The Property Market Reinvents Real Estate - Zero% Commission
23 September 2013
Market Reinvents Real Estate with Zero Percent Commission
Fare Share designed to reward hard work with zero commission on the ‘easy’ part of a sale price
Auckland real estate agency, The Property Market, has turned the traditional real estate model on its head with the launch of a new commission structure, created for the Auckland market. Under the new commission structure, the Fare Share, commission is only charged on the top end of a sale price, at a percentage rate that explicitly incentivises high-end performance.
The Property Market Director, Antonia Baker, says the current Auckland property market means houses sell within days, but with little incentive for an agent to put in the hard yards many home owners are missing out.
“Given the demand for properties it really isn’t difficult to sell a house, and in record time. But in this market there is a risk that some agents can look for the fastest commission, rather than working to try and get the highest available sale price for the home owner – which is the whole reason you engage a real estate agent.”
Many real estate agencies charge the bulk of commission on the first and lowest portion of the sale price. However, this new commission structure allows home owners to negotiate a level up to which zero commission is paid.
“The figure at which commission kicks in is based on market data and analysis of property sales in the region. So if we don’t achieve the sale price a homeowner deserves, they don’t pay over the odds. But if we achieve a sale price that is exponentially brilliant, we both do well,” says Baker.
Deborah Kershaw recently sold her Freemans Bay home using the Fare Share fee. Under this arrangement the agency shared the financial risk associated with the sale, ultimately incentivising them to achieve the best possible sale price.
“Basically it meant we were paying the agent for the hard work they did to get top dollar, rather than for the part of the sale price that could be taken for granted. It makes so much sense because it rewards the extra effort required to achieve a great price, rather than the minimal effort required in this market to achieve fast property turnover,” says Deborah Kershaw.
Independent Property Commentator and founder of Properazzi, Alistair Helm, says the real estate industry still thinks largely as it did 25 years ago, and many agents have not adjusted to the way technology has changed business.
“I think the belief that standard commissions are part of the business model for agents for ever is short-sighted. I think this new Fare Share concept is exactly the kind of thing this industry needs to show it is responding to smarter vendors. Vendors who ask why should I pay a commission on the total sale price, when I want you to show me you are motivated to get that top price. I trust you can do it, now show me your commitment. That commitment for me is embodied in the Fare Share concept.”
A minimum fee of $12,000 plus GST applies to all properties
sold by The Property Market using the new Fare Share