SA’s estate agency business was ripe for a shake-up, says Leadhome co-founder Marcél du Toit, a former investment banker involved in mergers and acquisitions at Deutsche Bank.
“Traditional estate agencies are old and stagnating,” he says. “Clients are unhappy with the normal 7.5% commissions, because they do not see the value. This is the problem we set out to solve.”
Traditional estate agents are forced to charge as much as 7.5% in commission because there are so many mouths to feed. First the franchisor takes a bite, then the franchisee, then the estate agent. Each of these layers comes with its own built-in costs, such as expensive retail offices, glossy marketing brochures and out-of-touch print advertising. Leadhome set out to eliminate these layers of costs by using technology to improve efficiencies and enable a better client experience.
Revolutionising the estate agency market
Leadhome stormed the market in late 2015 with a simple proposition: a flat R39 995 commission, regardless of whether the home is valued at R100 000 or R10 million. “That’s because it takes the same amount of work to sell a R100 000 home as a R10 million home,” adds du Toit.
The savings are significant. A R1.75 million home sold through a traditional estate agent charging 6% plus Vat would cost R120 750 in commission. Through Leadhome, the cost (with Vat) falls to R45 994, putting an extra R74 756 in the seller’s pocket.
Little wonder that Leadhome has grown from two to more than 80 staff in three years and, astonishingly, is reckoned to be the largest estate agency in Gauteng (though it now has a nationwide presence). How long before it takes up poll position across the entire country?
Commissions have a material impact on home pricing, as most sellers pitch their home prices to clear the high costs of selling through the traditional route.
One of the key inefficiencies eliminated by Leadhome is the ability of potential buyers to book home viewings online, rather than going through an estate agent. “This is an important benefit that we offer to clients,” says du Toit. “If I see a property that I like, I want to view it now, not in a few days after the estate agent has set up a viewing. So not only are we offering lower commissions, we offer a much more direct and immediate sales experience.”
In addition to sellers being more likely to reach their target sales prices due to low commissions, the average sales cycle takes just 35 days, against the industry average of 116.
The process works as follows: Leadhome’s local area property expert sets up an initial meeting to determine the seller’s objectives and requirements, then conducts a valuation based on national and local sales trends. The seller signs a mandate and a professional photographer is despatched to ensure that the property is represented as attractively as possible; Leadhome advertises the property to its proprietary database and on all leading marketing platforms in SA, both digital and billboard; potential buyers can book home viewings online, with Leadhome providing follow-up feedback to the client. Just like a traditional estate agency, Leadhome’s agent then negotiates on behalf of the client to secure the best offer to purchase. The transfer is then handled by an external conveyancer, completing the sales cycle. There is a call centre and online chat facility to keep clients engaged, with rapid response times to any enquiries.
The smart use of technology means sellers are able to track, through a personalised seller’s dashboard, the sales cycle and the number of enquiries online 24/7, and buyers can book a viewing at any time.
Pricing your home
The price at which you sell your home will be influenced by national and area trends. If the last three houses on your street sold for R1 million, it will be difficult to ask for R2 million for a similar house, unless it has some compelling features, and even then the area trends will tend to pull this figure back to the mean. Leadhome recommends touching up your home before selling, but not remodelling, as this can over-capitalise the home.
“Presentation is everything,” says du Toit. “We take professional photographs to render the property as accurately and attractively as possible, and add an attractive marketing description when we advertise on all the main marketing portals and on billboards.”
Pricing is also likely to be influenced by urgency of the sale: the longer the seller is prepared to wait, the better the offer likely to be received. Quicker sales tend to be closer to the area average.
Having stamped its presence on the real estate business in just three years, what does the future hold for Leadhome?
Its primary focus will be on improving the customer experience through technological refinements and expanding the range of services to clients. Obvious business add-ons are bond and insurance origination as experience suggests clients prefer to deal with a single provider to handle the sales cycle end-to-end.
What about international expansion? “That may come later, but for now we have plenty of room to grow within the SA market, so that is where we will be concentrating,” says du Toit.
For most South Africans, their home is their largest single asset, and has been made more affordable through some innovative mortgage financing techniques and property developers catering to lower-to-middle income earners.
“The decision to purchase a home is one of the most serious financial decisions any person makes and we felt the industry needed a higher level of professionalism, but at a price that is affordable,” says du Toit. “This is the gap in the market we are filling.”
For more information, visit www.leadhome.co.za.
Brought to you by Leadhome.