#ExpertsTalk: Did SA Home Loans back the wrong horse?
Last week it was announced that SA Home Loans had purchased 49% of online, low-commission estate agency, PropertyFox.
While welcoming SA Home Loans into the low-commission estate agency arena, Neville Berkowitz, veteran property economist and founder of low-commission estate agency, HomeBid, questions the decision by SA Home Loans to buy a stake in PropertyFox.
HomeBid charges 1.95% commission with a minimum commission of R17,500 while Leadhome charges a flat commission of R29,950 (VAT excl). PropertyFox is the only low-commission estate agency to charge an upfront registration fee of R5,000, whether or not they sell your home at 1.5%, and a minimum commission of R35,000. This means that if PropertyFox sells your home for R2,35m or below, you are paying the commission of 1.5% as if your home was sold for R2,35m.
The bad news for SA Home Loans (SAHL) is that more than 83% of the total number of homes sold annually in South Africa are below R2,35m. So PropertyFox, with a minimum commission of R35,000, is competing directly with some 5,500 estate agencies employing some 35,000 estate agents all scrambling to sell 3,750 homes a month at R2,35m and above. (These figures are based on annual Deeds Office registrations countrywide.)
Leadhome, with a minimum commission of R29,950, only becomes competitive at R1,5m and above where some 20% of the market exists in terms of number of sales and registrations annually.
So SAHL backing PropertyFox is going to financially penalise its client base by charging it a minimum commission of R35,000 to sell their home; HomeBid can do it for R17,500 (VAT excl) as a minimum commission and Leadhome at R29,950.
To add insult to injury for these SAHL clients soon to pay twice as much to sell their home through PropertyFox is the fact that the digital platforms of low-commission estate agents are merely information collection and processing hubs, and the real work is done by experienced estate agents who are employed by both HomeBid as salaried estate agents and retained by Leadhome in some form of fee split arrangement.
Each of HomeBid’s estate agents sells an average of 12 homes a month and HomeBid currently sells 78% of the homes it lists for sale within its 60-day sole mandate period at or near the valuation done by a registered professional valuer.
The traditional estate agents in the marketplace charging a commission of 5% to 8.5% (plus VAT) are reportedly perplexed as to why SAHL would want to “spit in the eye” of the traditional estate agencies who supply them the bulk of their current loan business.”
This comment was sponsored by HomeBid – the largest low-commission estate agency in South Africa, currently selling over 50 homes a month, at a minimum commission of R17,500 plus Vat.