An emerging group which aims to massively undercut agents could be vulnerable to a concerted industry fightback, potential investors have been warned.
Hello Real Estate, a multi-state business which has sold about 80 properties in its brief history, is at “particular risk” of lobbying from the industry, according to a report aimed at potential investors.
The report was prepared by Minrex Resources, an ASX-listed company that wants shareholders to approve its proposed acquisition of Hello Real Estate.
The deal is actually a reverse takeover designed to give Hello Real Estate a back-door entry to the ASX. If the deal is approved, Minrex will change its name to Hello Property Group and exit the mining business.
Minrex has advised its shareholders to accept the deal, but has acknowledged that it involves risk.
“There is a particular risk that the real estate industry may lobby against Hello’s licence-based real estate model,” the report said.
“Given the focus of Hello is to disrupt the real estate industry, there is a strong risk that Hello will be targeted by incumbent real estate agents, groups and industry associations looking to tarnish the Hello reputation and brand.”
Hello Real Estate, which has 12 licensees in three states, has positioned itself as a “high-tech, high-touch alternative to the traditional real estate agent”, according to Minrex.
Vendors are charged a flat fee of $9,990 for metro area sales and $7,990 for regional area sales, which reportedly provides them with savings of between 33 per cent and 70 per cent.
The fee includes a building inspection, a comparative sales report, professional valuation, conveyancing, styling, photography, print and digital marketing, wi-fi-enabled signboards and access to an online auction platform.
These services are provided in conjunction with service providers CoreLogic RP Data, BidRhino, Jim’s Building Inspections, BG Property Styling, Think Conveyancing and Open2View.
Licensees receive 44 per cent of the fee for each sale, which equates to $4,400 for metro sales and $3,500 for regional sales.
Minrex told shareholders that other risks of the reverse takeover are that Hello, which started operating in 2012, is a fledgling business in a “highly competitive” industry.
“Hello is of interest to its major partners due to the disruptive business model and national coverage. If either of these were not to occur, Hello would not be able to attract major partners or competitive pricing on their products and services,” the report said.
“It is also difficult to evaluate the risks frequently encountered by early-stage companies using new and unproven business models and entering new and rapidly evolving markets,” it said.
The independent expert has valued the merged company at between $7.4 million and $9.5 million. Shareholders will vote on the deal at Minrex’s AGM on 23 November.