Not all real estate markets are created equal. The differences are fundamentally based on the principle of cooperation.
International real estate authority, Carlos Matias, explains that the primary difference across global markets is rooted in the presence or absence of systems and policies based on cooperation. As Founder of leading global real estate technology companies, GryphTech and Phoenix Software, Carlos has 20+ years of experience helping global real estate companies in over 60 countries grow and is uniquely qualified to understand this.
According to Carlos, four of the most significant challenges unique to real estate markets outside North America are as follows:
1. Lack of Systemic Cooperation
Without an MLS system, associates are reluctant to cooperate, buyers struggle to know what is on the market, and sellers have limited property exposure to generate a quick sale at the best price.
With more than 800 MLSs in North American real estate, broker cooperation is the norm and broadly perceived as beneficial for both sellers and buyers. Sellers benefit from increased exposure for their properties and buyers benefit from access to all MLS-listed properties while working with only one broker. Whereas outside North America, there are very few areas with an MLS, so brokers, as a rule, do not typically share their listings. As a result, the way in which consumers search for, buy, and sell properties and associates service their clients varies significantly.
As an example, a few years ago Carlos experienced this challenge first-hand when looking for a property to purchase in Portugal. To begin his search he traveled to Portugal and walked into a real estate office asking to see some local listings. He was shown only three or four listings represented by that agent and when he asked if there were any others he was pointed to another real estate office down the street. When walking into this second office, Carlos was again shown just a handful of listings and directed to yet another office a few streets over to see if they had additional listings. This was clearly not the most efficient model from a buyer’s perspective nor did it serve the seller’s best interests.
When competitors cooperate it benefits everyone involved in the transaction. It also provides for maximum exposure of properties, which is good for both buyers and sellers. Without an MLS, brokers create their own separate systems of cooperation, fragmenting rather than consolidating property information. This fragmentation inhibits the amount of exposure each listing receives and limits referral opportunities between associates.
2. Open Listing Agreements
Open Listing Agreements limit seller opportunity due to the costs of undedicated representation and misguided buyer perceptions.
Unlike North American markets where exclusive listing agreements are largely the norm, in the
majority of markets outside North America, open listing agreements are commonplace. In Europe for example, it is common for property owners to solicit multiple real estate associates to sell their property. In this case, when a property sells, the commission is only paid to the associate who brought in the buyer. From the owner’s perspective, more associates equate to more potential buyers and competition between associates adds a sense of urgency supporting a fast sale.
The challenge, however, is that the competition open listing agreements create between associates often results in a race to bring forward an offer, any offer, in order to secure the commission, rather than finding the best offer for the owner. Also, associates are likely to prioritize their exclusive listings over their open listings, often lengthening an open listing’s days on market driving down the price.
Buyers may also interpret a property having multiple associates represent it as a sign that it is difficult to sell, suggesting there could be an issue with it or it’s overpriced. All of these occurrences are to the seller’s disadvantage.
Overall, with an exclusive listing, one that is listed with only one broker, associates are far more motivated and personally invested in finding the right buyer and price for the seller he/she represents. In the end the customers win: Buyers find the best home for their families from all the possibly inventory properly represented by an agent and the sellers get the maximum price for their home faster by exposing it to as many buyers as possible from other agents.
3. Lack of Regulation & Enforceable Law
An unregulated industry leaves all parties vulnerable and lacking confidence.
In North America, real estate professionals are subject to rules governed by boards and associations who issue licenses and enforce laws and regulations. These laws protect agents and consumers and provide everyone involved in a transaction with a sense of security and confidence. There is no such equivalent at the same scale outside North America. In many markets, there are no qualifications or licenses required to sell real estate nor are there enforceable regulations to govern transactions; almost anyone can sell a property and sometimes anything goes. For those laws that do exist outside North America, they vary significantly in type and enforceability and are typically only within a small geographical area and almost never at the national level.
Lack of regulation has its consequences. For example, it reduces the willingness of associates to split their commission on a transaction and when commission disputes arise (such as one associate claiming that another associate did not pay their split), they often need to go through small claims court which can be expensive and take a long time to resolve. A lack of regulation can also lead to associates finding creative ways of selling properties in order to avoid paying a commission split to their broker. Together, these issues cause challenges at all levels of real estate from inaccurate data and financial reporting to a lack of clarity on the rights of all involved.
4. Portal Dominance
Internationally, real estate portals are a necessary evil. To meet growing seller demand, associates are listing properties at a significant cost.
Property search has revolutionized over the years and portals have become powerhouses with significant market share. They invest heavily in marketing to create and sustain consumer demand. It is estimated that there are over 10,000 property portals around the world and growing. Portals are more than just classified sites. Some act as advertising giants selling ad space and making use of rich databases of consumer information they’ve gathered, who then sell the information to other advertisers. Others promote products and services from other verticals, such as automotive,
careers/jobs, short-term rentals and eBay-type marketplaces. This multi-purpose model often mitigates the effectiveness of real estate listings and their ability to generate qualified leads.
With the global market flooded with portals, it’s causing a battle for listings, web traffic and web leads between portals and real estate brands. Portals are perceived by some brands as a threat to their value proposition. It is increasingly common for sellers to demand that their associate list their property on the dominant portal in their market, regardless of the cost to do so or likelihood of generating leads, with indifference given to their listing being placed on the brand website. However misguided this may be, it is a challenge for many brokers and associates, as portal fees can be expensive and act as an opportunity cost for other marketing.
The World’s Largest Real Estate Brands Rely on PropTech Solutions to Help Accelerate Their Growth
PropTech Solutions Inc. is the holding company of leading global real estate companies, GryphTech and Phoenix Software. They offer lead-to-close real estate management solutions to global real estate companies, i.e. RE/MAX, Keller Williams, Coldwell Banker and ERA, to help accelerate their growth. The technology is designed with flexibility at its foundation to support a wide array of global requirements and is configurable to meet each customer’s unique local market needs. It is easy to use, cloud-based, mobile-friendly, multilingual, and multicurrency, with powerful tools to facilitate cooperation and lead generation. Frequent platform enhancements and integrations with best-in-class services such as DocuSign, WhatsApp and ListGlobally ensure its global customers have all the best tools available to be successful. In August 2019, PropTech Solutions was recognized as a 2019 Top 10 PropTech Solution Provider by CIO Applications Europe.
Visit gryphtech.com and phoenixsoftware.ca for more information.
About Carlos Matias
Carlos Matias is the Founder & CEO of GryphTech and Phoenix Software. With 20+ years serving real estate businesses in over 60 countries, Carlos has earned a reputation as a visionary leader and authority on global real estate. His unparalleled expertise in international real estate has earned the trust of the world’s largest real estate brands.
Carlos, a member of Peerscale and FIABCI, is frequently solicited for his advice and insight by industry leaders with whom he has long-standing relationships. Together, they make and influence decisions which shape the industry. Having traveled to over 50 countries, Carlos has spoken at countless industry events to inspire others and is an active participant in global industry and customer events. Carlos is fluent in English and Portuguese and divides his time between homes in Toronto, Canada and Lisbon, Portugal.
One of Carlos’s primary goals is to encourage and facilitate greater cooperation throughout international real estate at all organizational levels to generate new opportunities. The fact that more and more international franchises and large real estate companies use technology provided by PropTech Solutions make this a real possibility.
Learn more about Carlos Matias at proptech-solutions.com/carlos-matias