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Trade Me gets aggressive with real estate agents now that it dominates the real estate advertising market. Will sellers accept new costs?

Property
Trade Me gets aggressive with real estate agents now that it dominates the real estate advertising market. Will sellers accept new costs?

By Alistair Helm*

Trade Me has made a bold and challenging move, telling the real estate industry that they need to charge clients for their property to be listed on the site, instead of absorbing the cost.

With effect from the 1st November the company will no longer offer bulk subscriptions to real estate companies that previously allowed them to pay a single monthly fee for unlimited listings.

This move comes shortly after the annual report for the last financial year highlighted that the property section of the business held significant revenue growth potential.

Let’s look at the situation for a typical real estate company. (I chose at random Professionals Rotorua (McDowell Real Estate Ltd).

In the last full month of August the company listed 19 properties for sale.

The current subscription fee is a base cost of $250 plus $124 per listing with a cap of no more than $999. So this office would in theory pay Trade Me $999 for those 19 listings in August.

With effect from the 1st November the base fee of $250 is removed as is the cap. Each listing will be charged at $159 – a total for August of $3,021 – a 200% increase.

The big question that each and every real estate agent and real estate company will be asking right now is how can we manage this?

images.trademe.co.nz_others_pdf_Trade Me Property pricing 2013 A4.pdf-1 2.png

Click to access the full proposal to agents

Trade Me are very clear.

As far as they are concerned this fee-per-listing should be passed on to the vendor as a cost to market a property on Trade Me. After all a private listing costs $349 / $399 (inc GST) so $159 + GST ($182.85) is almost half the cost of a private listing.

In the communication being sent to real estate agents Trade Me detail that the recommended price agents should charge vendors is $199+ GST ($228.85) – this allows a 20% commission margin for agents.

The Real Estate Agents Act is very clear in detailing that in terms of advertising costs that the vendor pays for, the listing agent must stipulate if there is a commission earned for selling any advertising. At the time the Act came into force in 2009 the industry were very clear that they in the main passed on advertising costs without a commission.

Now there is nothing wrong with agents earning a commission selling advertising, it is just interesting that Trade Me are so explicit with it in their communication.

This is certainly a bold and aggressive move by Trade Me.

In terms of marketing a property for sale – advertising on Trade Me is the essential part of any campaign and when compared to c.$1,000 for a full page in a single property magazine or many thousands of dollars for a picture in a newspaper spending $200 for a listing on Trade Me is cheap.

Will the vendors accept this re-charge?

Since the start of Trade Me as a legitimate website for property for agents back in 2005 most agents have not charged their clients to have their property on Trade Me, just as they have not charged for Realestate.co.nz or their own website.

They started back then from the perspective of online advertising being a “nice addition” to the mainstream advertising of newspaper and magazines.

Over the last 10 years that situation has reversed, nowadays newspapers and magazines are the “possible addition” to the mainstream online advertising. Accepting this change has been tough for agents and more especially real estate companies as print media is so effective in real estate brand advertising as compared to the web which is solely property focused.

Clearly though real estate agents and companies have no choice; as to swallow this cost for all listings would mean the industry would have to pay up the $21m of revenue that this move creates for Trade Me up from an estimated $7.5m earned in the past year from subscriptions.

Once established as a vendor cost recharged by agents then it will make it easier for Trade Me to apply annual increases of the order that they have applied over the past 8 years to private listings for property.

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The above article was written by Alistair Helm, and is republished with his approval. The article was originally published on Properazzi here.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

33 Comments

Will sellers accept the new cost?  My guess is those with existing TM accounts - who understand the interface and are good online communicators will not.

 

Instead it will push these sellers toward DIY - a private sale. From TM's perspective this is much better as they convert that individual listing to twice the revenue to them.

 

TM is just so effective for RE sales. It's just too easy to sell your own place provided you take good pictures and you price the property right.

 

There is so much too that TM can do to improve the RE interface for their customers. I often, for example, head over to Zoodle for school zoning info that TM does not provide.

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I don't understand why more NZ'ers don't sell their properties privately, it's not difficult. However I have noticed in the past that many homebuyers are reluctant to negotiate with a private seller.  

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We sold our place from advertising on TM and a sign outside the door. It all takes time out of busy lives and when there are two income earners it can be quite hard to fit in such a large project. It is stressful enough trying to keep the house clean and undamaged while people look through it.

We found that it all worked out fantastically - purchasers and vendors both very happy AND WE ONLY PAID TM AND OUR LAWYER. Beauty!

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Yes I imagion alot of home owners think this is so easy to sell my house privately, after all anyone can take good pictures, do a good spiel, many get an agent in to give them the price and then they list privately.

Generally, selling one's property privately is not classified as being " in trade" and hence these activities are often not captured by the fair trading act 1986. What this then means for consumers is that if a private seller misrepresents the property or fails to disclose important facts about the property, then the only remedy available is in civil action which can lead to significant cost and time delay with no guaranteed outcome. More importantly, the onus of proof in these civil actions lies solely with the person bringing the claim.

Under the Real Estate Agents Act 2008, remedies are available to have fines imposed or to have compensation paid for the loss suffered by the person bringing the complaint but only persons holding license under this Act can be found guilty of unsatisfactory conduct or misconduct that would subject them to these penalties.

Whilst various remedies available to the aggrieved buyers may not necessarily bring joy to the real estate industry, a warning is definitely there for those who purchase property without a licensed agent.

The Real Estate Agents Act 2008 was enacted to protect consumers.  The compulsory licensing regime under this Act was also designed to protect consumers so that they get to deal with real estate professionals who must comply with strict requirements and professional standards and are required to keep up with continuing education.

So, the message to potential buyers of real estate, business or potential lessees is to make most of this protection provided and choose to deal with persons licensed under the Real Estate Agents Act 2008.  You should also be aware that not all real estate licensees are the same.  Only real estate licensees who are members of the Real Estate Institute of New Zealand (‘REINZ’) can use the title ‘MREINZ’ on the business card or other marketing materials.

REINZ members are bound by strict codes of ethics and are expected to develop and enhance the real estate industry by providing excellent customer care and upholding excellent standards of practice that are open, ethical and honest.

 

DISCLAIMER: The information contained in this material is not intended to form professional legal advice or legal opinion.  Readers are advised to obtain their own specific legal advice.

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If it stops agents from choking up the page with multiple identical listings from the same housing or land development , then good .... fed up with wading through page after page of one stylised house pictured 150 times ..

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This could end trademe's real estate business.

 

Considering some offices may have 100 listings, there is no way they are going to accept the monthly cost to rise from $1000 to $16,000!!

 

Realestate.co.nz offers a perfectly adequate service, as does the agents' own websites.

 

Given the market is red hot and properties sell themselves, buyers will simply go wherever there are listings.

 

Only recently did Harcourts start advertising on trademe because of the cheap deals offered.

 

I don't see it as being a difficult choice for a big firm to ban their agents from listing on trademe. Harcourts used to do this and individual agents faced fines if they used trademe.  Harcourts also did the same with the Christchurch realtor so that the Bluebook became the only allowable weekly glossy advertising for Harcourts.

 

Harcourts, Barfoots etc need to use their market dominance to show trademe that they don't actually have any market dominance and hold nothing that is not easily reproduced.

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Most sellers however will want their listing on TM - can you see an agent telling a seller no?

 

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With Harcourts having 50% market share in Chch, simply moving back to realestate.co.nz and their own website only will make no difference to them but a big impact on trademe.

 

I know I wouldn't pay extra for trademe, as it would have no impact on the number of viewers.  Those too lazy to look anywhere but trademe are probably not serious buyers anyway.

 

I don't bother advertising on trademe for my rentals anymore as a $10 newspaper ad gets more than sufficient enquiry to get an excellent tenant.  Those not looking at all points of advertisement are generally tyre kickers or dreamers, avoiding time wasters is essential when letting, so avoiding trademe seems to work.

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$182 to put your house on trademe is nothing compared with the thousands an agent will want you to spend in the newspaper - but which is most effective? When I am looking for a house I only use trademe and realestate.co.nz , but all homes seem to be on both so I suppose agencies could drop realestate.co.nz in favour of trademe - is that the most likely outcome?

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the agencies wont drop realestate,co,nz they own it. It costs them nothing to use it.

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Yeh, but no one else uses it.

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I think the jist of this is that product sectors should have their own websites and the buyers and sellers would soon start going to sites specific to what they are looking for...for example Autotrader for Cars, Boat trader for boast etc....this would be awesome as it would finally erode the market monopoly that TradeMe has and that I hate. I would definitly rather search specifically product aligned selling sites rather than trademe.

 

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If all the big agencies are smart which they are they'll band together and drop trademe completely.

Trademe will then only have listings from smaller agencies (the rebels) and naive private sellers.

In that new environment If one really wanted to buy a house one wouldn't bother searching on trademe (one might if one wanted to make sure one doesnt miss anything) but because time is precious one would be searching on realestate.co.nz because that's where all the big fish with most listings will live.

Dumb move trademe.  Love to be a fly on the wall when you soon sit down to negotiate with the big players and graciously reduce your proposed increases (thinking you're such educated negotiators).  The "industry" will likely dump you big time and leave you high and dry.

Unless trademe retracts their proposed changes it's probably a great time to short Fairfax shares.  An awesome opportunity.

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Unless trademe retracts their proposed changes it's probably a great time to short Fairfax shares.  An awesome opportunity.

 

It seems as though someone beat you to it and has covered  - are you now scouting for mugs to short cover against at a higher level? Round trip brokerage and stock borrowing costs for small time players makes it impossible to gain without undue risk. Graphic proof

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The time to short Fairfax shares was March 2000 when they topped out at $A 5.50 .... or April 2007 when they hit $A 4.85 ... they're already 90 % down since then , and now you want to short them ? ..... missed the bus there !

 

... but , as they don't own any TradeMe shares , they sold their remaining 51 % for $NZ3.80/share  to institutional investors mid-December last year , not sure of the connection between the two firms  ...

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Really? there is more to trademe than property...

but it is interesting how tm have in created a business model and are in effect a monopoly., ideal from a busoness perspective......and are of course pricing "appropriately"  I expect they will go on the charge like a wounded bull for some time yet...no effective competition.

Personally I dont sell there much, its too expensve...and only buy if something is cheap or its hard to get and I need it, crazy to buy off there at almost MRRP or even more!  

regards

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A little bit of lateral thinking by the real estate companies could help realestate.co.nz  turn this around into an opportunity to reposition themselves and beat Trade Me in their own game.

 

Realestate.co.nz should open up their website to private listings at half the price that Trade me offers.  Initially they could keep it free for a short period (maybe 4-6 months) and then charge half the price as Trade Me.

 

Real estate agents can easily persuade their clients to advertise on just realestate.co.nz. and avoid paying for a Trade Me listing.(unless a client insists on advertising there). 

 

Within a few months time a bulk of the private listings would also move to realestate.co.nz and this would increase its value . This move would force Trade Me to drop its prices for private listings and I am sure they would rush to reinstate the old pricing structure for real estate agents.

 

To quote Darwin: “It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change.”

 

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Realestate.co.nz will have to smarten up their web-site. It's clunky. If they are smart they have the opportunity of the decade. Such opportunities dont come along very often.

 

In implementing the proposed changes Fairfax must have sat down with their strategists and considered the risks and must have come to the conclusion that Realestate.co.nz is no threat. Must have.

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?

I take it you don`t read the news.

Fairfax has precisely ZERO shares in TradeMe....  the last of their TM stocks were sold last year.

 

 

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Realestate.co.nz is owned by Real Estate Agents - they would never make a private sale section on there.  What will happen is the agencies will stop using Trademe, buyers will follow the properties - they will start using realestate.co.nz to view.  

Trademe will realise that they are not 'bigger' than Agents - the Agents are the ones with the'listings' and will control where people view.

In terms of private selling - an extremely large proportion of buyers wont buy privately. Banks demand valuations, buyers dont want to offend the owner, owners get fed up with buyers coming through and 'pretending' to like the property because they dont want to say they simply don't like it.  Buyers always negotiate away the agency fee's.  Private sellers have to remember, yes they can 'sell' it, but if you are selling for less than a half decent AGent would get you (which over 80% are  undersold - fact) why deal with the buyers bullshit and stress of doing it yourself?

Goes to show ALOT of private deals fall over as well. 

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Thats a Brilliant Idea,,,,I would use it

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Realestate.co.nz is the better site, with it's advanced search options and better map and photo viewer.  The agents just need to promote it and forget about trademe.

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I just checked viewer numbers for a particular listing:

285 views on realestate.co.nz

1898 views on trademe.co.nz

 

I'm guessing that's pretty typical. It's a lot of ground to make up.

 

 

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Trademe is only dominating the real estate advertising market because they have the content, certainly not because they offer the best property search experience, which I find a nightmare. Trademe's greed will ultimately favour Realestate.co and Open2view.com, which is an excellent real estate advertising website.

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Kate it doesn't matter how many fewer hits realestate.co.nz currently attracts; what may soon matter is that Trademe will have minimal content.  And don't think everyone will just opt to sell privately. Won't happen.

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Kate the trade me numbers don't show the true story. On Trade Me if a property comes up in a search ie under a 4 bedroom home under $600k it will show as a hit on the Trade Me counter even if the viewer never actually viewed that property.

On Real Estate .co.nz it only shows hits for people that actually chose the property and went in and viewed the listing. This is a HUGE difference!

I'd put my money on the Real Estae companies will drop Trade Me and collectively use their site realestate.co.nz Genuine buyers will soon use that site as they will go to where the volume of properties are listed.

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Just watch this space though,,,, any opportunity to increase fees for the non business users across their obvious market monopoly Trade Me will relish. Has anyone noticed how the fees across all the catagories have sky rocketed with no real justification. I hate having no real choice to get coverage other than to use TradeMe ,,,it is a shame that the subscribers are struggling to support other nz sales websites based on the need for wide spread coverage. Maybe some regulation would help....

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TradeMe is a giant rip off, huge margins compared with thier international counterparts.  I have heard that EBay is eyeing up the NZ market and this latest move by TradeMe will give them even greater incentive. 

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27 comments on a change in real estate advertisement pricing.

sigh...We are stuffed!

 

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The real estate site on trademe is a excellent place to choose your agent. You can see by their listings the calibre of how hard they are prepared to work for your listing. Some of the photos agents put up show how disinterested some of them are. Another good test to choose your agent is to email them and see how prompt their response is. As for open homes. Spare me, most agents have 30_45 mins at the same time as every other agent in your area. Not enough time for serious buyers to view all, so your property may be the one that gets no viewing that day. I would rather market my own property with a half day of open home, giving potential buyers the time to fit viewing my property into their busy lives, than have all the rush and hassle of a 30 min open home.

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If they keep up that greed, somebody else will come along and do it cheaper and better soon enough.

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There is a new alternative for TradeMe, see here for more info

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