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The fee discount ‘race to the bottom’

By Jay Garcia
08 April 2016 | 1 minute read

According to the responses of Australia’s top agents, many competing agencies are offering massive discounts simply to win business; so how is this trend damaging the industry? Top 100 Agents share their insights into discounting, and offer ways to counter vendors who ask for lower fees.

Leon Gouzenfiter from Gary Peer & Associates said many agencies discount heavily as a key point of difference when their service levels aren’t in line with the market.

“The question I would love to pose to some of our competitors that probably can't match us on service or performance and can only win the business on discounting is, 'what happens if we start matching their fees?’ How low are they going to have to go?” he said.

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“If we also started playing the race to the bottom, their point of difference to be the cheapest will mean they'll have to be even cheaper and pretty soon people are going to start working for nothing, which is really going to damage the industry.”

According to Mr Gouzenfiter, agents need to understand their value and charge fairly.

“I believe that the rates we're supposed to charge people are very commercial and in line with what the real estate commissions were prior to them being deregulated, so we should try to stick to ‘no more than necessary’,” he said.

“I actually tell vendors that it's a great compliment to me when I'm coming in as the most expensive because I know my value and the value we bring to clients.”

Mr Gouzenfiter said if agents explain why they’re worth a fair fee rather than discounting, astute vendors will generally choose in their favour anyway.

“I think people are happier to run with putting in a lower base to get the business and maybe getting what we would like to get paid if the vendor’s thrilled with the end result, like working with tiered structures and bonuses.”

Bullish markets

Shad Hassen from McGrath Leichardt said agencies discounting fees becomes especially prevalent during bullish market conditions.

“Reducing fees happens particularly in a fairly decent market where people feel that any agent can get the result - that the properties will sell itself and any agent can get the same result,” he said.

“In a slower market, it becomes less of a problem because then people seek out the strongest agents because they realise that the market isn't the strongest and so they need the assistance of the best possible agent.”

Mr Hassen said one important way for agents to counteract discounting competitors is to demonstrate their skill and ability to produce a good end result.

“The other way is to start with some of these people before they actually need you, so you've actually built a relationship with them; assist them with what they need before they become vendors,” he said.

“They might be a buyer and they're looking to buy something, so you can assist them in buying something and keep them informed on what's happening around; it's about doing things that would help you build the relationship with them.”

Standing tough

According to James Tostevin of Marshall White, heavy discounting is a real source of frustration and is damaging the real estate industry.

“I always say to my team, ‘guys, if we miss a listing because the commissions have been discounted, the bottom line is that we haven't been good enough’.”

“To some people in the industry, it's a bit demoralising, but others don't seem to care what damage their doing because, to them, it's all about getting the listing at any expense.

“To be honest, if an agency’s point of difference is their fee then they're not good enough individually.”

To see who else made the Top 100 Agents 2016 ranking, click here.

 

The fee discount ‘race to the bottom’
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