Can I Save Money Selling My Property?
In the past few years, several new portals have popped up offering consumers the opportunity to sell their own homes. The objective is simple, allow buyers to interact directly with sellers. And in the process, you can potentially save thousands of dollars instead of paying your real estate agent. Now, the question is this. Is it worth it? Can I save this money? Is the selling process so easy I can do it myself?
The Economics Of Selling Your Home
First of all, let’s look at the economics of pricing and selling your home. Let’s assume that you are a seller or a landlord. You have a product on hand that requires targeting an audience that will eventually “buy” your product. This process is called marketing. Unlike conventional products that gets transacted daily, real estate is one that does not. Let’s take the example of buying a simple cup of coffee at a coffee shop. If you were to head to a coffee shop and request for a cup of coffee, most of the time, the price is $1.10. So what do you do? Negotiate? Ask a valuation report? Find out where the coffee cup came from? No, you pay for the coffee and be done with it. Why? Because you know that this is the market value of the product and before you, thousands of others have paid the same price. If you go back the next day, prices are still $1.10.
Now, let’s take a look at a real estate product. While it is also a product and a physical good, the similarity ends there. Why? The supply and demand curve is very different. Due to significantly higher prices of real estate products, transactions do not occur on an hourly or even daily basis. In some instances, transactions may only happen every year.
So, what is the Significance?
Assuming you just got a valuation of the current price of your property. The bank tells you that it is worth $1 mil. The question is, do you automatically get $1mil by putting your home in the market? After all, that is what it is worth right? Well, yes and no. The cup of coffee is worth $1.10 is because thousands of people buy that cup of coffee daily. Hence, supporting that price. However, for you to get $1mil for your property, you need to find that one buyer out there who is willing to do so. If you cannot get this buyer, you cannot sell your property at this price. It is that simple.
How To Find Buyers? Traffic Of Property Agent Portals Versus Direct Listing Portals
So how do you find buyers? List your property online and hope for the best? After all, the internet is one of the best ways to get the highest possible traffic to buyers who are looking for a home. However, that being said, not all places where you place your listing gets traffic. As a seller, you want to put your listing at a portal that commands the maximum traffic and get that one single buyer to pay the highest price for your property. So, the question is this. How does the direct listing portal traffic measure up against those of property agent portals? Are they comparable? Let’s take a look. For this comparison, I will be using screenshots from similarweb.com to give you a better idea.
For the direct home portals, they generate so little traffic that similarweb.com doesn’t even have numbers to show. The only one with data from similarweb.com is from OhMyHome.
Business Model Of Direct Listing Portals
So why do direct listing portals get so little traffic versus agent portals? Well, it all boils down to the business model. Let’s try to understand the business model of these direct portals. While currently free in the short term to increase users and visibility, it will not be free in the long term. Why? Because there is no financial feasibility. Who is going to pay for the hosting, upkeep and other various costs to maintain the website? The long term plan is for these websites to charge the sellers a fee for putting up their property in the market place once they have sufficient market share. They propose that instead of paying agents a fair amount of commission, these sellers can do it now for a much smaller fee. Thereby helping the seller reducing their customer acquisition costs.
The other business model is more like a funnelling process. These portals know that they have insufficient traffic to get the right buyer for your listing. So what they do is to give you a solution by recommending you to employ one of their agents. So, what these agents will do is to list them on major portals where most of the buyers are. Technically speaking, these are not official direct portals but operate more like a real estate agency. They are using the portal as a means of client acquisition.
Business Model Of Agent Listing Portals
One of the reasons why agent listings portals are successful in getting traffic is their funding. In addition to subscription fees yearly, agent portals also generate funding by upselling other features such as reposting and featured placements. Since property agents rely on the sale or rental of a unit for livelihood, there is an inclination to repost their listings so that it will come up tops. By charging agents, a small fee for each reposting, the revenue generated is extremely significant. With this funding, these agent portals can do a lot more. Like hiring a team of writers, programmers and even do data analytics. Equipping agents with tools consumers will never have access to via the direct listing model. Also, let’s not to forget their huge advertising budget on social media, Google Adwords and the such.
Who Saves This Money?
Assuming you did somehow manage to acquire a buyer to purchase your $1mil property via the direct listing portal. Instead of $1mil, this buyer proposes a price of $990k. Why? Since you didn’t hire an agent, why not split the savings halfway? After all, everyone benefits, right? Well, no. Instead of getting the price you were looking at, you ended up with a lower amount while doing all the work.
Of course, you might be insistent on your pricing or even put your property value above $1mil. Yes, you can, but by doing so, it also gives an impression to buyers that direct home sellers are not motivated at all. The prices are there to “test” the market. End up; these serious buyers visit agent portals. Either way, you can’t win.
Selling Even Without Listing On Portals
Did you know that some properties are transacted without even listing on portals? Within a real estate agency, there are some agents in contact with buyers on hand. These buyers have been looking for properties for the longest time and haven’t found anything. They might be too busy to look at listings or maybe overseas. Whatever the reasons, these buyers don’t look at portals. They subcontract the job to the agent. Direct listing sites will miss out this market segment of buyers.
If you are a seller or landlord looking to sell your home via the direct listing portal, the odds are against your favour. The economics doesn’t add up. However, if you were to travel back in time where the only portal was the classified ads, then selling direct might make sense. Because there is only one “portal” and this “portal” gets all the traffic. Although you still have to deal with the “who saves money” portion.
You may think that since we are realtors and as such bias against this direct consumer behaviour. However, did you also know that we own a lot of subdomains, and some of them are ranked top positions on Google? Just search “project name + floor plans”, and you will find that our sites are likely 1st positions. What’s more, we have the most extensive collection of condo floor plans in Singapore. We can convert to a direct model anytime but choose not to do so. Why? Because we know it doesn’t benefit you. If you are looking to sell your property and need access to all the agent portals and a project name website that is top position in Google, do contact us and we will get back to you shortly.
Note: Do take note that the assumption of the various business models is based on the author’s analysis. There is a possibility that their models might be different from what is written here.
Read Our Other In-Depth Resale Analysis Here!
Article contributed by Jerry Wong
Jerry Wong is a realtor with Propnex Realty. He loves coffee, cookies and condos. Most importantly, he loves connecting people to properties and gets enormous satisfaction when they acquire their dream home or make that capital upside in just a matter of months. Buy Jerry a coffee, and he will meet up with you on a 1 to 1 session to share the following
- How certain factors affect real estate prices. (Using historical transactions as references)
- Applying lessons from history to determine if a condo has the potential for upside or not. These condos can be those under construction, resale or the very one you are staying in right now.
- Or prepare the toughest question you have on your mind! If it is interesting enough, the answer will be in a blog post and shared with everyone!
You can also subscribe to our Facebook page and receive the latest real estate updates in Singapore!