Q. (Also posted in My-RealProperty2)
Can we really earn money (from your point of view) by taking up the course in near future and its prospects since it takes 4 years of work to make it done. Thanks!
How would you answer that?
A.
The key issue in this game is technology. According to The Guardian, March 2016 online article:
Home and dry: the high street estate agent of the future,
"... industry experts estimate that only around
4% of all homes in the UK are sold online each year, which is hardly an overwhelming figure, but it becomes alarming for traditional estate agents when considering that this figure is expected to rise to an astounding 50% by 2020."
Before attempting to answer such a general question, the below analysis of the current state of the real estate industry is referred.
Challenges:
1. Internet technology.
2. Regulatory framework.
3. Buyers do not want to pay commission.
4. Developers are more marketing savvy and adaptation of technology.
5. Expensive or inflated property prices and fees are extra transaction cost.
6. More intelligent buyers who help themselves as they are tech-savvy.
Well, you can't blame people to be more intelligent, right?
So, the overall scenario is that future agent would have to be more sophisticated. This is because they are dealing with smarter buyers and sellers.
The Internet will make people smarter in certain ways. It is digital marketing!
-Cost, the price. Probably the market price could be obtained quite openly in the Internet. Buyers and sellers are thus able to negotiate based on a range of asking price in the Internet.
+-Value. Which differs from price by a significant lot in fact can be reference to pictures and narration provided as well. Hence, there is a scope of comparison in the Internet with the types of renovation with and without furnishing.
+-Digital Images. In the old days, these images were never possible. Now, with Internet and imaging technologies, all that is no more privileges.
+-Transaction cost. The higher the price of property, the higher is the commission. But, it goes against the seller's or buyer's pocket in quite different ways.
+Seller. For higher price sold, the seller is willing to part with the commission as long as agent can provide value and get the job done in favour of the seller.
-Buyer. As for buyer, they are not as keen to part with the commission as saving is the key to a good buy. Hence, working for the buyers' market is an up hill task.
-Competition. Like Uber and Grab, competition for taxi is not more about bus or train. It is the technology. Therefore, real estate industry marketing is on a far complicated front. Advertising becomes sophisticated with social media, cross selling between insurance, banking and other investment products, including REIT.
+Market. The growing of Malaysian population, largely still young will fuel the growth of the real estate industry. Generally, the urbanization phenomenon is also happening in major cities of every state.
+Region. In line with the regional economy of Malaysia with the neighbouring countries, particularly with the betterment of Vietnam, Indonesia and Thailand, the trade will foster the real estate growth in regional hubs like Kuala Lumpur, Penang and JB. People are buying into a region, not anymore local.
Numbers of + are 3, number of - are 3, number of +- are 3. Thus, there is no obvious winner here.
It is all up to you to interpret.
But, the question asks "Earn good money with EA Licence?"
Money is the matter, not the whole lot of issues you wrote above!
Well, that is why I need to explain the estate agency practice. The definition of Estate Agency Practice is as according to MEAS 2014 below:
"Estate Agency Practice"
means acting or holding oneself out to the public or to any individual or firm as ready to act, for a commission, fee, reward or other consideration, as an agent in respect of the sale or other disposal of land and buildings and of any interest therein or the purchase or other acquisition of land and buildings and of any interest therein or in respect of the leasing or letting of land and buildings and of any interest therein including the act of making known of the availability of land, building or any interest therein for such sale or other disposal, purchase or other acquisition, leasing or letting.
It is a service, a profession. So, that is a fee for a job done. If there is no need of the service, then there is no need of fee payment.
This service is gradually replaced by technology. That is to say, the fee is to pay for the technology. Hence, if estate agency fee is to pay for the technology, which means the output for an agency is not really human-to-human anymore. It is human-to-technology-to-human.
But, as the end-to-end is still human, the law and regulation is to safeguard the legitimacy of the transaction. Thus, largely there is no change.
The only change is the cost of maintaining the technology. However, technology can improve efficiency. Thus, the cost of managing a team of salespersons can be better managed by replacing them with technology.
In a nutshell, the money is there to be made like before. Amidst all the fuss about Internet and technology, the way is still by shaking hands, viewing and door opening and closing, signing on the doted lines and pay through the law firm. Linking buyer and seller together becomes a technology shortcut. But, the transaction is still between buyer and seller. If the buyer can source the seller directly via the technology, the technology is the agent. The company that owns the technology should charge the agency fee.
Only thing is, how much is this technology going to charge? Well, it is a mere fraction of the cost of a human. Why? Because it is technology.
So, a human agent becomes redundant? In fact, in the future, it is not so.
Why? I am confused, I don't understand!
Because technology like telephone was once thought to replace business travels. However, years later, it did not! People in fact traveled more because of telephones.
So, an agency with a good technology will do more business. That is for sure!
Simple illustration:
You are buying a property. You look up in the Internet. You found one in Mudah.my. What happen next?
You will search for similar property and compare them. Then, you say you do not trust the price as advertised. It is much inflated. So, you compare with higher and lower range of the property. Best be around that location.
The more you compare, the more you will feel confused. Why? Because all the asking prices are not genuine prices. Why? Simply because sellers want to sell at higher price, and buyers want to buy at lower price. Simple logic. This logic is complicated by the various factors that come along with age of the property, renovation costs, land size, facing, maintenance fee, entrance fengshui, etc.
Your next move would be calling up these sellers one by one. Then, still the asking price is tooooo out of your expectation or budget. No choice, you start negotiating. Luckily, the seller got what you offered, you finally got your price! Thank GOD!
Later, you found out your next door was sold much lower price than yours. You felt cheated. Does it sound too familiar? You can still learn to be an expert real estate investor many mistakes later, but you have paid a hefty fee for it!
If you have spoken to an agent familiar with the transaction of the location. You might be able to avoid that pitfall. But, again this agent must be value added and safeguarding your interest, not the interest of the seller. In simple language, he represents many past buyers. He knows how much it was your next door when it got sold!
In such case, he earns a living from getting you a good piece of property, and not helping the seller to make money out of you!
Much said, this person comes with a fee. Are you willing to pay that fee?
Inevitably, no matter what a technology can do, it is a business guarded by human, but largely runs on the platform of technology. A big agency firm will still make the money. For, nobody will do a job without charging a fee. Imagine an experience agent with extensive knowledge of his location were to put all that data into technology, and not charge a fee for the ADDED VALUE?
On the whole, this total fee will decrease due to better efficiency of technology. For example, it has become less costly to fly a plane, Airasia, Malindo, etc. On the other hand, big players will emerge with better technology to win the customers. Small players will eventually be replaced by mega players. Much is the same like small retailers will be overtaken by hypermarkets.
As it may sound cruel, but it is reality in the survival of the best value an agency can add to its client. Inevitably, this value is running on technology.
Ref:
Peter Veash (2016) Home and dry: the high street estate agent of the future. The Guardian. Available at,
https://www.theguardian.com/media-network/2016/mar/31/estate-agent-future-vr-property
