The rise of commission-free property selling services
We have already seen it with Uber in transportation, Amazon in retail and Airbnb in hospitality. Big game changers following a customer-centric strategy and heavily based on technology. But what about real estate?
The customers’ swift to search for property online is already a fact worldwide. But when we talk about transactions, we still have something that causes a special distress in customers: The outrageous commissions.
Commissions that I believe already have a expiry date, let me explain why…
Recently the Spanish startup Housfy raised a €2 million investment, reaching a total of €3.7 million since it was founded in 2017. What they propose is pretty simple:
Flat fee of €945 to sell your property with zero commission.
Bold, isn’t it? Housfy claims that they have already sold properties in Spain for a total value of €50 million. They currently sell an average of two properties per day and most of their properties get sold in less than 60 days. Their agency model is totally online, they take care of the marketing but is the owner itself who shows the property and closes the deal.
And they are not alone in this. Just in Spain there are like a dozen of similar players, all of them based on who probably was the pioneer in Europe: Purplebricks.
Purplebricks is already a monster in the UK and they are currently expanding to Australia and the US. Their model is more of a hybrid agency, combining online activities with local agents, but still offering a flat fee of £849.
Let’s have a look to their figures: In April 2018 they reported a revenue of £78 million, while traditional brokerages reported falls. Last summer they claimed to have sold so far properties for a value of £9.7 billion. And they have spent £42 million in marketing. Huge numbers to be just a temporary trend.
What about the US market? With a usual 6% commission it would certainly make a huge impact. Seems to be going slower in the Americas but it has already started: California based Reali.com got a $20 million funding last summer for their national expansion. They offer a flat fee based on the property value, although customers still have to pay the buyer commission. And they are not alone, there are more US players already offering partial flat fees or “low cost” commissions.
Of course, like usually happens, all that glitters is not gold. Detractors claim that these services are charging customers just to list their properties on the leading property portals and barely nothing else. Purplebricks itself got several complains about misleading customers, forging fake reviews and such. And I can imagine speculative owners raising the selling price of their properties because “there is no commission”.
In any case, is it not common sense to pay just a service fee instead of a percentage of the product value? If we put customers’ interest first, certainly it is. So similar to what happened in other industries, I believe is just a matter of time until we see this spread worldwide.