Thursday, 19 August 2010

A bank versus an Agent versus commissions versus Sales SCARY

If you think the South African property market you’re working in is tough, spare a thought for the hard working estate agents on Spain’s Costa Del Sol.  eeeish!!!

Without doubt there are less agents in the market and those who have survived the onslaught are OK up there...but.....Agents selling overseas property in Spain have no such luxury. No Buyers and the competition for business has actually increased, forcing even some of the best run agencies to close their doors.  Seen that here in SA as well.

Now we know that the relationship between Banks and Agencies has always been kind off solid and a happy partnership -  SO WHATS THE SCOOP

Imagine this : You work hard “closing” a deal. Your buyer agrees and approaches the bank for a home loan. However the bank deliberately offers tough terms (40%+ deposits) but offers your client 100% finance on another similar property and is also prepared to discount heavily to get the property it owns off its books.- Sounds like a PIP scenario.  lets keep our eyes open.

This is exactly what’s happening in Spain and it is not only putting agents out of business, it’s disrupting the whole middle market as agents who want to make a living only have two choices:

1. Target cash buyers who are in a minority but at least can be closed

2. Sell high-end properties where the competition from banks is less (the majority of bank stock is low to
mid end apartments in sub prime locations)

The result of this situation is that there are far fewer agents than there should be, given the level of demand, selling mid-market property.

An overseas buyer looking in Spain does not just face mis-information from unrealistic property valuations, the people that can really help them and know the market have little incentive to do so.

It is a tragedy for the buyer and for the industry as a whole.

So Are they really - Tight-fisted bankers?

The obvious solution is of course for an agent is to work with the banks but the banks seem unwilling to allow agents to make even a meager living from the process.

Desperate and reactive

Although the situation is clearly terrible, it would be wrong to accuse the banks of cutting agents out through a cynical and well-thought out sales and marketing strategy.

According to what we have heard, banking staff have been told to get properties off their books and in many cases seem willing to accept almost any price.
The banking industry needs to act to prevent this from happening here in South Africa, and judging from what we see and hear they are remaining one step ahead of their European counterparts and working closely with Agents, online sales forces and mortgage brokers...well done Standard bank, ABSA, Nedbank and FNB - LeadSA.

The Spanish economy depends disproportionately on construction. The property sector and wider economy will not recover until the real estate market fully corrects and that correction could be dramatic (if banks start dumping properties onto the market because of a rise in reservation ratios for example) or it could be slower and less painful. A slower correction is better for everyone and for this to happen, banks and agents must work together. Banks cannot sell properties alone, they don’t have the time or expertise; and their unilateral reactive approach is not in their interests, or the interest of the wider economy.

LEAD SA - A Proud South African Initiative

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