Although most of us part of the Dubai real estate brokerage sector have been skeptical and none accepting to the current changes feeling the heat of the challenge and the frustration of the possibilities, we need to admit that change is most needed and when accepted becomes most beneficial. This is the case with the newly publicized permit system and MLS implementation, although it is part of a legislation that has been there for some time.
The legislation not only changes the dynamics of our market which is definitely needed however also changes the CULTURE. The culture of buyer trying to abuse the seller and the agent, the seller trying the same with the buyer and the agent, the agent going ahead with his own game to abuse the buyer and the seller. As a result agents are seen as none professionals, none transparent and our business becomes less sustainable. Such market activity pushes professionals away from the market and the industry.
Are brokers the problem. Not really, brokers are victims as much as guilty.
When a buyer runs all through the market to get the cheapest listing, and negotiates the cheapest commission this is the result.
When a seller lists the property with all agents in the market and negotiates the cheapest fee this is the result.
The result is an agent who would either need to play the market game or sit on the side and ethically watch. Malpractice only encourages more malpractice.
An agent will need to drop the fee (thus offer a less quality service) charge the other party under the table, live a conflict of interest and get his fee asif he is steeling, drop the price to the least without negotiation as he is afraid that another broker down the road will start at a lower asking price and get the deal (sometimes start at an asking price which is below what the seller would accept). The seller still gets a fake sense of the market as 50 offers are sent to him while it is the same buyer circling the agents the property is listed with. The buyer thinks that there are 50 similar properties on the market while it is the same property listed with 50 agents 50 times.
Bottom line, transparent brokers would be called naïve.
Seller’s and buyers believe that such practices are the norm and feel that they should be part of the common practice. New buyers and sellers who are used to more regulated markets feel none comfort in entering the market.
Let’s look calmly at the pros and cons of the permit and MLS system’s implementation.
To start with permits:
There has been a flood of brokers, and developers who would falsely market a property online, through social media or any other digital forms. Over promising on a property that you are trying to offer as well. If you are a descent strait forward agent and you market the same property for what it is, it won’t appeal to the market. Your money is badly spent, your add has no value. This will all be organized with time. Nothing is born perfect however it all sits in its place with time.
To market on any other form of media you needed a permit at all time prior to the new publicity drive, it is now only simpler as you can do it online.
Here we get to the MLS system analysis and at the same time we will discuss all fees.
Don’t we all prefer to only take exclusive listings, or at least listings not distributed to more than a handful of agents. Many agents feel currently that such a privilege is not possible, to a limit that they rarely ask for a mandate to market or any kind of exclusivity. How many times have a broker called a seller and the seller mentioned that he is not ready to sign any documents (come back to me when you have an offer). Is it acceptable that you market your neighbors car without legal authorization, surely not, so how will you be able to sell someone’s house which is worth millions without an authorization.
When sellers know that hundreds of agents accept to market their property without any authorization where is the urgency to sign any documentation. Such practices create a bad culture. And currently it is a cycle of that.
When seller’s know that they can list only with one agent or a max of 3, and that the property cannot be marketed except if proper documentation is signed, the seller will sign the documentation, as a result what agents currently feel is a privilege will become the norm.
The same goes for a buyer.
We will reach a culture and an atmosphere of transparency with less efforts. All agents need to thank Dubai Land department and the real estate regulatory authority for such an approach. And yes many are skeptical as this has been tried and there has been challenges. Gents our market has done in 10 years what took other markets a hundred to do. Are we perfect, definitely not, are we taking a giant step towards better practices; we surely are.
Our current business models are not sustainable as they are. Real estate brokering should be a career not a money making few years in someone’s life. Real estate brokerages should be companies for life not silos which generate profit in good days and lose money in bad ones with revolving doors.
Our market should move to a sustainable model sooner or later.
Commissions should be paid by the party the broker represents. Commissions rates for sales should be at 5 to 7% similar to many other markets. An agent should be a buyer’s agent or a seller’s agent thus that partys’ window to real estate. Solicitors should be part of our everyday life. Escrow accounts should be opened for each transaction.
Each ethical broker should be able to be proud of what he does, rather than live with a feeling that he is at all times doing something illegal. Every ethical professional broker should live a decent life rather than struggle for the coming deal. Brokerage firms should be able to afford to build careers, retirement plans, investment initiatives for employees, growing businesses which make it through the good times and bad times.
Fees; it is surely evident that if every firm looks at the current number of listings they have and the fee structure in place panic will fill the market. Any agency with 2000 listings would do a simple calculation and notice that they need 2 million AED to be able to get permits for their listings. Ladies and Gents no average size agency should have or be able to maintain more than 100 to 200 listings. 200 listings only per agency with only 1000 agencies in the market means that 20% of all the properties in the market are on offer.
Other questions to be asked: Why should a listing stay on the market for 1 year. Why should a listing which is 30% higher than the going rate of similar properties be on the market.
Wouldn’t we rather pay 104AED more per listing per month and make sure that there is a government body overlooking our and the investors interest.
Wouldn’t we prefer to have customers think about professionals in our industry similar to how they view architects, doctors, plumbers, teachers, painters, tailors and all other pros.
Hand in hand towards a better culture. It’s a business not for everyone. Professionals shall thrive.