BizCommunity gets the lowdown on how a startup company dared go up against the traditional giants of industry, and come out on top. Originally Published,
HouseME founders Benjamin Shaw and Kyle Bradley
“South African estate agents, like their global counterparts, operate in an archaic and unevolved industry that has maintained the status quo for several decades,” says Shaw, who believes the fees being charged by rental agents have gone unchallenged for so long that many simply accept them as the norm.
“We still see average fees of 8-12% around the country, and as high as 22% of the gross rental for short-term stays,” he says. “Many agents advertise rates of 6%, but then add an upfront fee of one month’s rental for successfully placing a tenant. This fee alone costs the landlord more than 8%, which means agencies employing this model are charging far more than investors may realise.”
Lack of transparency
Shaw says there is a clear lack of transparency around how fees are calculated, and the services that back them up. “Landlords across the board are questioning if they’re getting what they pay for, and the more cynical ones won’t even consider approaching an agency.”
Shaw says that agents are incentivised to move onto the next deal as soon as possible and that holding out for the best price for a landlord may be a secondary priority. “This means that a property tenanted after only one viewing will still attract the same fee percentage as the property that requires more energy to let. Landlords are not aware of this imbalance.”
“Frankly, the fees reflect an outdated system where the advances and efficiencies in technology have had no part to play, or have been roundly ignored.”
Shaw admits that the general ‘it has always been this way’ malaise in the sector has however created an opportunity for a tech-enabled disruptor like HouseME to step in and set fees of 2.5% across the board, which many in the industry are up in arms about.