Low Cost = Poor Service?
August 30th, 2006
After VIVA’s recent announcement of a flat 2% commission rate on property sales and my comments yesterday, I received some pertinent feedback from David Novi of Novi Property Mallorca, he says:
“Many observers have for some time blamed such low commission levels in the UK for the poor quality of service offered by Estate Agents in that market. Rather than applauding the lowering of rates in Spain we should be encouraging higher rates back in the UK, along the line of other European markets like Spain.
This would encourage a more professional approach from Agents who should consider themselves more as ‘professional intermediaries’, taking a full and active role in the whole sale process – rather than simple brokers looking to make a quick buck.
The emphasis in Spain should be less on reducing commission levels and more on improving service quality, regulating the industry and ridding the market of the ‘cowboys’. Reducing commissions will only encourage the less reputable agents to take short cuts, push through sales without the appropriate due diligence, in order that they can get their hands on the commission as quickly as possible.
One of the attractions of the Spanish approach to residential property retailing is that agents can cooperate, on a split commission basis, to widen the ‘property offer’ for their purchaser clients. This allows buyers to access the widest possible choice of properties without the need to approach dozens of different competing agents.
This cooperation will become a thing of the past and, rather than moving further towards a true Multi Listing System, the Spanish market will drift towards the UK sole agency model dominated by a few large chains of Agents, offering an almost ‘self service’ approach to property buying and selling with little or no added value offered by the Agent.
When we are talking about the biggest purchase most people will make during their lifetime this is profoundly worrying and will only exacerbate the poor quality of service in an already unregulated industry.
Vendors will also lose out. Less income means less investment in the marketing and promotion of properties. However, if this multi agency approach could be adapted to one similar to the US Multi Listing System, both purchasers and vendors would benefit.
Property Finders, Relocation Specialists and Buyers Agents, all of whom have a very important and valid role to play in a market with so many foreigners entering the market for the first time, and who generally earn their income from split commission deals, will be squeezed out of the market. Since these Agents are the most likely to be offering bespoke services directed to the needs of buyers, their loss will significantly reduce the options available to prospective purchasers and the quality of service they can expect.
While I am the first to admit that there are some agents out there making quick and easy money while offering, at best, an indifferent service, I think we are at real risk of throwing the baby out with the bath water by tackling the problem through commission reduction rather than greater emphasis on service quality, regulation and training.”
That’s what David Novi of Novi Property Mallorca thinks – What do you think? Email me, Martin Dell – and let me know.
