When looking to buy or sell a property, are we too conditioned to accepting known real estate practices to look outside of this familiar box? We readily accept that the agent’s commission is factored in to the property price. This commission effectively pushes real estate values up by around 2-5% more than they actually should be. The end result is inflated property prices with agency and developer’s bank accounts getting fat at the expense of the buyer, and potentially, the entire industry.
No one is begrudging a fair fee for a job well done, but when agency commission structures entitle them to $20-50K per sale in a $1M median house price city such as Sydney, questions need to be asked;
- Is this familiar process contributing to increasing property prices?
- Are property buyers and sellers paying too much?
- Are there alternatives that make property prices fairer?
The answer is a resounding, “yes”! The current process and fee structure do contribute to increasing property prices.
Agents most certainly hold a valuable position when selling property, however, the selling fee greatly exceeds the time and skill required to achieve a property sale. Vendors and developers are entitled to a realistic property sale price but an overzealous attitude drives prices to grow too fast. This contributes to potentially serious financial consequences for us all.
Is there a solution?
Online property forums offer a viable alternative to buy, sell and invest in property. One such example is centralpropertyexchange.com.au [CPx] which is a residential property sales advertising website that provides a free listing service with a property Grading option. The Grading is carried out independently by JLL and effectively enables the buyer to easily compare similar properties for value and price.
By using the CPx method of buying or selling property, the agency fee is avoided saving thousands of dollars to both parties. The independent Grading provides researched market information to the vendor to establish a fair listing price, whilst also providing the purchaser clarity on where the property sits in the current market to decide upon what is a fair bid.
The CPx model successfully defeats the opportunity for agents to compete for a listing by submitting a higher sale price over other agents and in so doing creating unrealistic vendor expectations and contributing to an overinflated market. Further, Off-The-Plan marketers cannot spruik unrealistic property values, resulting in vendors of similar properties to demand the same inflated sale price.
The fact is, the higher the sale price the more stamp duty the government continues to collect. It is apparent that industry practices and regulations will not be addressed or changed until something eventually breaks. Are we on the verge of a reality shaking break? Australia is now in the unenviable position where major city property prices are unaffordable to an increasing percentage of the low and even middle income population.
All clues indicate that the real estate sales process is already broken. Property buyers deserve better than being carried along in an unescapable bubble of excess; over-zealous pricing and high-inbuilt commission costs. Getting back to a facts and figures reality of property listing and buying based upon actual market research is one way of returning sanity to our real estate market.
Buyers, sellers and investors now have another choice to turn to. If agencies and developers continue to greedily milk the market, they may in fact be the cause of their own profit demise.
Posted by: Anthony Aoun