Rising prices mean rising commissions for real estate agents. Now new players are entering the market, offering the same service for little money. Will the classic real estate agent soon no longer exist?

Claude Ginesta: You are quite wrong if you assume that the same service is offered for less money. That's not economically feasible at all. It would also mean that we brokers would have margins of 50-70 percent. The new players sell standardized, digital services and may replace today's unprofessional self-sellers in the future.

Where are the differences?
It is clear that the new players - I deliberately do not call them "brokers" - have to cut back in terms of performance and know-how. For example, in comparison with Neho, we have found that at most one employee out of 26 employees with sales tasks has an SVIT/USPI diploma in real estate sales. We have 28 real estate diplomas with practically the same number of employees - trustees, brokers, appraisers and administrators.

What can clients expect?
The customers who hire these low-cost players have to make do with career changers from outside the industry who "look after" the greatest value of their assets. They compare the hamburger of a fast food company with a hamburger in a good and tested restaurant. In the restaurant a cook cooks, in the fast food company perhaps a student or a machine. Commissions are an old hat and no longer justified at current real estate prices, it is argued. Currently, brokers and especially real estate sellers are benefiting from rising real estate prices. We have found that a certain fixed-price provider is on the market only half as long as a traditional broker.
This is the proof: It is not the sales result and thus a longer structured sales process that counts, but only the number of quick closings.

How do traditional brokers do it?
The traditional brokers are animated by the percentage to achieve as high a sales result as possible, because the broker participates in the sales success. In the meantime, 50 percent of all contracts are concluded with dynamic commission, i.e. the brokers have developed a bonus-malus system and the sellers let the broker participate in the sales success, or penalize him if this success does not occur. With the fixed-price model, the seller loses much more money than he supposedly saves.

The supply of properties for sale is scarce. Has it become more difficult for agents to find such properties?
Depending on the region, between 20 and 40 percent fewer properties were published on the marketplaces in 2020. This has to do with the fact that the properties sell better "under the table" or brokers place the properties directly to their customer base. However, the mismatch "many buyers versus few properties" is not a new phenomenon - and above all, it has nothing to do with the new to do with the new players.

How was it for you?
We were lucky - or maybe it was a bit of skill - that we were able to increase our acquisition volume again very significantly this year.

Brokerage is not limited to the sale of single-family homes and condominiums. Brokers are also used for initial rentals in new construction projects. Do the new players have any chance at all here?
So far, the new players have not yet penetrated this market environment of rentals and new construction. New construction projects in particular are the supreme discipline in real estate sales. Here, you can't plan and set up real estate projects with lateral entrants, former ice hockey players, bricklayers or hotel managers and then sell them successfully.

New portals also offer fast and cheap ratings. Is that still reputable?
Today, many traditional brokers also have free real estate valuations on their homepages. These valuations are based on similar or identical basic data provided by the banks. In Switzerland, there are five providers of hedonic (quick) valuations. For a first gauge, such a free valuation is not bad. The free ratings however, are misused by many providers and marketplaces as a pure lead generator.

And how does the professional do it?
For accurate estimates, you need a local expert who knows the market and makes an on-site assessment.  In contrast to the new players and lead portals, traditional real estate. In contrast to the new players and lead portals, traditional brokers evaluate properties using the real value, net asset value, capitalized earnings value, DCF, present value or location class method. This is where the wheat from the wheat.

The new appraisers on the web argue with digitized processes, which saves costs. Have traditional real estate brokers not taken digitization seriously enough?
Digitization is a big topic and concerns all of us brokers. If you don't have a certain company size here or work with good IT partners, it can be difficult in the future. Unlike the new players, we brokers know how the business works. Now we have to digitize where there is no human benefit. We are much more digitized than we are portrayed in advertising. A big "stop" sign needs to be put up here: The young providers are trying to distinguish themselves at the expense of traditional brokers. For example, the advertising mentions that traditional brokers can't offer virtual tours or are unable to build updated customer databases. This is ridiculous misinformation to the layperson. It also borders on unfair competition.

The announcement of the new players is: "Your time is over, we want to break up the encrusted system". So how encrusted is the broker system?
Every disruptive player claims that an existing system is encrusted and old-fashioned and that they would offer innovations with their ideas. What's exciting is that fixed-price models have already failed in most parts of the world. For example, Purplebricks has had a colossal crash landing in the USA and also in Australia. In Switzerland, too, there are already some fixed-price brokers who are "Fix no longer on the market." Other players are currently trying to sell quickly because the business model cannot be sustainably profitable.

Can you give examples?
In Switzerland, Neho claims to be the "largest broker in Switzerland". Independent evaluations by the Chamber of Brokers have shown that Neho had a market share of just 0.4 percent of ad volume on marketplaces in the whole of German-speaking Switzerland, i.e. excluding Ticino and French-speaking Switzerland, in 2019 and 2020. The effective largest brokerage firm had 4.1 percent market share in this time period and was therefore over ten times larger. When considered as a network and equated with the large franchises, the Chamber of Brokers with its approximately 120 members was very clearly the largest player in the industry with a market share of 6.3 percent. Only in terms of advertising budget was Neho perhaps the market leader. But the truthfulness does not improve by publishing defamation and misinformation to the address of the brokers over and over again.

Comparison of Claude Ginesta professional brokers versus digital portals: "In a restaurant a chef cooks, in fast food operation maybe a student or a machine".

Original article PDF