Real estate agents charge sellers a commission, which in Sydney is currently 1.65% of the price - $16,500 on a $1m property; plus marketing expenses of about $5,000 which cover a signboard, photography, listings on domain.com.au, realestate.com.au and its own website, brochures and auction expenses.
Online marketers are disrupting this traditional business model. They are doing away with shopfronts, and operate virtual agency models. By doing so, they are able to lower their cost base and charge less for selling a property.
The most prominent online marketer is Purplebricks real estate, which charges a fixed fee, instead of a commission, for selling a property. It advertises prominently a fixed fee of $5.999 in NSW & VIC, and $4,999 in QLD, WA & SA. The fixed fee includes the services of a 'Local Property Expert', photography and write up for listings on the domain.com.au, realestate.com.au and its own website, a generic signboard, and inspections booked on the internet.
You might think that the fixed fee includes accompanied viewings, marketing reviews, marketing upgrades, an auction and so forth. But you would be wrong! In the fine print, you will find that these are additional services for which additional fees are payable.
Consumers complained to the Queensland Office of Fair Trading that Purplebricks was being misleading in advertising fixed fees, when additional fees were payable. The OFT agreed, and as a result, Purplebricks has changed its advertising to make the additional fees payable more prominent, and has agreed to pay $10,000 to the OFT as a 'fine'.
When carrying out its investigation, the OFT found that Purplebricks was in breach of many of the real estate licensing requirements, and fined Purplebricks another $10,000.
For more information on the action taken by the OFT,