What is the future of the Real Estate Industry?

Looking at expectations, market impact and legal considerations

By Jan Davel

During 2012 and beyond, real estate agents can expect a continuing escalation in consumer demand for better service, better information and better value for money.  As the Consumer Protection Act becomes more widely known and applied, the proverbial bar will inevitably be raised by consumer behaviour, in the real estate as well as other economic sectors. The ever increasing levels of professionalism demanded of estate agents will require that they give credence to ongoing training and skills development and that they improve their efficiency by embracing new business practices and technologies.

Real estate agents should also consider the more conservative criteria applied by lenders against the backdrop of a global economic recession. Many consumers are also inclined to keep a tight rein on expenditure, as they rebuild their credit records and more importantly, lower their debt exposure.  Although real estate offers an underlying asset and remains an excellent long term investment commodity, unlike most other commodities bought on credit, we believe that for some time to come, the challenge faced by real estate agents to convert the bulk of their offers to purchase to successful registrations of transfer, will continue.

To make matters even worse, lenders and other industry commentators are predicting single digit house price growth, slightly below the rate of inflation (around 6%) for most of 2012. In real terms this means a deflation of house prices, except perhaps in isolated pockets of the market where specific circumstances could cause demand to exceed supply.

Now, more than ever before in the South African real estate industry, the benefits of a tried and tested franchise model that allows agents to focus on sales, can be brought into play. All real estate practitioners require, amongst other things, general business skills such as financial management, personnel management and training skills as well as a sound knowledge of the local real estate environment, the legal and transfer processes, finance mechanisms and of course, branding, marketing and advertising.  

Visibility, availability, credibility, market share and most of all, profitability, are the basic pillars on which a successful real estate agency should be built during 2012. Since time is an estate agent’s scarcest resource, it makes sense for those who want to focus on sales to subscribe to a well-established and reputable franchise business model. Under the umbrella of a well-positioned and well respected brand, such a model will offer state of the art information technology, compliant contracts and other template legal documentation, up to date and high quality training courses, proven communication, marketing and advertising systems, discounted marketing and advertising material, as well as on-site support provided by experienced real estate specialists.

Each real estate franchisee’s business is still his or her own business with its own fidelity fund certificate, trust account, business account and in the case of some franchisors such as RealNet, even certain elements of its own identity. However, once a franchisee, the real estate agent is no longer operating alone as an independent operator in a very tough real estate market, but as a member of a greater, like-minded family. 

Since the real estate industry is a highly regulated industry with various barriers to entry, all credible real estate franchisors evaluate prospective franchisees’ applications against its own selection and recruitment policy. Ensuring that the applicant meets certain minimum criteria will assist in safeguarding the brand against reputational risk. The more stringent the franchisor’s selection and recruitment policies are, the safer the franchisee’s investment in that particular brand. 

Now for the good news. Since the franchised sector is now also governed by the Consumer Protection Act, all franchisors are “suppliers” and all franchisees are “consumers”, which means that franchisees now enjoy more rights and privileges, and also have recourse against unscrupulous franchisors. The real estate industry is no exception, and in addition to the already stringent requirements of the real estate industry, real estate franchisors must now also comply with the provisions of the Consumer Protection Act which calls for specific disclosures and mandatory terms and conditions in the franchise agreements, for the benefit of the franchisee.

Further good news for prospective real estate franchisees is the fact that there are real estate franchisors, such as RealNet, who are long-standing members of the Franchise Association of South Africa (FASA), subscribing to this acknowledged authority’s Code of Ethics in pursuit of the promotion and protection of ethical franchise business principles in South Africa, in accordance with internationally accepted standards. 

Real estate agents who want to consider a franchised system can now make well-informed decisions prior to committing to any long term business relationships, and they can choose who they want to associate with.  For more information on ethical franchising in general, please contact FASA on 011 615 0359 or visit their website at www.fasa.co.za, and for more information on RealNet franchise opportunities, please contact 012 460 4605 or visit www.realnet.co.za.  

As a final thought and true to the words of Margaret Mead:  “Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.”

RealNet

+27 12 460 4605

www.realnet.co.za