Where and what is the true value in a Real Estate lead? Portals v Agents

Times are changing in real estate all over the world in many ways, not least the way that portals are trying to monetize their businesses. 

If you follow Simon Baker on his Online Marketplace YouTube channel, you would have heard from Georg Chimel (Juwai IQI) who recently said that Juwai were now actively involved in the transaction directly with the developer. They have evolved into selling property for developers direct and thus receive a commission for their services. 

If you now look at Simon’s latest video it explains that Zillow and realtor.com are cutting their seller account rates by 25-30% to help businesses through the pandemic. At the same time they are transitioning to a referral or success fee model were the portal sends the lead to a selected agent and instead of paying upfront (subscription), the seller pays on the back end of closing. This can be up to 35% of the fee received from the agent.

Currently. there seems to be a little tension in the air between the portals and the agents, because of these changes, it almost like a turf war, we will have to see where it ends up.

I was a broker in Asia for over 12 years and I have founded and operated SnowOnly ski portal for the last 3 years. I have experience from both sides of the fence.

My question is: Can the portals safely have a slice of the commission from the agents without causing disruption, or will the agents reject it and a big gap appears when we are all on the same side?

I used to use portals for my brokerage on a subscription model and paid around $200 per month to successfully generate a lead, one in particular that resulted in a sale commission of $75,000. That was a good day. Spending $200 a month (amongst other costs) was quite a lot and only in hindsight did it prove to be a good deal. However, I still had some hesitations about paying initially and also after the sale completed, it felt a little like gambling. When do you take your money and walk away to make the most profit? If it had been offered to me that my listings were FREE and you had to just paid a commission fee on completion, that would have worked out fine as I would have had no outgoing costs and I was used to paying referral fees anyway, especially if the referral fee was only 10% and paid only on success of the sale. Most referrals wanted a lot more and some 50:50, even if they were taxi drivers picking up buyers from the airport.

My company, SnowOnly.com have recently started to charge a referral commission based only on successful sales. We offer a rate of 10% for agents (tiny in comparison to Zillow) and 1% for developers.

We have had a good, yet mixed response from agents with some resisting, which wasn’t totally unexpected.

In my head it sounds like the perfect scenario, zero money upfront to list, so zero risk to the agent, brand exposure for FREE and only paying for the service we provide when the seller also makes money. A win-win situation all around, you would think.

If I look at it from the side of an agent, where is the resistance coming from? you may feel like you do all of the work in finding the property (not always the case as some buyers buy the property they enquire after) and closing the deal, as well as the long calls with the buyers trying to keep them on the rails without the sale falling through. Plus the duration of the sale process means you can forget where the lead originally come from and in your mind you might have already starting spending the sale commission, only to look back and realize you owe someone a small percentage that you had not accounted for. I get that, I have been there.

Now from a portal’s perspective. The lead is the gold dust, the needle in the haystack, the one thing anyone needs to complete a sale: a genuine buyer. For me, finding the lead is the hardest part of any real estate transaction. It is easy to find a property, there are 8500 properties on SnowOnly and that is counting each development only once, yet there are clearly not 8500+ buyers otherwise we would all be incredibly rich. Finding that elusive buyer is the key. This is achieved by no stroke of luck but by using targeted marketing and a vast sum of money spent.

Before I write my conclusion to this, I remember going to the Property Portal Watch in Bangkok in early 2019 where most of the big portals attended. What I found really interesting was how many portals were either actively involved in the transaction or changing their business model to become involved. Juwai.com is a perfect example. Maybe this information has yet to be filtered down to the agents, and they are not aware of the way the portal’s business model is evolving, so it is coming as a bit of a shock when portals are asking for a commission.

What agents must understand, which was explained perfectly by one particular attendee at the event is: “agents cannot compete with portals as they do not have the finances or the technology”. Thus more and more leads will come through portals before they reach an agent. The event also showed clearly how much money was in commission and how much less there was in subscriptions unless you are Rightmove, Zoopla, Zillow etc.

If you are a fan of paying subscriptions as an agent then it is easy to stay away from portals that are asking for a referral commission but in my experience of using Rightmove and Zoopla, there are a lot of poor leads. Having to filter through each of these to find the good one is sometimes very time-consuming process after all their sales pitch is that they will send you loads of leads, music to the ears of a broker, but they are missing one-word ‘quality’. I recently met a developer who had listed with Rightmove and Zoopla for 3 years without a single sale (the subscription for this must have been huge) and yet his first lead from SnowOnly resulted in a 700,000 EUR sale in a development in the French Alps. I would take one genuine lead over 50 average ones.

My point comes down to asking how much value to give to the service of finding a genuine buyer. The portal and agent need to work together. Portals are great at finding buyers but lack the local knowledge of a broker. If portals offer poor leads to agents then they don’t profit, so they are highly incentivized to only offer high-quality leads. A seller isn’t who prepared to pay 10% for a genuine buyer from a portal when they will happily spend at least that price on marketing costs to generate leads means the resistance can only be to their mentality resisting this change. I can see in the future that Portals can have satellite agencies to gain the local knowledge but agents can't and won't expand into portals. So, unless they work together I can only see this happening, maybe not at 35% commission though, it has to be fairer than that. But that is what happens when you corner the market.

Offering free listings and only charging for success is the fairest of all business models at a fair price.