Property industry needs to reinvent itself
It’s a tough time to be selling property and forward thinking estate agents are seeking ways to reinvent themselves as trusted transparent advisors, rather than mere marketers of property. Home inspections and compliance with the spirit of the Consumer Protection Act are two obvious strategies for future success in the property business.
Not only is the economy slow, with banks refusing to dish out home loans like they once used to, but with a fraud case against prominent agent Wendy Machanik and now the Consumer Protection Commission (among others) investigating Rael Levitt and Auction Alliance, the industry is fast being caught up in the “perfect storm”. This has created a public relations nightmare for an industry which is already viewed with cynicism by the public.
Agents are, however, refusing to let their spirits be dampened writes Stuart Graham in the Wits Business School Journal of 13 February 2012.
First National Bank property analyst John Loos says the estate agency industry is under pressure, due to the stage of the economic cycle. “Far lower property transaction volumes has meant that many thousands of agents have exited the industry,” he says.
Lew Geffen, the chairman of the Sotheby’s property group, believes there will always be a need for estate agents. The industry has seen its agents shrink from 80000 to 30000 due to the recession. The 30 000 who are left are mostly the professionals, he says.
Pam Golding chief executive, Andrew Golding, says “on the current trajectory” his firm hopes to have concluded R12 billion in deals for the group’s financial year ending in February 2012. He explains that there is “a growing acceptance” among sellers for the need to price properties realistically, in line with current market conditions.
The fraud case against Machanik and the Auction Alliance scandal have focused the attention of the public and of the authorities on the reputation of the real estate business. Editor of The Property Magazine, Nicky Manson, believes that, despite its problems, the industry is in good shape. A lot more franchises of various realtors are opening up around the country, which is a positive sign for the industry, she says.
Bill Rawson, Rawson Properties chairman, announced this week that his group was on a rapid expansion curve and was aiming for 300 franchise outlets in Southern Africa.
Manson adds that successful agents in the future will be those who can adapt to the internet. “Young people are internet-savvy, and they are the new market, so agents will have to be prepared for that,” she says.
However, many buyers still want face-to-face interaction, which means that they are unlikely to ever turn to the internet exclusively. “They want human contact and they want more information than a website can give,” Manson says.
Speaking, perhaps presciently, before his current troubles Auction Alliance chief executive Rael Levitt said he expected a few more companies to go out of business as more trust fraud “rears its head”.
Levitt added that the real estate industry “simply has to attract a better caliber of agent. He said: “I think we are already seeing that in many companies, but these tend to be in the country’s wealthiest suburbs. Estate agents became good marketers in the 1990s, and I think in the next 10 years agents will ‘match the froth with the beer’. I foresee a time when estate agents will become more advisory.”
During the current property downturn, the larger estate agencies may well become larger and bigger brand names, Levitt said. “I think, in the short term, you will see a few more companies going out of business, franchises failing and more trust fraud rearing its head. “In the medium term, the more reputable estate agencies will improve – a case of the strong getting stronger. In the long term, I think some sort of innovative disruption is on the cards, as we have seen in many other industries that haven’t changed their business models in years.”
With a cloud over it and uncertain economic times to come, it may be the right time for the estate agent industry to reinvent itself and perhaps recapture its integrity along the way, concludes Graham’s piece in the Wits Business School Journal.
If you haven’t yet started integrating home inspections into your business model, now is the time to start. It’s a great way to show your clients your commitment to transparency and sound ethics.
John Graham, HouseCheck. www.housecheck.co.za