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Earning $900 an hour, real estate boss says model is broken | Stuff.co.nz

Earning $900 an hour, real estate boss says model is broken | Stuff.co.nz

One Auckland real estate agency boss earning $900 an hour wants a shake-up for the industry, which he says is “feeding off Kiwi complacency”.

Mike van Wagoner owns Emphasis Real Estate in Auckland.

He offers a fixed-fee structure for sales, charging between $6000 and $9000 depending on the value of the property. 

Van Wagoner said traditional industry commission rates had not kept up with the reality of the property market.

“Twenty years ago, it may have been acceptable to pay for an agent to handwrite a sale and purchase agreement in an educated and legal manner, to make up any necessary conditional clauses, using the REINZ book of common clauses, to do three copies, to run back and forth while negotiating between buyer and seller.

“The commission at this time was acceptable … normally 4 per cent on the first $300,000 dropping to 2.7 per cent on the balance. I will let you do the numbers on a typical sale where houses in Auckland were selling around the $450,000 to $500,000 mark.”

But he said now the median price was $850,000 the structure was a lot less reasonable. Most Auckland real estate agencies would charge between $24,000 and $28,000 for that sale.

Mike Van Wagoner says the public is being overcharged by the real estate industry.

The advent of the Real Estate Institute’s eform and systems such as FlexiSign, which allowed buyer, seller and salesperson to all work virtually on the same document, reduced the work salespeople had to do, Van Wagoner said.

“Any agent can now go on to this site on the REINZ members’ page and [it] only requires the name of the purchaser, the name of their solicitor and any conditions which the purchaser may require.

“If they so choose, they can also determine the offered price or leave it blank for the purchaser to complete. Using the eform, the agent can now complete a sale and purchase agreement in as little time as five minutes.” 

Van Wagoner said he had been selling property this way for more than three years. 

“I sold a multimillion dollar property in this manner.

“All that is required is a mobile and a laptop. I recall a sale last year at $2.85 million. It took just over five weeks to sell…This particular property sale came in with lots of phone calls, emails, open homes but only totalled a tick over 10 hours of actual work.

“My accountant mentioned that I was too cheap. I related this sale to him and asked him how many professional people – doctors, dentists, solicitors will charge my rate of $900 per hour. And I don’t have the strenuous education or responsibilities that they have – literally, I am an uneducated person with the exception of my real estate training and yearly compulsory training, making $900 per hour.”

One salesperson says technology does little to speed up the real work of finding buyers.

He said other agencies dealing with that same sale would have charged between $45,000 and $50,000. 

“They feed off good old Kiwi complacency, its a matter of the public accepting that this is how it is done and they will have to pay excessive charges for the sale of their property.”

But Alistair Helm, formerly chief executive of Realestate.co.nz and now a salesperson at Bayleys, said the aspects of the job that technology sped up were not those that required the most work.

“It’s not changing the primary cost base which is the sheer work of bringing buyers and sellers together.”

He said some properties might require hours of work before the right buyer could be found, and even at a reasonable hourly rate, that would soon become a big bill.

He said it was good to have competition, and for questions to be asked about the industry, but the majority of sales around the world were done by salespeople earning pecentage-based commissions.

Fixed-fee models that charged a certain price for each sales band could create lumps, where a $1m sale was charged thousands more than a $1,000,001 sale.

This content was originally published here.

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