, Think Conveyancing and Open2View). The company should focus on the "service offering" of a one-stop-shop rather then its potential cost savings to a client.</p>0
- <p>The market cap of Minrex Resources (MRR) is $3mill and share price has not really moved between its 10c - 20c range. I imagine the shareholders will welcome anything.</p>0
- <p>I don't understand why more agents don't set themselves up in the same way. Do away with everyone having an actual license and associated overheads, everyone should set themselves up as simple "mentors".</p><p>How long would it take for the authorities to step in?</p>0
- <p>How does this work? Shareholders who invested in a mining company are told the company is going to leave the mining industry and hand themselves over to a real estate concern that in 3 years has sold 80 properties.<br>Who was the independent expert who valued it at nearly $10 million?<br>Nostradamus?</p>0
- <p>It will be hello and goodbye within 3 months.</p>0
- <p>I Think it's a fabulous model and I wish them well.</p>0
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