Time for change in real estate industry (2/23/2008)

The real estate industry cannot afford to insist the traditional model of selling property is beyond reproach

The real estate industry cannot afford to insist the traditional model of selling property is beyond reproach, says a senior lecturer in property studies in the University's College of Business, Dr Susan Flint-Hartle.

Dr Flint-Hartle is a successful former real estate agent in Auckland city who returned to study a decade ago and has just completed a doctoral thesis on real estate franchises. She says the industry cannot afford to dismiss innovation in the way property is sold - regardless of the reasons for the recent collapse of the Jones's Real Estate agency.

Dr Flint-Hartle says the cost of sellling real estate by the prevailing method, may be one of the least understood and least acknowledged influences behind housing affordability in New Zealand.

"Vendors expect to get high prices because they factor in marketing costs and high commissions.

Not only are commission rates amongst the highest around, but vendors are forced to pay massive marketing fees - say $5000 for the anticipated sale of a $700,000 property; where is the partnership and risk sharing in this?

"Although the current model of selling real estate places increasing financial burden on sellers by adding considerable marketing costs onto already high commission rates, the majority of vendors still don't want to step outside the system endorsed by the Real Estate Institute."

"Participants in the market are largely caught within the system and the reality is that the cost of sale is too much for many. In many cases people cannot see value for money."

Dr Flint-Hartle says recent support for new real estate agencies like Go Gecko and Green Door, which offer different selling methods, indicate real demand for price-driven alternatives. It is a narrow view to suggest only the best salespeople work for commission-based agencies because some actually prefer a team-based and salaried approach.

"Many people are not satisfied with the way things are in the real estate industry at the moment. The industry attracts public attack and is very defensive in the face of public query of its methods. It is time for the real estate world to encompass alternative ways of doing things and encourage diversity to provide real choice for the public."

Note: This story has been adapted from a news release issued by Massey University

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