Discounting remains prevalent: survey

Discounting remains prevalent: survey

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Over 40 per cent of agents are discounting their commissions in a bid to get a vendor's business, new research has found.

In a recent Real Estate Business straw poll, 40.8 per cent of the 287 respondents admit to offering discounted commission rates to potential vendors, while 59.2 per cent of agents said they charge a 'standard' commission.

Century 21 chairman Charles Tarbey said he was not surprised that four in ten agents were discounting, particularly given the current state of 'blue ribbon' property markets.

“Discounting is generally a price range issue, but more so in the prestige markets,” he said.

“Most discounting occurs in these upper markets, and in some cases agents have charged zero commissions, just to get the profile [from] completing the transaction.”

“If you have 59 per cent on your books saying they are not discounting I wouldn’t disagree, because the majority of the sales...are in the $300,000 to $800,000 price range,” he said.

Discounting may be on the wane, however, he added.

“There a fewer agents around the traps, and agents have got their hands on fewer transactions, so you will find in these market places that the actual commissions should probably increase.”

Starr Partners chief executive Douglas Driscoll said agents that offer discounts could be placing themselves at the top of a slippery slope.

"The worst [thing] any agent could possible do is to cut their fees," Mr Driscoll said.

"Today, business is noticeably tougher, and some agent’s believe quantity is the key to success. But the real problem lies in the ability to turnover a profit. If an agent is continually dropping their rates to make a sale, how are they going to survive over the longer term?"

Speaking to Real Estate Business earlier this month, Jock Gilbert, managing director of Jock Gilbert Real Estate, from the Adelaide suburb of Rose Park, said there will always be those agents that cut rates to secure business, but what is surprising is how low they are prepared to go.

“Some agents will always offer discounted commissions, but what is really concerning is how far they cut their rates,” he said.

“In South Australia, we are seeing commission rates as low as one per cent. In today’s market two per cent is reasonable but one is seemingly desperate.”

The straw poll also comes not long after the launch of discount operation Refund Real Estate, which has plans to open 50 offices by July next year.

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