Opinion: The real estate industry has a lot more to lose than Trade Me

By David Hargreaves

The pragmatists among us would argue that someone should never take part in a fight unless they know they will win it.

Essential to this philosophy is for each party to know their own strengths and weaknesses and to be able to see when they are in a good position and when they are not.

With that in mind, the actions of some real estate companies in pulling out of listing on the Trade Me website, look at best rather speculative and at worst downright risky - not just for the few companies involved but the whole real estate industry as it currently exists.

I would argue that any war the real estate industry in its current form chooses to wage with Trade Me is not one the real estate industry can win. Real estate agents risk hastening their own demise. Yes, I'm talking about the 'death' of an industry.

Well, is that a bit extreme?

I don't think so.

It's human nature that we all like to think that we do well in our jobs and that the job and industry we are in are valuable, even essential ones. But are they?

One lesson that surely nobody needs to learn now is that with the explosion of global communications the world changed. This meant that jobs, the way of doing jobs, and whole industries changed. And some have disappeared. More will.

No job, no career, no industry has a 'right' to exist. Because things have been done one way in the past there's no reason to suppose they will be done that way in future.

One career that I watched 'die' from close quarters was that of the newspaper printer.

A confused mess

When I first started working in journalism, newspapers were still put together in a rather confused jumble of 'hot' and 'cold' metal. Journalists wrote their articles on little pieces of paper with the assistance of manual typewriters. That's where 'the printers' came in. One set of them took the pieces of paper and entered the articles into a computer, which then belched out a printed version of the article, which was then cut by scalpel and arranged on a dummy page by another set of printers, and the dummy page was then photographed and the image of the photograph then etched on to the metal plate, which was then put on the printing press and, voila, a newspaper was produced.

The printers were very powerful. They were the hammer that knocked the nail in. The physical producers of the paper. The heavily unionised workforce could decide at a whim (and it often seemed to be a whim) whether the paper would be produced that day.

They had muscle and they used it.

When I worked on a newspaper in London during the mid-1990s I worked alongside a delightful chap called Greg who had retrained from being a printer in the 1980s and had become a more-than-capable page layout sub-editor.

How much do you get?

I once had the temerity to ask Greg what he earned when he was a printer, and to my surprise he told me. In his last full year of being a printer in 1986-87 Greg earned £57,000 gross. At the time, in mid-1995, I was earning £24,000 working for the same organisation as a journalist.

But it gets better. Due to long service and negotiated terms Greg was down to working just three days a week, for which he was on £57,000 a year. And there's more still. I've got no way of verifying whether the following is true or not, but Greg said he was earning more than the editor. Nice work if you can get it.

The fact is, although they would not want to put it in such terms, the printing industry held the newspaper industry to ransom. High wages and benefits were the price that had to be paid by the newspaper barons just to get their paper on the street every day. That is of course until one of these barons, by the name of Murdoch, managed to cut a deal with other unions in 1986 that enabled production of papers without the printers. That basically killed the newspaper printers off. Death of an industry.

Nobody likes you

I doubt whether newspaper printers actually ever realised how unpopular they were. Everybody (and that includes unfortunate journalists who had to interact with them on a daily basis) treated them as a necessary evil. "We need you, but we don't like you."

Now, I would not seek to argue that real estate agents are as unpopular as the newspaper printers were.

But I would pose the question: Do real estate agents realise how much the general public resent the fees agents charge for selling their houses? No, do they really realise just how much these fees are resented?

It goes back to the central proposition of how people involved in a job always think they're doing a good and worthwhile job. No doubt real estate agents think that too. No doubt they think they provide a valuable service and that they are necessary and that other people outside of their industry think that about them too.

Well, not so. The way the fee structure works for selling a house, with the agent receiving x% of the total price paid regardless of how much work he or she has put in is a recipe for resentment. Arguably the recent drive of, particularly Auckland agents, to use auctions as the principal method of sale, has promoted more resentment.

Arguably also, it has helped to demonstrate to people that, hey, maybe we don't need somebody else to sell the house?

That's how it was

People have used real estate agents because that's always been how you sold a house. So, the fee charged was most probably always resented, but it was seen as a necessary evil. That expression again.

But still necessary?

The success of particularly Trade Me as a means of marketing houses is a clear pointer ahead. The internet is a fantastic marketing tool. People overseas can and do virtually decide on buying a house in New Zealand based on what they see on the internet.

By taking on Trade Me, the real estate agents risk really alienating themselves. A big part of Trade Me's success has been in the way it built, not a business in the traditional sense, but an online community. People felt a sense of being part of Trade Me. They empathised. They loved the idea of throwing some goods up on the site and having them being bought by someone somewhere in the country.

As the ease of doing that has caught on then so the ever-wider implications. Well, why not just chuck your house on there? And do you really need to be signed up with a real estate agent?

It seems to me the real estate industry is playing power games right at the time it is losing power. The industry is on the verge of being replaced and yet it is flexing muscle as though it still thinks it is essential.

Uneasy relationship

How long the uneasy relationship between Trade Me and the real estate agents could have gone on in any case is a moot point. Individuals would, I suggest, have more and more been tempted to simply market their own homes through the internet anyway without assistance.

But by seemingly getting aggressive, the real estate industry as it is, is surely pushing its own demise. The industry is picking a fight with someone stronger. And, worse, it is picking a fight with someone that holds public sympathy while it does not.

The real estate industry will do itself a lot of favours if it resolves this battle with Trade Me quickly, while there is still a real estate industry.

And just as a final word, don't take it that I think Trade Me will be around forever either. But it seems pretty clear the internet will be around for a while and if Trade Me isn't the website of choice forever, then you can say with every confidence there will be something else that replaces it.

Will anything replace real estate agents? The best answer is probably another question: Will we need to replace them?