PHOTO: FILE
With property markets cooling across New Zealand and Australia, real estate agents are facing a new set of challenges. Slower sales activity and declining house prices mean reduced commissions, creating pressure to rethink traditional business models. To remain competitive and sustainable in this environment, agents must explore innovative commission structures and leverage efficient back-office support systems.
The Challenge of a Slower Market
The recent downturn in the property market has been driven by rising interest rates, affordability constraints, and cautious buyer sentiment. For agents, this has translated into:
- Fewer Transactions: With reduced demand, the number of properties changing hands has fallen significantly.
- Lower Sale Prices: Declining house prices mean smaller commissions, even when sales occur.
- Increased Competition: As the market slows, agents are competing more fiercely for a shrinking pool of listings.
These factors highlight the need for agents to adapt their business practices to thrive in this new landscape.
Why Traditional Commission Models May Not Work
Traditional commission structures, which often involve high rates for agents and substantial cuts for franchise owners or agencies, may no longer be viable in a slower market. These models were designed for high-turnover environments but can become a burden when revenues decline.
- High Overheads: Agents tied to traditional commission splits often struggle to cover expenses when income drops.
- Client Expectations: In a tougher market, sellers may demand more competitive rates, forcing agents to adjust their fees.
Exploring New Commission Models
To remain competitive, agents and agencies must explore alternative commission models, including:
- Flat-Fee Structures: Offering a fixed fee for services regardless of the property’s sale price can appeal to cost-conscious clients while ensuring predictable income for agents.
- Tiered Commission Rates: Introducing lower rates for lower-priced properties or higher rates for exceeding certain benchmarks can incentivize performance while accommodating a broader range of clients.
- Shared Risk Models: Some agencies are experimenting with shared-risk approaches, where agents receive a base salary plus commission, offering stability during slower periods.
The Role of Back-Office Support
Efficient back-office support can significantly improve an agent’s ability to weather a slower market. By streamlining operations, agents can focus on building relationships and closing deals without being bogged down by administrative tasks.
- Technology Integration: Investing in customer relationship management (CRM) tools and automated marketing platforms can reduce time spent on repetitive tasks and enhance client engagement.
- Outsourcing Solutions: Partnering with third-party providers for administrative support, bookkeeping, and compliance management can lower operational costs.
- Virtual Teams: Utilizing remote assistants for tasks such as listing preparation, database management, and scheduling can offer cost-effective flexibility.
Collaboration Over Competition
In challenging markets, collaboration among agents and agencies can also provide a path to sustainability. By sharing resources, such as office space, marketing budgets, or support staff, smaller agencies can reduce costs and remain competitive.
Embracing Change for Long-Term Success
The property market’s slowdown offers a chance for agents and agencies to rethink their approach. By adopting flexible commission models and leveraging back-office efficiencies, real estate professionals can position themselves for success, even in a challenging environment.
As the market evolves, those who adapt quickly and strategically will not only survive but thrive, setting a new standard for the industry.