Frith: real estate process ‘too expensive’
Before she became a real estate agent, Sue Frith thought there must be a compelling reason that sellers were charged a 5 per cent commission on the sale price of a property.
“I thought there must be a ‘secret sauce' to justify the high commission rate,” she says.
“But when I began working in the industry, I realised there was no secret sauce.
“The process is just too expensive, and it doesn't have to be.”
Ms Frith has launched Frith Real Estate, a broker offering to list and sell houses for a 2 per cent commission, some 60 per cent cheaper than the standard 5 per cent normally charged by real estate brokers in Bermuda.
A seller paying a 2 per cent commission, rather than the standard rate, will save $60,000 on the sale of a $2 million home.
Ms Frith, a graduate of Princeton University and Harvard Business School, has worked as a senior marketing executive for Sports Illustrated magazine, and as a vice-president of Morgan Stanley Private Wealth Management.
She moved to the island in 2006 after marrying Bermudian businessman, William Frith. They purchased a home together in 2012, a process Ms Frith says she found “expensive and frustrating”.
After obtaining a real estate agent's licence in 2015, Ms Frith worked at Rego Sotheby's International Realty and Coldwell Banker Bermuda Realty for four years before striking out on her own. Darlene Davis, formerly at Rego, has joined the new firm as an agent.
“I would meet people here who are British and they would say the 5 per cent commission rate is outrageous as they pay 2 per cent in the UK,” Ms Frith says.
“That got me looking at the 2 per cent model. I spent a lot of time thinking about it, and as I saw other countries do it efficiently with a two per cent commission model, I thought there must be a better way of doing it here in Bermuda as well.
“Nothing in the licensing act for brokers said the commission rate has to be 5 per cent, so I realised I can charge whatever I want.”
Ms Frith says the industry reaction to her cut-price commission model has been muted.
“A couple of agents have told me it's a great model, they think it makes sense,” she says.
“But from the vast majority, I haven't heard anything. No one's called me.”
Ms Frith says she understands that other brokers are “up in arms” about her lower commission rate.
“But look at Jeff Bezos at Amazon,” she says. “I'm sure booksellers were up in arms, too. But it's part of our lives now to get a better price and do things more efficiently.
“Obviously, other brokers and agents don't like this, but the reality is that they can adopt this model as well and I think eventually they will because it's a better model.
“An industry should seek to provide the best model for its customers.
“There is a strong lobby against it, which is what I feel now. It's the right thing to do, so I am going to stand my ground.”
Key facts on commissions
• Real estate commissions in Bermuda are split between the broker that lists a property for sale, and the broker that brings a property purchaser to the table.
• Upon a sale, the seller of a property has traditionally paid a 5 per cent commission, equally split between the two aforementioned brokers.
• If the same broker both lists and sells a property, then the full commission is paid to that broker.
• Purchasers of property do not pay a fee unless they enter into a “buyer's agreement”, agreeing to pay a broker for finding a suitable property and negotiating its purchase. However, it is rare that purchasers take that step.
• Under their groundbreaking model, Frith Real Estate — as listing agent for a property — receives a 2 per cent commission from the seller upon its sale.