Entry by Lester Langdon

latest twist to selling homes

  13 Comments

The real estate industry, like so many others, is being upended by the Internet.

Eckardt’s venture in the Albany, New York, area, ZonicRealty.com, is promising real estate agents they will earn more on each sale because of the low-cost structure.

He is also offering homebuyers a 20 percent rebate on the commission at closing.

“We’re really trying to leverage where we see the industry is going,” said Eckardt, 38. “My objective is to bring a model that will disrupt the marketplace.”

Real estate agents have little choice but to embrace the digital revolution.

more ..... http://www.bizjournals.com/albany/morning_call/2012/02/zonicrealtycom-offers-latest-twist-to.html

13 Comments

Great article Lester. 

Interesting article.  We have seen with Zip and Redfin that its difficult for brokerages who are offering limited and/or discount services to thrive because the majority of consumers really want quality service when dealing with real estate services. I've recently started with a new brokerage in MA that is an online brokerage ( there is a headquarters, but no brick and morter for consumers) - everything is online, including paperless transactions - but its traditional full service - striving to get agents who can work "hyper-local" - agents pay only a small monthly fee ( not like REMAX) and get 100% commissions.  Different from other 100% models, the brokerage has taken themselves completely out of the commission  - they are no longer forcusing on agent's production but what kind of services they can provide to the agent.  Sounds familiar doesn't it?  The agents are free to use whatever business model they want - most at this point are traditional agents, but you can see why this kind of brokerage is so compatible with the consulting model. 

 

Very cool, what is the name of the new Agency that you are currently working with?

 

Wow - I love that idea!! It's working well for you, Linda? That's how RE/MAX used to be - 'cept for the small monthly fee(!) - but since agents were paid 100%, they could charge whatever and however they liked. I loved it.

 

I like the idea. I agree with it totally. 

oops, that is I agree with Linda's post. I don't like giving away any of my earnings to a party in the transaction. When it comes to buyers I'll help if I need to in order to get the deal closed and get an even bigger prize, but I don't like making a habit of it. The rationale for this is I agree with the notion that realtors give away to much of their services for free. Why? We have something ov value. Letting clients know your services aren't worth what you get paid is a depressing downward spiral I think. I think one should be cleear with a client on why your services are valuable and why you get paid what you do (if the need arises for that). Let your client know that your services will be far superior and they'll get more attention than offices that "rebate". If that doesn't work, do what you like, but if I lose a client because some other brokerage is offering a rebate I just thank the stars that I did not end up working for less than my worth, and I wait for the next phone call to come, normally shortly thereafter. 

As a designated broker, I'm concerned about not having the capital coming in the front door, to keep the doors open.  There is overhead to running a business and there is time involved in managing employees / independent contractors in any business, (especially) Realtors.  How many times have you seen the company with the lowest cost services survive & thrive over the long run?  It's one thing to be the lowest cost product (i.e. Costco, Walmart), but something totally different when it is a service.  One lawsuit without capital reserves and your employer could be forced to close their doors.  Perhaps, it might make sense to change it up and instead of offering large rebates to the buyers, we offer a larger share of the pie to the buyers agent, or maybe split the benefit between the buyer & the buyers agent?  Afterall, who do we really want to become our repeat client if we are in the business of selling homes more than once every 5 to 7 years?

Agreed Mr. McIntire. I think if we are offering Buyers, for instance, the opportunity to paty us on an hourly, or consultative, basis, and we make a contract that staes for them paying now hourly you'll rebate the commission to them, that is fine. But just giving up money after you've waited far to long, and have put in many hours to get it and giving it to a party who put you to work, used your services, and is essentially not paying you correctly for your time is something I personally would not consider in doing, nor would I recommend that practice to any of the agents working for my company. No one would dare ask a Dr. or a Lawyer to give up a piece of their pay in utilization of their services, why do we professional realtors (as opposed to professional salespersons) allow ourselves to be drawn into that trap. 

The brokerage is Andrew Mitchell & Co  - only in MA at this point.  They have enough venture capital to run for 3 years - at that point they need to break even - and at break even.  They also have an incredible e&o policy or theselves and the agents that is far more comprehensive than the usual (including where I was at KW).  Since they don't have an office, they can have an unlimted number of agents working from any area.  The fee is $400/month. At a brick and mortar office this model would never work but since their costs are stable, and the income via agents are unlimited, they have tremendous potential. 

I believe that all of these processes are still only tweaks to the traditional model. My belief is we need to engage with the customer(buyer and seller) before the actual need is there.  I have heard it mention here many times -- for us to take a page from the playbook of other industries i.e. financial planners. Most people consult with financial planner far in advance of the need they are planning for, like retirement.

Why do you think that is the case for the financial industry? Not only are they planning the concept of retirement for their clients in advance, their clients are  pre-funding their retirement plans in order to guarantee the outcome. So why would they not want to plan and pre-fund the disposition of such an important asset as a home? 

What are the implication for a process like this? Well there are 65+ million single family homes with mortgages -- this is now the new customer base for the real estate industry. If you believe that discounting has a place in real estate, I couldn't image you disagreeing with a program that expands the market base, saves your clients money and stabilizes the real estate industry for those of you running a real estate Brokerage.

I willing to debate anyone on the merits of the process and why it is an excellent option to the traditional model. 

Please remember that agents generally close one of four clients that they work with.  I give 40 or 50% rebate but close 100% transactions of clients that I work with. I give $4 rebate and get 1$ upfront to a maximum of half my commissions.

On a $500,000 property, I make $7,500 and give up the other $7,500 as rebate, and I get $,1500 OR $2,000 up front when the buyer rep agreement is signed. I lose half but increase my closings to 100% of all clients i work with.

If it does not close, I got some money up front.

William, I see what I do as a broker to be quite different than that of a financial planner. First a financial planner gets paid for what they do on day one and every year thereafter as long as the client continues to maintain his account. If I consult with a client about long term plans to purchase and how to save for the enevitable costs involved, I may be able to charge a small fee up front but I have no resedual income and no guarantee that I would ever receive any in the future.

I believe your comments are regarding the purchase (acqusition) of a home and NOT the "disposition" (the act of diposing) of the property. Unless you see somthing that I don't, long range planning for the purchase of a home is not somthing that appears to be a carreer building idea unless you could engage the services of a financial planner who could build a plan and actually get the buyer to put money aside right then and there with a commitment to make monthly deposits with a specific goal in mind.

If that could be done then as agents, we would have some long term gain with an outcome in mind. Since this type of plan would be years in the making I am sure we would not find many agents willing to wait 5-10 years for a pay check.

Don, you are almost there. If you increase your market base exponentially and were able to charge a small fee for entering a client into the program (this is an upfront fee) say $295 and you consult with them thoughout their ownership ( there is so much we could advise them on during that time, but I will not go into it here) and have the ability to charge a small fee when consulting. Remember I told you there are 60+ million owners with mortgages -- would you like to potentially collect $295 from 60+ million homeowners? That alone is enough to consider the model.  

There is a guarantee given by the future seller to list with you when they are ready to sell. See, with the homeowner believing that an Advance Marketing Prepaid Commission program is in their best interest-- if a database ever gets to scale of all the MLSes in the nation, what do you think the impacted would be on the market?

Do you think agents could just say to 10 million homeowners that I not going to show your home or accept you prepaid commission because I don't like the idea? They will most certainly by default, have to accept it if homeowners believe it works in their best interest.

A funeral home director doesn't use a financial planner to sell their preneeds program to the general public. To that point, all real estate brokeragse are set up to start offering this type of option to their clients. Property data sitting in databases like those of Zillow and Trulia are in essences pre-marketing homes of current property owners with no intent to sell presently. The data they use is without the permission of the current property owner. The only piece missing is the prepaid portion for the benefit of the owner.

The only change necessary here is a mindset. I'm borrowing from financial planning not trying to be them or saying we are them.

Don I do see something you don't see. You can offer the program to someone making a purchase(acqusition)as an incentive and to an owner before there is a need to sell(when it time to dispose of the property) as a way for them to keep more of their equity.

The kicker here Don, is I have created a program where it could cost the property owner 0(zero) as in nothing in commission and still have the agent getting paid for everything they do for their clients. 

This page contains a single entry by Lester Langdon published on February 3, 2012 5:11 PM.

ACRE 2.0 Re-Branding Update was the previous entry in this blog.

Leaving a real estate franchise to become an independent broker is the next entry in this blog.

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