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Starr Partners CEO Douglas Driscoll has joined the LocalAgentFinder discussion, arguing that third-party lead generators have a legitimate place in the real estate value chain — but only at the right price.
Mr Driscoll told REB that he has “absolutely nothing” against the likes of LocalAgentFinder and OpenAgent, but feels that their costs are “hugely disproportionate” to the service they provide.
He also suggested that agents who use them should question whether they are getting enough value for the money they spend.
“According to the latest Macquarie Bank Benchmarking Report, the average real estate business in Australia operates at a 15.4 per cent profit margin,” Mr Driscoll said.
“If you were to remove the income from property management, it is not inconceivable that the average net profit from a sale could be as little as 10 per cent. This being the case, surrendering 20 per cent of your commission to a third party is commercially nonsensical.”
Mr Driscoll added that a fee of around five to 10 per cent for this service would be more appropriate.
He said that some of the rhetoric coming from the lead generators can be misleading.
“These companies justify their fee by arguing that it is in line with traditional referral arrangements within our industry, but these tend to be warm leads between agents, where a relationship already exists and trust has been established.
“I’m not sure when the traditional 20 per cent agent-to-agent referral fee was first introduced, but given our eroding margins, I think it’s high time we review this, too.”
Mr Driscoll also issued a warning, urging the industry into remedial action before it's too late.
“As an industry, we need to wake up and realise that there is only so many times you can slice the pie,” he said.
“For me, this has an all too familiar feel to it. We continue to bemoan the spiralling costs associated to advertising on the major listing portals, but let’s not forget that we helped create that monster, because we allowed ourselves to become far too reliant on them. If we’re not careful, and lack foresight, we could also end up being at the mercy of these agent ‘comparison’ sites.
“My advice to business owners is to take a very close look at your margins and determine whether or not it’s commercially viable to accept leads from these sites. If the answer is yes, then maybe consider reducing the commission split with the agent on these particular sales to offset any potential shortfall.”
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