The following article has received thebiggest response of the articles we’ve written so far. The style of the article is forthright and challenging, and its possibly the style, rather the content that has got people hot under the collar. We encourage you to read the article objectively, and then also to see the email response sent to some of the people who have taken the time to respond to this article and challenge Graeme on his ‘attack’ on estate agents. By the way, we’ve also had many people compliment us for this article, and verify for us that there are people who have had similar experiences with agents.


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So this was it then. After weeks of back and forth negotiations, sleepless nights, fervent prayers, discussions with bankers and tiring searching – this was it. I was standing with two documents in my hands – one for the sale, and one for the purchase. And there were two smiling estate agents. So why did it feel so hollow? Something was missing. We had just sold our home – the home that we had brought our two daughters back to from the hospital after they were born. We had just bought a larger home closer to the school our daughters will be attending from next year. It should have been fantastic, but it wasn’t. There was something missing.

As I reflected on the process of selling and purchasing property I wondered what real value the estate agents had actually added. What had they done, that I could not have? Estate agents earn anywhere between 5 and 9 percent commission on the selling price of a property. On a property worth a million, for example, this would give an estate agent about 70,000 for the sale – not bad in anyone’s books! Even if you only do a few a year. In our case, both agents negotiated more reasonable commissions, and were quite involved (read on for details) – but it got me thinking about previous experiences and the stories I’ve heard from countless friends and family. I really believe that most estate agents hardly ever actually earn anything near the amount of money we usually pay them. And that is not sustainable in today’s economy.
Estate agents (in South Africa at least) do four main things to earn their money:
1.They help you value your house – or, at least, ask you what you want for it. Now, unless an estate agent is an expert on your suburb, this value is largely generated by having a look at what other houses in the area are selling for, then looking at the relative size and quality of your property and suggesting a price. Even an expert in the area doesn’t do more than that. At one level, not much more can be done, of course. Prices are not fixed at all, and are relative according to supply and demand. But my point is that this is work that you yourself, as the seller of your property, could easily do. In fact, most home owners do this before calling in an agent. When we put our house on show we discovered many nosy neighbours coming to see what our house looked like and what we were asking for it. What an agent does do, is inflate the asking price by between 15% and 25%. This is a game that everybody plays. Everybody knows that the price being asked is a good way above what will actually be accepted. But at no point does the average agent actually add value to your house.
2.The agent will come and take a picture of your house (or ask you for one). You hope that they will take it from a good angle and will be able organise fantastic lighting on the day that they pop in to take the photograph. They will then also at the same time come up with some flowery wordage describing exactly what your house is about. This includes a whole a lot of euphemistic code, which property buyers soon work out. For example, phrases like “lots of potential” or “a fixer uppers dream” or “a little bit of work will turn this into a darling” are code phrases for “this house is a dump and needs gutting before you can even think of moving in”. My favourite code phrase of all time appeared earlier this year in a Johannesburg paper: “close to everywhere” – I had pictures an inter-galactic wormhole in the bathroom, or personal “beam me up, Scotty” machine in the back garden. Having put together the photograph and code phrases they put that info into a newspaper or, if they are more progressive, up onto a website, in order to get it noticed by the public. Again, nothing that you couldn’t do.
3.They then boot you out of your house every second Sunday, and “sit” for you, while a bunch of strangers walk through it on what we call a “show day”. On that day they will come and put marker boards out to indicate where your house is, so that anybody who did not want to troll through the newspaper looking for houses will just follow the boards as they drive around your suburb on that particular Sunday. The goal of the agent that Sunday is to simply collect names of people who are looking at houses. Of course this amounts to marketing and database generation by the agent, and, to be honest, if they are using your property and your premises to gain more client details and possibly sell other homes in the area, they should be paying you for that privilege.
4.When an interested buyer arrives they make a time to go around and get them to fill in a formal offer to purchase. This is usually a standard document that could be downloaded off of the Internet. Sometimes there is a back and forth with a counter offer and a negotiation, or possibly changing some of the clauses and eventually an agreement is reached. The agent’s role in this (or so it seems to me) is to be economical enough with the truth in order to be sure that each party makes the right decision or a decision that is correct in the circumstances. Of course selling a home is an emotional experience and so in some cases the agent needs to work emotionally rather than rationally or logically. But I’ve always wondered whether these agents actually get in the way of the negotiations, rather than actually facilitating them.
None of these four things are actually very onerous. And given a nice home that has been well maintained in a good area where the sellers are reasonable about their expectations, the agent has very little to do. Of course, there are some houses that are tough to sell, and sellers who are unreasonable. But my question remains: how much actual value does an estate agent actually add?
The bottom line is that this type of agency – which adds no particular value, but simply provides an intermediation role – is actually fast becoming a thing of the past. With Internet-based agencies that teach you how to sell your own home and give you just a little support for a fee instead of a commission, it is now becoming a lot easier for people to sell their own homes. If you are prepared to deal with the emotions involved with selling your home, you could sell it yourself. And it is really not difficult to call up the newspapers and place an advert. It is even less difficult to place one on-line at the online sales pages. It is not difficult to sit in your own house for a show day, and why would it be difficult to negotiate with a buyer in terms of the price you want for your home?
The real value an agent can add is to assist you to set a fair price for the house, and then come in and tell you how you could get more. An agent with years of experience in selling homes will know what the average person is looking for – what turns them on and what turns them off in buying a home. I would love for an agent to walk through my house and tell me that I need to spend some money on improving the garden – that it needs some colour at the entrance, take out an old tree and move those plants, put in some instant lawn, and pave over here. Agents with a good eye (or even just a “new” and objective eye) can point out easily fixed items, such as fascias and gutters that need to be scraped down and repainted, or cracks in walls that can be filled and touched up. It is not a lot of effort but these can make all the difference to potential buyer. I would love for an agent to suggest that we put a mirror on this wall, or that we move a painting or change furniture around in a room to make it look more spacious. I would love for an agent to suggest that we buy flowers for a show day and put them in certain rooms – even suggesting types and colours of flowers. What about lighting a fire or putting on heaters if you are selling in winter, so that the house feels warm? Or suggesting that you wash curtains or repaint a room, or clean carpets? In other words, the agent should actually bring some expertise to the task of sprucing up a house for sale.
Why not go even further? I have heard that in certain parts of the world an agent who signs a sole mandate contract with a seller is actually prepared to put their own money into a property in order to raise the value of that property. Imagine you and the agent agree what price you will accept. In an agent’s world, this can be very frustrating, as sellers have unrealistic expectations about what their house is worth. But assuming that the agent is a professional and can do their job properly and add value, you agree with the agent what amount of money you are prepared to get out of the deal. Whatever the agent gets above that figure the agent gets to keep. In this case, if the agent feels a coat of paint would be a good thing, the agent pays for that paint, because the agent knows how much extra value that coat of paint will add.
In our case, we did not have garages – just a lock up carport. The agent told us that we could add R40,000 value to our house if we built a garage. My argument was that it would cost about R20,000 to build the garage. So why doesn’t the agent spend the money and build the garage? Surely that would be a wise investment – and if the agent is not prepared to do it, why are they asking me to take the risk? Besides, emotionally I’ve moved out already – so why fix a house I’m about to sell?
The bottom line is that agents need to do more than providing an intermediation service. In other words, they need to do more than just broker the deal. With technology and increased consumer awareness, intermediation is being taken away from agents and being put directly in the space of the seller and the buyer connecting with each other. We are moving to a world of disintermediation. The true value of an agent is going to be to deliver real added value. This shouldn’t be a surprise to anybody. The whole world these days is based on added value – that is the by line of business. You get paid and you make your profits out of the value that you add – not simply out of distribution and agency. An estate agent needs to wake up to this fact sooner rather than later. Their job is going to transform into a value adding service for sellers and buyers of homes.
There is a lot more money to be made in doing this than simply cashing in on an easy job at the moment. The same is true for agents of all kinds, from travel agents and ticket booking agents, to bankers and brokers. Unless some real expertise is delivered (and remember that the entire contents of your agency exam and curriculum is available online for free!), and some real value is added (and remember that many online services are free or offer substantial discounts), and customers feel that they have really got something beyond expectation, then the death of the agent will be no surprise.


E-MAIL RESPONSE TO CRITIQUES OF THIS ARTICLE:

Thanks for taking the time to respond to our article. The goal of all our articles is to stimulate thought and action, so we’re thrilled when that happens.
The goal of this particular article was to talk about the concept of agency, and how, in a world where connectivity and convergence dominate, the simple act of bringing buyer and seller together (even if that act is not actually “simple”) is not good enough to justify agency fees (finder’s fees, maybe, but not agency fees). I could just have equally used Travel agents as my primary story, but selected to use Estate agents instead. So, for the record, I have nothing against Estate agents (or travel agents, for that matter) – the article was intended more as a helpful warning for them, than a derision of their profession (well, career, actually, as it is not a strictly “professional” industry – but lets not be pedantic). In fact, if you read the article slightly more objectively, you will notice that I actually compliment the agents involved in our deal. I simply used the experiences of friends and family, as well as my own observations, to kick off a discussion/conversation.
My goal was to get agents to think – even the good ones! Because the world IS changing, and agents are in trouble – even the good ones! Yes, there are some great agents out there. In fact, my mother-in-law is one of them! And many of the things I suggested for agents are from her. So, yes, I acknowledge that there are great agents out there who add value. And the others who don’t would do well to read my article. But even those doing well need to realise that buyers are getting more savvy, and much more empowered these days. And if these agents want to continue in their chosen career, they will need to innovate and gain some form of competitive advantage. Again, I trust my article will provide some food for thought.
You were clearly upset by the article. That, of course, was not the intention. Our work aims to stimulate thought and discussion. I apologise if my style was not clear in that regard. But I do not apologise for the content or intent. Agents need to wake up to the 21st century. Even the good ones!
Thanks again for taking the time to interact with us. We really do appreciate it.

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