New Real Estate Model Set To Reduce Cost Of Sale For Kiwi Homeowners
A new property sale model which reduces the need to use real estate agents by pre-qualifying buyers could save Kiwi homeowners hundreds of millions of dollars in commissions according to an industry expert.
Around 115,000 properties are sold in New Zealand each year with an average commission of $38,000 - netting real estate agents an estimated $4.3bn in commission annually.
The new technology which uses an algorithm to match prospective buyers with vendors based on their search criteria will give buyers early access to properties before they go on the market.
Mike Harvey CEO of Yelsa, who developed the new pre-market tool, says the property market is set for a period of extended uncertainty as the impact of the current health crisis hits the economy.
Harvey who has sold more than $300m of property over the past 20 years, says a reduced fee structure will become important to those wanting to maximise the return on their property, and savings on marketing and agents fees will go some way to ensure that.
The new process will see vendors in direct contact with prospective purchasers and will use the platform to take on a number of functions currently managed by agents - avoiding paying commission which can exceed 10% and hundreds of thousands of dollars in some cases.
Homeowners can prequalify buyers by inviting only those they select to view the house or make their profile public.
“The traditional method of marketing your home carries a number of inherent flaws, as multiple owners could all be paying fees to attract the same potential buyers to the same street at the same time.
“This creates a high level of duplication and wastage and only adds cost to the property sale for both vendor and purchaser - not to mention the impact on the environment from the production of thousands of print advertisements and hard copy signage that could be avoided.
“Under the new model, buyers will have direct contact with vendors who are prequalified based on their specific criteria which means owners will know whether they are preapproved, have pets or just need somewhere to park their boat - all before they see the property,” he says.
Harvey says vendors will pay a one-off $500 fee and can invite an unlimited number of potential buyers to view their property profile. The model is also flexible enough to allow them to enlist an agent to carry out the basic paperwork for the transaction if they prefer - at a reduced fee of just 1%.
He says already 30% of houses are sold before they go on the market as some homeowners prefer to avoid the inconvenience of an extended sale period.
Harvey says the public nature of property sales can also cause issues for vendors.
“There are many scenarios where a vendor does not want to let the public know their house is on the market including a landlord marketing their rental properties.
“At the same time, an unrestricted invitation to allow strangers through your open home carries a degree of risk and can make many people uncomfortable - having the ability to see a buyer’s profile and suitability provides vendors with a level of reassurance,” he says.
Harvey says home-owners rarely sell their house on a whim with many lacking visibility as to an optimal time to enter the market.
“The new technology provides a level of transparency in the market allowing property owners to see how many buyers who meet their criteria are in a market at a given time.
“We expect the model to be popular with some agents as well, as the pre-prospecting aspect to the role can be time-intensive and in many cases is not profitable.
“This would free them up to carry out the elements of the transaction where they can add a higher level of value such as the details of the contract - and at a higher volume could be more profitable for them as well,” he says.
He says vendors will soon be able to also invite other service providers to assist with the transaction including lawyers, mortgage brokers and insurance brokers.
Harvey says the locally designed technology is transferable to other countries and will launch in Australia later this year.