The “them” is mortgage provider, SA Home Loans (SAHL), and the email in question is a promotional message sent from SAHL to its existing homeowner clients, as well as previous and potential future home buyers, announcing the bank’s partnership with low-commission estate agency, PropertyFox. Perhaps most shocking is the fact that the very same promotional email was sent directly to real estate agents which are in competition with PropertyFox.
Even though the deal was inked last November, last week’s email blast has struck a new nerve in the industry, with many estate agents viewing the deal and the bank’s open promotion of a low-commission service to be a slap in the face of the traditional real estate sector which feels it has been directly responsible for SAHL’s growth and success.
SAHL has taken a big gamble by investing directly in and promoting PropertyFox – a low-commission player which many in the sector feel is the least competitive of all the current options available. SAHL is now the first “bank” to straddle the real estate broker line, competing directly with more than 5,000 registered and operational real estate agencies (and their estimated 30,000 agents) which previously supported it by bringing it bond applicants.
So much so, in fact, that an industry representative whose organisation has a long-standing association with SAHL – but who requested anonymity – tells HomeTimes that estate agents provide the bulk of referrals to SAHL.
“Many bond originators are supported by the large commercial banks to bring them bond applicants,” he says, noting that SAHL is a last resort for bond originators as SAHL does not provide any commission for referral business. “Estate agents, however, are SAHL’s biggest supporters in bringing in new business. The decision by SAHL to partner with an online agency, even a small one, is very dangerous.”
Small is an understatement. PropertyFox, which falls within the online estate agency camp, is not a viable competitor for the traditional real estate industry.
According to Crispin Harrison, sales and marketing director at SAHL, the industry’s reaction “is a little surprising”.
“We were expecting this reaction last year when the deal was first announced,” he says. “The reaction is an emotional one, not a factual one.”
By Harrison’s own estimates, last year the online real estate agency industry as a collective made up just 0.36% of sales volume! That translates into just three homes per 1,000 sold.
“PropertyFox and the other online estate agencies are not their competition; the larger, established names are their competitors,” he says, drawing parallels with the UK real estate market. “The online estate agency industry in the UK makes up just 6% of market share – and that’s in a highly sophisticated market.”
Harrison says that SAHL hopes the industry does not make good on its call to boycott referring home loan applicants to the bank, saying the fact is SAHL purchased a minority stake in a start-up agency.
History is often the best predictor of the future, and SAHL would be remiss to ignore this. The estate agency industry directly brought down the Sunday Express, while the Saturday Star is a shadow of its former self; both are the result of agents collectively boycotting support. Will SA Home Loans be the next casualty of an industry that is a powerful lobby for enforcing boycotts?
On the other side of the coin, estate agents operate on an ethical code of conduct where they are obliged to present every offer received on their clients’ (sellers’) home sales. This same ethical code of conduct does not exist when estate agents assist buyers with accessing bond finance.
This brings into stark focus the call by players in the industry calling for a boycott to presenting potential buyers’ applications to SAHL. Surely, the politics of an industry should not affect the industry’s clients. An application not presented to SAHL by a traditional estate agent could literally be the difference between a home buyer being financed or not, and ultimately a seller’s sale falling through.
“Is this how Standard Bank and the Public Investment Corporation, which are SAHL’s shareholders, want to be seen treating their own loyal customer base?” asks an estate agency principal who asked not to be named for fear of his own applications being rejected by Standard Bank. “Whether or not this is intentional, this is the message the market is receiving.”