The story of Myyntiturva
In 2009, Vuokraturva‘s major client, an investor who wanted to sell more than one hundred small flats in the Helsinki Metropolitan Area at one go. All the flats were studios or one-bedroom flats. Demand for such flats was extremely heavy in the market, and the task was expected to be easy to complete. In order to get competitive commission offers, Vuokraturva tendered the work to estate agents.
Although small flats sold like hotcakes, often before preliminary viewings and at a higher than asking price, the commission offers of the estate agents were only 10-15 percent lower than their normal rates. This meant that the client would have had to pay an average of ten thousand euro in commission for every flat.
Vuokraturva considered the offered commission rates completely unreasonable, and, frustrated with the price cartel like situation, ended up selling the flats at a fixed commission of 1500 euro + VAT per flat. The flats sold fast, the prices were good, the client was happy, and Vuokraturva made a reasonable profit with the fixed commission rate. The Chairman of Vuokraturva’s Board of Directors, Timo Metsola, commented the case in public as an alarming example of how wide the gap between the sales commissions of small flats and the actual amount of work involved had grown. There were a few headlines, but nothing really changed.
The sale of the flats was supposed to be a one-off project, but Vuokraturva started receiving inquiries from clients who had flats they wanted to sell. As a result, Vuokraturva launched a small-scale pilot project to sell its private clients’ flats. When the pilot project period ended in autumn 2011, Vuokraturva reviewed the results of the project.
The rather surprising conclusion to be drawn from the results of the project was that Vuokraturva had reached a margin of about 25 percent by charging a reasonable fixed commission. The result was extraordinary, and again Vuokraturva told about it in public. Vuokraturva ‘s question was the following: If a company whose main line of business is rental property brokerage is able to make a profit as a side business by charging such low commissions, how is it possible that estate agents, who are experts in the business, would not be able to do the same? Again, the matter was discussed and debated on the radio and in the press, but estate agents replied by silence, hoping that the issue would just go away.
In spring 2012, Vuokraturva’s management had to make a decision. There were two alternatives: just accept that commission rates in property sales are and will stay high in Finland, or try to make a change by taking active measures, which would mean establishing a competitor that would challenge the traditional commission rates. After considering the matter for a few weeks, the latter alternative was adopted and Myyntiturva came into being.