Real estate agents are on the endangered list


Real estate agents are on the endangered list - 11th September 2015

Profiles

Business Movies Hollywood Sports Television Entertainment

The Committee for Economic Development of Australia predicts close to 40 per cent of jobs will disappear because of technological advancements, with real estate agents one of the highest-risk group. Photo: Josh Robenstone

By Mike King

Poor old real estate agents. A number of companies are eyeing their mouth-watering commissions for selling real estate and taking a whack at it.

When you consider an average agent's commission for selling a property is 2 per cent, a $1 million property will attract $20,000 in selling fees. Some agents can charge up to 5 per cent in commission. When you consider how many properties can be sold in a week or month, you can see why your real estate agent drives around in the latest Porsche or Lexus.

REA Group has repeatedly stated that it needs real estate agents – after all, they provide the company with its largest source of revenues through listings on realestate.com.au. The listed property advertiser has repeatedly taken advantage of its position to increase advertising prices and introduced new, higher fee products. Ditto Domain.com.au, the property site owned by Fairfax Media, the publisher of BusinessDay.

While most of these are passed on to the property sellers, there may come a time when agents will have to wear some of those costs. Particularly as online sites begin offering many of the same services a real estate agent usually charges for: Things like providing a list of comparable sales, an estimate for what your house might be worth and recommendations on how to improve your sale price, such as low cost improvements.

Several websites already provide those services – many free of charge. Others, like Onthehouse.com.au, offer property profile reports, history of sales, similar sales, suburb profiles and the list goes on.

Down the track, even buyer databases could be taken over by online players – after all, they are only lists. Auctions could be easily conducted online, so who needs an expensive auction marketing campaign?

Buy My Place

Now another company is looking to take its own bite of the property market, eliminating real estate agents completely.

In the US, around 20 per cent of homes are sold without an agent and in Canada it's as high as 30 per cent, but in Australia that figure is less than 2 per cent.

Killara Resources, a tiny explorer, has agreed to buy BuyMyPlace.com.au and the company that owns it. BuyMyPlace.com.au allows property owners to sell their properties for just $650, potentially saving them many thousands of dollars.

Killara estimates that using a 2 per cent commission rate and an average value of $525,000 for Australian houses, real estate agents rake in around $7 billion each year, not including the marketing and advertising that goes along with it.

When you consider REA Group has revenues of $523 million and Domain an estimated $200 million annually, there's substantial room for new players to take a larger piece of real estate agents' commissions.

Other targets

And it's not just property sales that digital disruptors are targeting. Property management is also under threat, with BuyMyPlace entering that market – following in the steps of Rent.com.au, REA Group and Domain offering landlords the ability to rent out their properties and bypass real estate agents.

Others like 1Form.com allow renters to apply for multiple properties without filling in applications for each real estate agency or property.

Rinse and repeat

Once, physical newspapers were the primary source of all things in the property market, but print real estate classifieds have virtually disappeared - taken over by the disruptors. Online stockbrokers have virtually replaced full-service brokers, and it would seem odd now to ring up a broker to make a trade, unless you didn't have internet access. ATMs have mostly replaced bank tellers.

Jobs, cars, real estate, property rentals and even general classifieds are just some services that have been disrupted in a new digital world, but this revolution is ongoing. Commercial television and Pay TV is under threat too from the likes of subscription video on demand (SVOD) services such as Netflix, Stan and Presto.

Foolish takeaway

Consumers have never before had the wealth of information they do now, all just a few key presses of a smartphone away. We have been empowered by the digital revolution, and those industries that have traditionally relied on old consumer habits may be consigned to the history books.

A report by the Committee for Economic Development of Australia predicts close to 40 per cent of jobs will disappear because of technological advancements, with real estate agents one of the highest-risk professions.

This new wave of property sector disruptors suggests their time may be approaching fast.
Investors, don't miss out: If you haven't taken the opportunity to view my brand-new report on Warren Buffett and 2 ASX shares Buffett could love, now is the time. Click here to claim your free copy and discover 2 top ASX picks now.

Mike King is a Motley Fool investment analyst. He owns shares in REA Group. You can follow Mike on Twitter @TMFKinga. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691).