Tommy's First Word - Issue 125, current to 29 March 2011

Competition is an important ingredient in any business environment. Real estate is no exception and over the years there has been no shortage of strong and capable operators for us to compete with for our business.

Some have entered the field in a blaze of glory and have done well while others; usually the discount operators, have come and gone quite quickly. Competition drives us all to provide a better service than our competitors; it keeps us on our toes and ensures that we don't take things for granted in our day by day business activities. It is with interest therefore that I have read and observed the media frenzy surrounding the possible launching of yet another cut price real estate operation by Mike Pero, the founder of Mike Pero Mortgages in 1990.

Whilst I hasten to acknowledge the obvious business acumen and entrepreneurial skills of Mike Pero I fail to see that an operation as has been outlined in the media by the spin doctors will succeed. Well known property guru Ollie Newland sums it up succinctly in one line when he is quoted as saying "the move could be a "watershed" moment for the industry if Pero lasted the distance". All the hype that has surrounded Pero's movements into real estate has certainly not kept me awake at night worrying! Let me put some of the pre launch publicity in perspective:-

SUPERVISION.

A key ingredient of the success of Tommy's has been the fact that we operate collectively as a team from a central office in each region where we operate. This team situation cannot, in my opinion, be replaced by an army of sole operators working alone from their home or the boot of their car. People feed off one another, they need to exchange ideas and communicate and they need each other to assist in selling the properties under their control. The team situation is often the catalyst for creating a multiple offer situation resulting in
greater competition and inevitably a better price for the vendor. This is a real benefit that a lone operator would find difficult to achieve. Above all, salespeople expect and need direct management control and ready assistance in difficult and stressful situations.

The industry as a whole is subject to the controls of the REAA (Real Estate Agents Authority) and the 2008 Real Estate Agents Act which clearly states in Section 50:

Salespersons must be Supervised A salesperson must, in carrying out any agency work, be properly supervised and managed by an agent or a branch manager.

One can only assume that Mike Pero would be subjected to the same controls as we are?

STAFFING.

Pero's expectations (if you can believe what you read in the media) are that he will have 50 salespersons operating by April and 100 by the end of the year. The truth of the matter is that good people are normally fairly settled and well looked after by the agency they work for, so why change? Harassment of our key staff happens on a monthly basis anyway, thankfully with little result, so why would that change? I don't envisage a mass migration from our ranks to the Pero operation.

COMPUTERISATION.

Reports suggest that a sophisticated computer system will take away the need for office support staff and management backup. Most of us in real estate have fairly up-market computerized systems in place already but computers will never replace people entirely in what is a “people” business. Good communication and negotiating skills will never be replaced entirely by computers. As I read recently “as much as a computer can do, it can't smile back at you”.

COMMISSION RATES.

The big selling point and the one that everyone gets excited about! Contrary to what we are reading, the rates attributed to existing real estate agencies fluctuate considerably depending on area and value of the property. In many cases, the rates Pero is quoting are in line with what the industry is charging now particularly on higher priced property. It's an old saying but a true one, “you get what you pay for in life” and that is true in real estate sales. To me, the proposed Mike Pero operation has too many similarities and the same amount of hype surrounding it as did the Jones operation a few years ago and it would not surprise if it suffered the same fate. The solicitors tried cut-price real estate sales a few years ago, others have tried and failed. At Tommy's, we may be a bit more expensive but we have a proven track record and a significant market share. I believe it is worth paying a premium to have team work, accountability and face to
face support from salespeople and management when required.

Bring it on!

Best wishes

TOMMY HEPTINSTALL

Managing Director