Selling houses is painful – and while some folks really enjoy the challenge and do so privately, almost everyone uses a traditional real estate agent.
And gets ripped off. Not that Real Estate agents are crooks, but the industry is ripe for a shake up. The fees are extortionate for the work involved. They insist on expensive advertisements in print, while the traffic to Trade Me Property and RealEstate.co.nz indicates that the action is happening elsewhere.
Enter 200 Square, and enter in savings. Not many people think too hard about the current fees, which average about $20,000 for NZ, but are a lot higher for more expensive houses (e.g. a $1m house would be about $31,000). That fee still needs to be earned and paid by you, and chances are it isn’t going to be in a sweet one-off deal like the agent just made.
200Square fits in the gap between the expense (and sometimes the incompetence) of traditional real estate agents, and the pain and uncertainty of private sales. Sellers and buyers get the advantage of the recently upgraded real estate industry protections and the marketing and negotiation experience of agents. However they avoid the pain of dealing with old-school agents and paying their poor ways of selling and high industry standard fees. 200 Square is a web-first real estate agent, and uses the internet and SaaS software tools to increase the effectiveness of sales while lowering costs.
I’ve just invested and have joined the board, joining co-founders Grant and Nik Wakelin.
It’s a surprising industry for me to join, as I am not a fan of real estate investment. But I’m very happy to be part of a team aiming to disrupt a sleepy business. It will be a long journey, as real estate agents are untrusted, a profession ranked last on this 2011 Readers Digest survey, and climbing to 6th-last in 2012. Let’s not get too deep into why agents are not trusted, as virtually anybody who has bought a house, and most who have sold, have sorry stories to tell.
My own observations are that many agents add very little, or even subtract, from the sales process, whereas there are a handful in each city who are great. Those agents who are great have to support the not so great ones, and all agents come with a very high cost way of doing business, and need to demand high fees from sellers. The traditional industry has to support offices in prime locations, retain sales staff with flash cars and time to drive around, and blows seller money on newspapers and glossy brochures for marketing. Those print advertisements are an order or two of magnitude more expensive than the internet ads, and while the pictures are pretty and the rhetoric amusing, any serious buyer is checking out one or both of Trade Me and Realestate.co.nz. Those print ads are also about the agency rather than the property – quite different to how it works online.
200 Square is deliberately focusing on improving the parts of the sales process that matter – the valuation (using geeky techniques along with the professional individual touch), the sales material and the negotiation and close – generally over the phone and email. We (I can say that now) are progressively automating the bits that can be automated, and the business is designed to have inherently lower operating costs.
But the best thing about 200 Square is that they sell houses – 75 of them so far, about $30 million worth, and with very low pain and fees. There are a growing number of very happy sellers who are spreading the word to their neighbours and friends, fueling our organic growth. We are also doing deals with larger sellers of houses and winning business from traditional agents. The prices help – a quarter or less of those traditional agents, and so do the results.
So that’s it. If you are selling your house, then save $12-25,000+ by using 200 Square. I’m looking forward to many years of increasing sales and a shift in how the industry operates in response.