Can traditional and fixed fee real estate models coexist?

Adriaan Grové
Jun 7, 2019 · 5 min read

According to the Pam Golding real estate group yes, there is room for both:

“Lower priced properties are less prone to complexities, requiring less consultation and negotiation … The idea that selling and buying a property is a linear transaction is a myth.”

So, as Anthony Stroebel, Head of Strategy for the Pam Golding Property Group puts it, it is all about your appetite for risk and this is where you have to decide between online or fixed fee and traditional agents. Tougher, less buoyant markets therefore requires the knowledge of estate agents who are experienced mediators and negotiators.

Does Pam Golding have a point?

Not so easy, says Marcél du Toit, CEO of fixed fee hybrid agency, Leadhome after I questioned this with him:

“Absolutely not. The premise of his comment is that sellers “take a risk” with the “less superior” hybrid model, which is absolutely false. The hybrid model, which is underpinned by technology, is vastly superior in many different ways: client experience, cost, and speed of sale. Technology allows for automation, transparency, and real time user experiences — all of which has been historically lacking from the traditional model. I cannot help but think that Anthony is betting against technological progress — and we all have seen how that works out for historically dominant incumbents in established industries around the world.”

Now it is worth pointing out that Pam Golding made a clever strategic move 8 months ago and bought online agency Eazi:

So it makes sense defending the model but perhaps at the same time also protect the interests of their top agents, as the Pam Golding brand is seen as a more premium brand in the marketplace.

Since the acquisition Eazi’s mandates have grown from 200 to about 260 homes currently so nothing to write home about. But about half of these homes advertised are still priced over R2 million. I wonder if there are processes in place to advise clients of the ‘risk’ in going low fee with a R2 million+ property and then referred to a Pam Golding area specialist?

Leadhome’s CEO says that he believes there is room for both fixed and traditional fee models in the market, for the time being. “The traditional model is an older, outdated model that will die over time as sellers get more exposure to the undeniable benefits of the hybrid model, but it will take time, and won’t be an overnight phenomenon.”

Will we see a gradual market shift as pointed out? To answer that, I think we need to think about how consumer behavior has changed over the years and how digital natives, Generation Z will affect the market place in future:

Until recently, low-cost, fixed-fee online real estate services were in direct opposition to the traditional real estate model. But, is it possible to merge these two approaches under a single brand, and will more traditional real estate services adopt this approach over time? Adrian Goslett, Regional Director of RE/MAX of Southern Africa shares his views:

“In my opinion, and with the real estate agent in mind, this model cannot work. The onus would be on the agent to sell their services to their clients while competing against a lower cost version of their own brand. Part of a real estate agent’s value is the backing of an established brand that provides the desired exposure to market a home. If this same brand offers a low-cost version of the service, then the real estate agent is left with one less advantage to mention when marketing his/her own services. In order to make his/her services appealing, the agent would either have to downplay the level of service their brand’s low-cost alternative offers, or oversell their own level of service,”

Final thoughts

One thing I need to get my head around is that for lower priced properties, the commission difference between traditional and fixed fee is quite small…so at that price point sellers would really need to choose the agency that they believe can provide the best service and sell their home the fastest. Eazi has pointed out that they sell their R750,000 to R2,000,000 mandates in 1/3 of the time of the industry average. Leadhome pointed out that sale that they are at an average 35 days for their overall portfolio.

Finally one also has to question whether certain models will work better and certain areas. Seen on Inman news from a local realtor “Residential real estate is local, and not a one size fits all platform”.

My personal opinion is that there is room for both fixed and traditional fee agencies…combining them under one brand, I don’t know. In the end, poor performing agents are the ones that will be pushed out of the market place, leaving room for a new breed of ‘Super Agents’.


Can fixed fee and traditional models co-exist in the same areas? Join the The Real Deal Facebook group and share your views on this article.

Maybe you have an opinion on other real estate matters or would love to write an opinion piece for The Real Deal — would love to hear from you so contact me here.

The Real Deal ZA

Promoting opinion, insights, transparency and challenges in…

Adriaan Grové

Written by

I’m the CEO of www.entegral.net, I love working with my remote team to solve real estate problems. Questions everything.

The Real Deal ZA

Promoting opinion, insights, transparency and challenges in the South African and International real estate industries

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