We talk to Tim Godden from Seekology about why he would offer to work for no fee in helping buyers secure a suitable property. Just what is the business model and how is it going to work?
Kevin: The term game-changer is quite often bandied around in the real estate industry, a lot of it lately because there are some changes occurring in how agents work. This one is particularly interesting because it came across my desk a couple of weeks ago. It’s about a new business called Seekology. It’s an organization that will help investors and owner-occupiers find the ideal property.
I won’t spend too much time doing any more explanation other than that, but I want to introduce my guest, Tim Godden. Tim is the national director for Seekology, and he joins me.
Tim, thanks for your time.
Tim: No problem Thanks very much, Kevin.
Kevin: When I received your first release, it told me that you were operating in an environment where you were not going to take a fee for investors; in fact, you were going to be achieving your income by taking a referral fee from agents. But that has since changed, I understand.
Tim: We have revisited that pricing model or the structure of the business in that reference and we did that because when we launched we found… As you said we initially said that we were going to receive a fee from the person selling the property. We revisited that because we found that there was firstly a bit of skepticism around that and that is because there are people obviously within the industry that do receive a fee and perhaps give advice based on the fee they’re receiving rather than what’s in the best interest of the buyer. We didn’t want to get confused with that.
What we actually have changed it to be is the fact that we are a free service for property investors – a free buyer’s agent service for property investors – but we do charge for people that are looking for a property to live in.
There’s a number of reasons why we charge for owner-occupiers, and that comes a lot down to the fact that it’s very much an emotional decision; from a buyer’s agent’s point of view, it’s not such a matter of the facts and figures. For an investor, obviously, there’s a lot of research that goes into it, but it does come down to the facts and the figures rather than an emotional attachment to a property.
Because of the interest that we received initially, we found that we were able to run the business successfully with the income that we were receiving from owner-occupiers or people looking for their own property, and then it enables us to help clients find an investment property.
And when we do service those clients and they are extremely happy with their purchase and the end result and the capital gains they received from those purchases, they’ll obviously tell their friends and family and we then develop clients for life. That allows us then to possibly assist them when they do want to buy a property to live in.
Kevin: One of the reasons, Tim, I was skeptical of these types of services – and we’ve seen a number of them come across our desk. They all talk about being a disruption to the industry. One in particular is a company called Open Agent. We’ve mentioned them before on the show and they are a company who purport to help a seller find the best agent when really it’s only an agent who will pay them a commission. This is one of the problems that I have, and that’s why I’m pleased to hear what you say is that you’ve moved away from that model.
That’s quite an adventurous move, Tim, because that’s actually going to impact your income if you’re not charging a fee for helping an investor find a property.
Tim: That’s right. We do a few things differently to other buyer’s agents, as well. Our employees are not commission based whereas a lot of other buyer’s agents are. That then allows us obviously to generate more income from the owner-occupier property. That is a change compared to other buyer’s agents.
But we are also a part of a group that is called Australian Properties International, which is basically a one-stop shop for anybody looking to buy a property. They have other departments that we can refer clients to, be it finance or investment coaching, or partners that are accountants and advisors. So there are other options.
We are going to create clients for life so that they will revisit us when they do want to purchase a property. That’s our intent, and that’s where we’re coming from. But in saying that, when we’re working for an investor it’s very much research based and we’re specialty in that regard, as well. It’s not simply just a side avenue to build our client database or anything; we certainly know what we’re doing in that regard, as well.
Kevin: When it comes to owner-occupiers, you’ll be helping them. What is the fee if I want you to find me a property that suits me and my family and I’m going to move into it? What would be the cost of doing that?
Tim: It’s 2% of the sale price of the property. We go through the whole process with the buyer, so obviously we go through a full brief. This is slightly different from when we work with investors because we are talking more about facts and figures with investors, but with an owner-occupier, we go through a full property brief with them.
We have access to properties that are off market. I heard statistics only last week that in Sydney particularly, almost 20% of properties are sold prior to them even being advertised on the Internet. We’ve been able to put together a team of people who have a wealth of knowledge and experience but more importantly have built those relationships within the real estate industry so that we can have access to those types of properties and do receive contacts from agents that do have properties when people want to sell them discretely or who don’t want to go through the hassle of marketing the property and we can gain access to those.
That helps owner-occupiers, but it also helps investors because obviously if a property is going to auction or a property is being marketed, there’s going to be more competition in the marketplace for that property and more competition or more buyers who want the property. Particularly if they’re looking to live in the property, it can obviously push the value of the property up beyond what an investor would be prepared to pay or what’s in the best interest of the investor, really.
Kevin: What sort of research can someone expect, like an investor who comes to you and says “I want to buy an investment property.” You take them through the analysis and analyze what they can afford, what sort of property they should be looking at. What sort of tools do you use to do that, and how can I be sure that you’re giving me the best possible advice, especially if it’s free?
Tim: We’re very transparent with what we do through the whole process. As you said, we sit down with the investor initially and we go through a strategy meeting, and that’s basically asking them why they want to buy a property and what their desired outcome is. Often they may have already spoken to a financial advisor or somebody in that relation and they know what sort of property they want or they need.
Then we go through a property brief with them that specifies the type of property they want – its features, if they have any specific locations that they want. But often clients may not know the specific location; they simply may have a budget. They may need the property to be cash positive or they may just simply want the property to provide great capital growth over a long period of time. We can then obviously refer them to finance experts to assist with that.
Then we come down to our research side of things. We go through every point of research with the client so that they are understanding why we look at particular aspects – looking at things like, depending on budget, we prefer to buy in inner or middle ring suburbs around CBDs. We look at population growth.
Everything really, at the end of the day, comes down to basically the supply and demand of an area. So when we’re looking at the supply and demand, we’re looking at whether there’s limited free space or limited areas for development in a particular area, whether there are a lot of properties that are very similar to the property that our client’s looking for.
Obviously, the buzz word is oversupply. If there are apartments – and we don’t necessarily work with many apartments, but if there is a lot of one particular property in an area obviously that can affect the supply.
Also when you’re looking at demand, we have a look at areas and look at infrastructure and whether people will want to live there, whether there’s planned infrastructure, whether there are neighboring suburbs that are having growth, whether there are employment options or whether there are going to be employment options and a variety of different employment options.
We go through a whole lot of information with the investor and go through a whole lot of different categories – if you like – for us to consider and for them to understand so that they can be confident in the decision that they’re making.
Kevin: It’s a great topic. We are out of time unfortunately, Tim. I’d love to be able to talk to you a little bit more, and I’ll get you back into the show to do just that.
Tim Godden has been my guest – national director of Seekology. Check it out for yourself. Tim, thanks for your time.
Tim: My pleasure. Thanks very much, Kevin.