"All that glitters is not gold"

Q.
All that glitters is not gold. Small or big firm, which is better for Estate Agency Practice?

A.
This is a famous proverb in English, meaning - the attractive external appearance of something is not a reliable indication of its true nature

This is the same question when one is asked to join a big corporation or a small firm, which is better? A big firm glitters? A small firm looks weak and vulnerable.

Being an employee, you would think that Small Firm would not pay the money. Big firm have advantages like better salary, annual leave, room to grow (can be disputable) and hierarchy for promotion.

However, let us put those elements aside. We just concentrate on the business operation itself, not about employment issues.

Big firm of estate agency practice like Knight Frank, Rahim & Co and Henry Butcher have a good spectrum of specializations. They are like supermarket of real estate including Valuation, Estate Agency, Property Management, Consultancy and Tender or Auction. They are like Medical Specialist Center, with various disciplines of sub-specialties. They are high volume and high cost of operation. In certain aspects, they pay good salary for high positions, and they will not pay a single sen less on your taxes or EPF.

So, you can see that their structure is hierarchical and volume of business is also enormous. On the other hand, smaller practitioners of Estate Agencies are mainly like GPs, or even like pharmacies. They mobilize their activities in local geographical area and work with cost saving and in small scale. They might have very unstructured hierarchy, everyone operates on his own, be responsible for his own cost and expenses. The salary is non-existent as most Negotiators are engaged on a "Contract for Service", where each one is a "contractor" of his firm.

On the business front, which will garner more customer? The question is about what bottom line you are looking at.

For retail business, most big firms are not so involved. They are more into Corporate Sales - building which are in hundreds of millions. Small apartment of 800 sqf  they are not so interested. Let us put corporate sales aside, among the agencies which do retail sales - subsale and developer sale, does size matter?

Size does matter when it involves developer sales. It does not matter when it is subsale. Hence, when it is about image and professionalism, it will not depend on size that much. It depends on quality of service. On the contrary, buyer or seller would be worried if the cost (commission) will be exorbitant to sell their small property. So, big firm usually would not undercut small firm in the retail subsale market. It is too small for them.

Among the competition in the subsale market, agency firms try to outdo each other by claiming that their team is bigger. It appears that bigger team means better performance. However, I beg to differ.

The listings are concentrated among a few internet sites - Mudah.my, iProperty.com, Propertyguru, etc. So, general public will not go to firm website to see the listings. So, big or small firm listing does not matter much. Indeed, a REN with 10 listings or a REN with 100 listings, to a person who sells or buys property once in a lifetime, it really does not make significant impact.

Probably, his choice would be a firm with 10 RENs rather than a firm that has 100 RENs. We do not know. It is individual choice. However, when his property is difficult to sell, then he would look for concentrated attention. He will not look for a big firm. Unless, the big firm have lots of buyers. Is that true of the big firm?

When I come to this industry, I thought that big firms will have investors who follow them over time. They are the land bankers. They are the big bosses of developer firms. So, they will buy from you anything with no question asked. They are so rich!

On the contrary, big firms who have all these investors will only buy from you if you are desperate. They are not stupid. They are smart investors, or "sharks". Therefore, when you want to sell your property, it might be good to list them with medium or smaller firm. They will likely give you more attention and find you a genuine buyer who buy your property to stay rather than to speculate.

Truly, at this time of downturn, who on earth - investor or not, will buy to speculate? There is nobody to speculate with! So, small firm will survive better during this slow time as they rely on genuine buyer and tenants. Big firms would not be interested in small tenancy. They only target expatriates or corporate clients. Thus, during the low period, there will be no business as big corporate appointments are put on hold!

The next article is about joining a big "MLM" real estate firm. It will be interesting to see...