The true disruptors of the industry (Updated)
There has been much talk about how the "low/fixed cost" estate agency model has disrupted the real estate industry.
Some believe they are here to stay. Others believe it is a passing phase and, because of commercial reality and affordability, the low-cost agent will just fade away.
The truth is, the industry is being disrupted by an unexpected third party.
The true disruptors are the attorneys who have re-donned the hat of an estate agent.
Attorneys have been selling properties from times immemorial.
It was part of their stock standard services, like conveyancing, administering deceased estates, drawing wills and auctions.
Attorneys are, arguably, the oldest regulated estate agents in South Africa.
For the last century until now, a combination of factors has contributed to attorneys becoming less interested in practising as estate agents.
Restrictive advertising, the requirement of two businesses, low property prices and profitable legal work, made the option of earning an income through selling properties less attractive.
The advent of the Estate Agency Affairs Act in 1976 compelled estate agents not only to undergo training and to qualify as estate agents but also resulted in estate agents organising themselves into very powerful organisations.
This was the period when real estate agency giants were formed.
Many attorneys found it easier to solicit work from estate agents, rather than selling properties themselves.
Gradually, the pendulum of power swung from attorneys to estate agents.
From the early 1980s to date, the South African property market has been dominated and controlled by estate agents, in particular, a few very large estate agencies.
This control was extensive and powerful.
A perception was created with the public that it was normal to pay exorbitant commissions ranging from 7.5% to 10% of the purchase price.
These commissions are of the highest in the world.
More worrying, for attorneys, was that conventional estate agents, slowly but surely, began to exert undue influence over attorneys. Attorneys who offered the "most" to agents (not just good service), secured the conveyancing work from the agent. Regrettably, this imbalance of power exists to this day.
But the pendulum is swinging back, and disruptively.
Several factors have created a unique opportunity, exclusively to attorneys in South Africa and Namibia, to re-enter the realm of the estate agency and to truly own it by offering a professional, affordable and comprehensive property service.
These factors are:
- The Internet - means global and rapid adverting of property stock at a fraction of the cost of newspapers which have limited coverage;
- Now attorneys may freely market their services as estate agents - in the past, this was forbidden;
- Attorneys may run their estate agency businesses from their existing law practices - resulting in a significant cost saving;
- Higher property prices allow for commissions to be cut and still allow for attorneys to operate profitably; and
- Work traditionally performed by attorneys, such as deceased estates and wills, is now also provided by banks and accounting firms.
This is a unique opportunity, for practising attorneys only, to enter the arena of the estate agent, competitively and profitably.
Logically, it makes sense. An attorney with his legal training, knowledge and experience, does the job professionally, comprehensively and cost-effectively,
If ever there was a true disruptor in the industry, it is the return of the attorney selling properties - doing what they have been doing for centuries.
The circle is complete.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
Author: 3%.Com Properties