Mike Pero and Mike Pero Mortgages say they plan to launch a new real estate agency group from March or April.
The new group would charge commissions of 2.95%, rather than the 3.95% typically charged by established agency groups.
Pero said real estate agencies had charged too much for too long.
"It's one of the most talked about topics, and what people grumble about most, when selling their homes," he said, adding commissions should "reflect the challenging economic times that we are in today".
Pero said lower marketing and communications costs over the internet and mobile phones meant companies didn't need big overhead costs any more which had to be passed on to customers.
Mike Pero agents would work with iPads, intensive online marketing and modern operating techniques and systems, he said.
The new company placed an advertisement in the Sunday Star Times yesterday calling for real estate agents to sign up, saying smarter use technology meant they would earn more while charging a lower commission because they would use their time better and make more sales.
"Realistically with a better proposition for the home seller the agents sales will increase, we believe, more than twofold," Pero said.
"Effectively, we have taken a large part of the administration and management overheads out and shared those savings between the customer and the agent."
36 Comments
Well, he has the midas touch and under the present volume of sales he may well need it. A lot of existing efficient r/e offices can't cut the mustard financially due to the lack of sales made. Perhaps he has a cunning plan that will allow him to muscle into this very competitive market, discounted commissions usually mean discounted service.
Good luck to him, and the team he cobbles together, his advantage is that he has deep pockets and is a recognised brand name, both essential elements in the present climate.
2.95% commission for selling houses is still a rip off. In the UK the typical sales commission is 1% to 1.5%.
Why is real estate now the only business that still charges a percentage of the sale price for their remuneration. As house prices go up so does the Agents income Which other type of worker doubled their income from 2002 to 2007, without doing anything extra? There is no reason for this type of sales commission, why doesn't the seller arrange a fixed fee with the RE Agent for this type of work.
Anybody who has bought a house since 2007 has now lost up to 5.8% of its price. If they now have to sell that property they have to pay another 4% plus GST in Agents fees. This is not going to happen for very long before the whole RE industry method of remuneration is reformed. Last year RE Agents were paid over $1 billion dollars in fees, that's not going to continue if house prices continue to decline, which they will.
Come on NZ'ers when are you going to do something about being ripped off by outrageous RE Agents fees.
Brad - I appreciate, and applaud, that you and a very few others now charge a realistic fee commission. However the fee discounting Agencies are unfortunately only a very small part of the overall RE market. Why aren't NZ'ers using these low cost Agencies a lot more?
Having sold and bought a few times, often the house will sell itself (with a matching price).
In my opinion, the role of a GOOD agent is to initiate the offers and maintaing the commuication between the parties. I've dealt with some useless REs and some really good ones whom I think deserved whatever they earned!
I'd give Mike Pero - unlike the Jones they already have a high profile.
Bernard there are a number of 1% agencies like mine that have been operating for years on lower fees. In the NBR in 2002 the then president of REINZ Howard Morley said that we probably won't survive a downturn, but we have and still going well in 2011.
Mike Pero offers nothing new to be honest.
Bernard, X Realty in Whakatane. I don't know the agent and have never used them. IMO it is great to see this in a smaller town, rather than the cities getting all the benefits of competition within an industry.
Low commssion real estate services are nothing new in New Zealand, there have been a few over the years and around the country there are a number of great local firms already charging even lower fees.
Premier Realty Ltd in Christchurch was one of the first fully professional real estate agencies that charged less than 2%, as long ago as 2002.
Premier Realty Ltd charges just 1% + $250 + GST, which saves the average client $10,000, as it managing director I have been in real estate since 1985, and the savings we make our clients is twice the savings that Mike Pero may achieve.
Entering real estate in a tough market is brave, anyone who thinks it is going to be easy is going in with blinkers on.
Poor Mike how will he survive. Only 2.95% commission plus the brokage fee for arranging the mortgage and a great big fat cheque on top of that for arranging the Insurances. He should be laughing all the way to the bank! Bonus: Punters still think they got a great deal.
RE commission at 1%
And Bernard Hickey didn't know?
There you are David/Bernard, an opportunity (a new service to readers and a new source of advertising revenue) to set up a new section on Interest.co.nz listing all RE agents in NZ together with the rate of commission each charges.
To those commenters above discussing selling privately, it is HARD. Whilst I agree agency commissions are way too high, I've sold privately before and I can say that an agent adds value to the sales process. Buyers are generally more comfortable with the process of using an agent and those that do like to buy privately are often those who will demand a discounted price since there are no commissions involved!
I wonder why B & T sold half the houses in Ak last month ..
May have something to do with a fee structure that delivers value to sellers.
MP will fail in this venture. He has no particular expertise in this field.
Record low sales and half the market taken. A really dumb investment MP !
Pero says on www.mpre.co.nz
"The large national brands work on a commission rate of 3.95% - we think that’s too much (so do you), so that’s why we’re establishing a network of salespeople who can deliver their services for 25% less. They’ll deliver the same, if not better, service for only 2.95% (plus $390 admin fee, advertising & gst). That means that if you’ve got a property that sells at $500,000, you’ll save $5,000 with us."
However this is not correct as most big players drop to 2% after $300,000 or $350,000 so they are not actually going to save much with the Pero 2.95% structure which runs all the way through. In fact on higher priced properties they will need to get out the calculator as they may be paying more with Pero!
ie on a $500,000 sale through most national groups:
3.95% on first $300,000 = $11,850
2.00% on next $200,000 = $ 4,000
Total payable would be $15,850 plus GST
on Pero structure
2.95% on $500,000 = $14,750
Plus admin fee = $ 390
Total Pero fee would be $15,140 plus GST
So in actual fact a saving of only $710
http://www.barfoot.co.nz/Selling-With-Us/Stories/Commission-Rates.aspx
Barfoots charge $29,728 incl GST for a $1m sale but Pero would charge $29,890 plus GST!
If Pero offered a rate of 1.5% then he may have a point of difference but 2.95% plus $390 admin fee plus marketing plus GST is hardly an enticing alternative.
Funny how MPRE is going in a joint venture with MPM
MPM is 50% owned by a Company that has announced it will be unable to repay "capital notes" and investors but offerred shares in the Company as alternative or have to leave their funds for a further 5 years at lower interest (shares were at 10c !!) .
Bernard has made scathing attacks on the Hubbards,Hotchins etc. of this world.. albiet based upon historical evidence unearthed after the companies demise. Most problems related to inter company advances/lending.
Here we seem to have an alarm bell ringing but nothing said or investigative journalism undertaken - just main headlines in case there is an opportunity for future advertising income possibly???
I for one would like to know who the others involved in the ventures are and if the 50% owner of MPM can start a new venture(even if jointly) then surely they can pay investors in the capital notes out if they want/need their money..........
Or is Mike buying MPM back as well ???
I think you will find Mike will be trying to build another franshise to sell. The money will possible come in from people buying into locations and taking the majority of the risk. I don't think he is still connected with Pero mortgages apart from promotion, however I may be wrong.
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