Selling the cost instead of the service.

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Selling the cost instead of the service.

Hi folks. Today I want to write a little bit about ABMs(Alternative Business Models) or "Discounters" as they are commonly called, not by me but by themselves and many others. Personally, I think we need to drop the term "Discounter" since real estate commissions are ALWAYS negotiable. I prefer the term ABMs.

First, I want to mention that I have NO problem with ABMs. In fact, I think the consumer should have options when it comes to who to hire and how much to pay. I welcome ALL business models and have done many transactions with folks that choose to work for an ABM.

There are many ABMs that provide very good service just as there are many "traditional" offices that do not.

I am NOT a fan of the old cliché, "you get what you pay for". I do not believe that to be true. It's too much of a blanket statement and certainly does not apply in many cases.

BUT......here's my problem. I know many ABMs that will argue with you that they provide just as much service as a "traditional" brokerage only at less cost to the consumer. I agree that in some instances this is a true statement.

However, if this statement is true, then why "pitch" the discount instead of the service provided?

Here are examples lifted directly from the web sites of two national franchises:

Created 30 years ago, the xxxxxxx model was the pioneer for providing an alternative to the dated 6% commission structure, something that had virtually gone uncontested for years in a market overrun by a monopoly of traditional brokerage firms. (bolding is mine)

We discovered that by CHARGING LESS, more sellers choose our company. This gives us the opportunity to offer more homes for sale, which of course helps to attract more buyers. We can afford to make less per sale since we sell so many more homes. In other words, VOLUME! Everyone benefits at xxxxxxxx. (bolding is theirs)

In the first ad they are basically selling their business by "cutting down" traditional brokerages. In fact, they are calling traditional brokerages a monopoly and out dated. Why? Is their service not good enough to stand alone?

The second ad is doing nothing more than selling the "discount". An astute consumer would also see that they are taking listings in "volume" in order to use them as "bait" for Buyers. Why advertise that way?

My question is, why not advertise the service provided and what you bring to the transaction and then use the "discount" as the icing on the cake?

Maybe I'm missing something here but these ads sound very negative to me. They are attempting to sell the cost before they have sold the service. In my World, that won't work. So what am I missing?

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Posted by Bryant Tutas Broker/REALTOR(R) Tutas Towne Realty, Inc on 01/04/2008 03:31 PM

Comments (69)

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69 Comments on Selling the cost instead of the service.

JAN

2008

Reserved Parking For "The Lovely Wife"...TLW...ROAR!

Blog Boy...

As you know, we see the same thing happen with Salespeople in this business.

Rather than sell their value they try to 'sell' using their perceived ideas of what their competitors do or don't do.

I think many folks under estimate the Consumer. They're not stupid!

A Consumer who has even half a brain can spot this kind of marketing from a mile away.

Can I be done being serious now? I want to take a few moments to think about what kind of business model I am :)

P.S. My comment makes more sense in my head.

TLW...ROAR!

You get what you pay for when you go to Nordstrom and buy a pair of Ferragamo Loafers.

You may or may not get what you pay for when using a real estate broker that charges X% or XX% or XXX%or even the discounted 1/2X%.

Last August I wrote a piece that "There is no such thing as a discount broker". There are brokers that discount their fees under certain circumstances. We do that when we list a home for one of our sellers. THAT is a true discount because we have a definite broker policy that our listing fee is XXX%. However, since we are also representing the buyer who buys and sells, we give them a discount of the listing fee. We do not, ever, discount the co-op. That's suicide by listing.

Brokers use the word "discount" as an advertising term. It works because the public are easily fooled because, as we know, the consumer has little knowledge of how our business works.

When a seller consistantly falls for the "discount" term to find a listing agent, they get the service they are not paying for.

Bryant- I agree that if you are ABM then you should advertise about their services. But from a market standpoint, neither of those ads are playing to the radio station WIIFM and neither are selling benefits. They are selling features so no matter what they are selling, they are failing from a marketing standpoint. Katerina

BB, I have looked at the flat fee menu services available, I have even talked to Scott Daniels from this very forum about his company. I believe that the cunsumer is very gullible, and will listen to whomever is in front of them. So it is always a toss up as to who will do better, and of course the listings themselves and the way they are priced and staged have a lot to do with it too!!

Many flat fee menu listing services offer a variety of commision structures, and of course an option for a cash upfront fee. I have considered charging a fee for those who wish to list with me and require being in all the glossy mags and local newspapers. I will watch to see the reaction here, and will anticipate the feed back you get.

Nice post BB, and Happy New Year

Okay....I can't say anything else from what Lenn said to add to the conversation......except...Knock knock...who's there? WooHoo Sally ...your new Realtor®

I think it should be renamed discount service. Because they treat it that way...just like Lenn said....you get what you pay for.

BB - (don't know if that is particularly endearing but if flows off the fingers) I don't think your missing anything. I think they advertise in that fashion because that is the way that they have always done it. Everyone gets what they paid for, they may not get what they perceived to be offered.

I agree with the roaring one. Consumers are a bit more savy than many are willing to admit. In my area, agents and brokers seem to be so full of themselves, they overlook what we do in favor of promoting what they think the public believes we do. Sales promotions are long on "I am better than them" instead of "This is what I will do for you."

Gee, look what happened to Foxton's and their ABM. For those of you not familiar with that company, they took the east coast by storm few years ago, with a whole new business model (OK, it was a discount). They grew like widfire, the the president was even named enterpreneur of the year a few years ago by a major business publication. A few months ago, they suddenly declared bankruptcy and closed their doors.

The bottom line is this. I worked for 2 major real estate franchisies in 18 years. I've never seen an "ABM" company that came close to offering the same tools we did, and if you study the numbers, it always showed that these company's listings sold for between 3% and 9% less than the average sales price to list price ratio. Hard to find any savings when you look at it that way!

Bryant - IMO they are not "selling" discount , but justifying why they can charge less. In a any business higher volume, i.e. lower cost per item, is achieved by becoming more productive. It's easier with widgets/machines, much harder with the service provided by people. How much more effective can a lawyer, a doctor, or realtor get? Somewhat, but not greatly.

The second way -is to reduce profit, by charging less, which is perfectly legitimate, if that's what the business decides to do. That is not what ABM are saying they are doing. They are using an argument that makes no business sense to me: they can do the same quality work, in the same amount of time, and achieve the same profit. Something has to give: quality or profit, unless they discovered the "super fast" way to sell houses and are keeping it a secret. If they did, I would think they would advertise it.

I see absolutely nothing wrong with any business charging whatever they want. But the business model in terms of quality, revenue and profit will always reflect that.

My thoughts when reading your quotes from the ABMs was, if the volume of listings is what's attracting the buyers, and the traditional brokerages are controlling the market, then HELLOOOO, the buyers are still going to end up buying the listings that are held by the traditional brokerages.

Why do you ALWAYS have to write such consistently GOOD stuff?....

Hi BB!

Happy New Year! Viva la differance! Thank goodness for choices and the ability we all have to make them and that's all I chose to say at this time. :) Thanks for pointing it out though - it's a very good point indeed. Business never comes without cost - o.k. so that's two things I had to say.

Lisa

BB, Putting someone else down never makes one look good. It's just unnecessary. Tell folks how good your service is without putting someone else down.

you raise a great point. If commissions are always negotiable, and the consumer has the right to reject any fee that we propose, yet most of them still choose my fee and my service, then obviously they see the value, and feel that what I charge is well worth it. If it wasn't, I am certain they would let me know

Dan, I agree. Stansd on your own merit. If you can't them you need to improve what you do.

Lisa, Good to see ya Lisa. I hope you had a great New Year!

Rich Jacobson, I can't help myself. I'm a blogger!!! You know I only get featured because I'm "popular":: Thanks!!! I see the check arrived earlier than I had expected.

Lisa, EXACTLY!! If traditional brokers started offering smaller co-brokes the discounter would not be able to survive. Their money comes from our co-brokes.

Faina, Very good insight and comment. I agree on all accounts.

Rich, There were many of these companies that thrived during the boom years. And why wouldn't they? If you could breathe you could sell a property. The cost from listing to closing was very low. Not any more. That's why commissions are actaully on an upswing. It cost money to keep a property on the market for 6 months or more.

John, I think many REALTORS(R) are missing the mark in their advertising these days. It is not about us. It's all about the consumer. The consumer doesn't care how many houses you have sold they just want to know of you can sell theirs.

Neal, I actually don't agree. I truly don't think what we charge has anything to do with the amount of service we provide. How many traditional agents have you worked with that sucked? Many I'm sure. Did their customer/clients "get what they paid for"? That phrase works both ways.

Howdy WooHoo:)

Mike one thing about Scott is unless you clicked through to his profile you would not know he is a 'list for a fee" broker. He NEVER sells the cost. He does provide service. I would venture to say he provides a lot more his $500 or so than many traditional agents do for their x%.

Katerina, Agreed. WIIFM is certainly what we need to be concentrating on in our advertising.

Lenn, The publics perception is....they want a deal. A good broker can sell them our services at a higher costs because the value we bring to the table makes it a deal.

TLW, Very profound. What's up with that?

Broker Bryant, As long as there has been any type of competition in man kind's history there have been jabs and in some cases insults directed by one party towards the other or by both. Politicians contribute to this behavior and I see it even in young children. It's a sad measurement of our nature in which some of us have elected to ignore.

Sean, Here's the comment I left Lenn: "A good broker can sell them our services at a higher costs because the value we bring to the table makes it a deal." So I guess you and I agree:)

Shhh...

Don't tell anyone :)

It was just for a moment :)

TLW...ROAR!

Broker Bryant (am I supposed to call you that when we haven't ever been formally introduced?) I believe the discount is "sold" first because of the public perception of the "traditional model". There will always be folks who will only buy generic and others who refuse. Aspirin is Aspirin is Aspirin, but some people will just pay more for it. The problem is, when they say it's Adult Aspirin but it's really only 1/2 strength.

That analogy makes sense to me, but if it doesn't to anyone else please refrain from pointing it out to me :-)

Mana, It has been going on forever and it turns me off immediately. I will not do business with anyone that slams their competition.

Colleen, Of course you can call me Broker Bryant. I've been called a lot worse by many people:) I think your analogy works just fine. And hopefully there will always be folks that want the best and are willing to pay for it. As long as there are I will be in buisness:) There's room for all business models.

TLW, My lips are sealed.

Colleen...

Allow me to introduce you too Broker Bryant.

Broker Bryant (aka Blog Boy) this is Colleen.

There you go. Introductions taken care of.

Don't worry Colleen as long as I am around no one is going to give you a hard time.

It's too risky :)

TLW...ROAR!

They lead with discount because that is what catches everyones attention. Then they get the chance to pitch their listing presentation. People want to believe that if this company can sell their house, why should I pay more with another company, even if they say how much more they do for me. The house gets sold. Why do I care how much more work you do? Paying less and still getting the job done is mighty attractive. Some people think selling a house is as easy (simple) as selling a car. Many times having a full service agent in the transaction is the only reason their house sold. That may be the ABM's best feature. They benefit from advertising a listing on a MLS that full service agents put together years ago. Some ABM's do provide good service and they may be a good fit for some people and some full service people are not worth a darn. However, ABM's are her to stay. They do provide competition and keep us all a little bit sharper and that is good for the consumer.

When I see the signs, I immediately think "discounters", in terms of both price and service. It will be hard for me to change that perception. I also feel I will lose many prospects to the discounters, but there is not much I can do about that. I just need to learn to make my promotion better.

It's funny, BB- having had dialogue from you in the past about this very thing, we haven't done much (anything) in the way of print ads discussing commission one way or the other. Initially it was a priority, but I actually liked our logo enough that to sully it with something crass didn't seem appropriate- it looks better with the properties on it. Even if it's a slower start, I like the idea of our fee, if it HAPPENS to be lower, being the icing on the cake. I think that your direction was sound- with a new company, introduce the character/integrity first; the nice suprise, if there is one, is that we're cheaper than some. If we're higher than others, we'll demonstrate why. Now, if all you traditional (charging whatever that means to each Broker) compadres would just lighten up on the derogatory stuff...nah. Won't happen. :)

Now, on our website...fair game to discuss ourselves.

Laurie, I was thinking of you when I wrote this post. I think the advantage you will have in the long run(by not advertising commission) is you will have the flexibility to change your pricing structure if you need to. Where folks that are only selling the "fee" are stuck in a rut. It may be an easier sell but they are boxing themselves in.

Karl, I think that "perception" is very real and in part has been created by the ABMs. Also, yo need to remember you are NOT losing business to a ABM. These are customer/clients who would not have fit into your business model. I wouldn't give it a second thought. Help the ones that want to work with you and wish the others well.

Wayne, Your comment: "They do provide competition and keep us all a little bit sharper and that is good for the consumer." is exactly how I feel. Competition is a very good thing. If only the DOJ understood that.

I ran across a Craig's list ad today where the agent used the "why pay x% to list your home" ad. I'll do it for x%. Now anyone who knows the math knows that if you listed with him for the x% he was suggesting that there was no buyer agent in the deal. So the % is nothing but a bait and switch tactic. Then he had an ad for buyers offering them a rebate up to $10K. So I couldn't resist and went to the MLS to look up his sales for 2007. All I can say is the guy is very very hungry. Yes he did some business, nothing to brag about and if he gave up as much on the buyers side as he advertised then he didn't make enough money to pay for his website. So quit trying to fool everyone and just be up front about whatever you charge and what you will do for the money. Simple and straight forward.

Mr. Tutas, I do like "ABM" better than discounter.

Harking from the Northeast I can report that Foxton's did generate market share with their business model. Like so many folks have pointed out there is a niche for everyone ... but not everyone will succeed in that niche. IMHO Foxton's was very close to carrying off a radical paradigm shift and then there was transition at the top, change in direction.

Today I still do not know why they failed: management, excessive advertising, reduced revenue, all of the above.

The public values an automated, reduced commission model. They want it, now more than ever. Some company will build a better mousetrap and advertise as the ends-justify-the-means. Truth be told, I'm sorry I'm not smart enough to pull it off.

I would defend the use of the term "Discount Broker" by bringing up another discounter... WalMart. They are a discounter. They sell the same thing (let's equate it with listing a home), but at a discount from other traditional outlets (brokers). But, they do it by selling a higher volume, and also by providing less service.

I think that there are very few brokerages that truly provide like for like... for less money. It would be fun to explore why that it... I think I hit on it in one of my two-parters on fewer agents in the market.

But, on the face I think that there is a problem with calling the many and varied traditional brokerages a monopoly. That discounter has said something that they can't back up... because if they could they would have an anti-trust case. So, perhaps someone should be looking at them for a truth in advertising suit.

Interesting topic. I have info on my website comparing traditional vs. alternative. I try to point out that the important thing is that our commissions and services are negotiable.

Some of the big corporate and franchise brokerages in fact do tell their associates to say that their commissions are non-negotiable. In fact I have had Realtors join my firm specifically because their name brand corporate firm would not permit commission negotiation and thus the associate was losing out on obtaining listings.

I often wonder what would happen to the real estate industry if bigger companies like Zip Realty, Iggys House, Assist 2 Sell, etc. started doing major TV and radio ads. Right now these outfits fly under the radar with most of the general public.

To quote one of my favorite bloggers, "They are attempting to sell the cost before they have sold the service." Sounds like the mortgage business--thus my disdain of the GFE. Not that I don't send them but that mine are accurate. I also will not answer this question on the phone: "Hey, what are y'all's rates like?"

BB, There've been many great comments already and I can't add much but reiterate that there is a time and place for each of these models. I think the reason that some use the name 'Discounters' is because this is perceived as a bargain, but with all the benefits. Now that may not be true, but I think it is a valid perception. I utilize the phrase "you get what you pay for", but that's because I firmly believe in the cost for the services that I deliver.

"I know many ABMs that will argue with you that they provide just as much service as a "traditional" brokerage only at less cost to the consumer. I agree that in some instances this is a true statement.

However, if this statement is true, then why "pitch" the discount instead of the service provided?"

For the same reason you sell price when you have a listing that is comparable to the one down the street that is more expensive - price is the only differential.

"I utilize the phrase "you get what you pay for", but that's because I firmly believe in the cost for the services that I deliver"

What services do you all provide that are so much more valuable, and necessary?

Okay, Okay, I feel a blog coming on in response to this...

I am an ABM (hate the term, makes me think of bowel movements...) I also hate the term discounter. I don't use that term in advertising at all, since I think, well..Wal-mart. I don't want to be the Wal-mart of real estate. I also hate traditional agents that call themselves #1 (there are about 100 # #1 agents in Salem, and several "Most trusted" experts as well).

In my opinion the issue is risk vs. reward. I in no way shape or form say that I do what other agents do because I have no idea what they are telling a potential client what they are doing. For all I know, they are telling them they will mow their lawn once a week as part of their service. I don't do that...

My flat rates are clear about how many months of ads they get, how many fliers, staging, v-tour etc. Most of my clients are custom quotes which are not even in my brochures. I walk into a house, assess it, and then decide what I need to in order to sell it. I write a quote for them at that point. The reason I am cheaper is one simple and basic reason. I get paid regardless of whether or not the home sells. Since I risk nothing, I don't have to build my losses as a business expense (and yes, traditional agents have to do that).

I also charge a more traditional commission, and some people choose to pay me more for the "all or nothing" aspect of it. Now, I personally don't understand the business plan of "ABMs'" that charge less AND waive their fee if the home doesn't sell. That is not sound business. So for those of you that struggle with selling your higher price, talk about risk vs. reward. The consumer gets it, really they do...I actually find there are many that will pay more (the commission) in order to have no risk.

This topic never ends. Blog after blog . I feel very qualified to speak. I come from being a top producer with a Prudential Franchise for 8 years. The past 3.5 years as an Owner of Assist 2 Sell VIP Realty. When with Prudential, there was a Help U Sell office across the street. Did I freak out ..no...Did I run around Bad mouthing them ..No...When Prospective sellers would ask me about them vs. my commission, I would merely say, they operate off a different model of fees & service, but THIS is what I CAN DO For you Mr & Mrs Seller. Why do so many fear the "ABM" 's and spend needless hours at office meetings complaining and moaning, Blatantly & Unethically badmouthing to Sellers,running around at night Stealing Signs (ohhh not anyone here of course), taking down open house signs, emptying Flyer Boxes...I could go on and on, but I don't paint all (Trads),( for post purposes) with a broad brush. And to do so with ABM's could come back to hurt you.

I will say again, successful Trads and Top Producing Agents never skip a beat when it comes to ABM,s...WHY?? Because they are too busy perfecting THEIR Business and servicing Their Clients and Discussing their Skills and qualifications and "what they bring to the table" with potential clients. Those who constantly bitch and moan about ABM's do so because it is easier to blame another Model for your lack of business or no business then it is to look in the mirror and see if you are truly being the best YOU can be. Only you can truly answer that.

Before using the "Our Listings Sell for a Higher Price than "ABM" Listings, please have your facts to back that up. I know I do, Last I heard that around my way, I emailed "OLD WILLY LOMAN" Trend stats from three neighborhoods where I have the Highest Resales on Record. So , Please, Experience and Service will win out every time. The Concept may get you in the door, The Professionalism and results will get the Listing and Sale.

I have nothing but respect for all my peers , Trad, Discount, Flat Fee, Upfront Fee ..whatever. Until they give me a reason not to. I have successfully Sold more homes in the past 3.5 years than most will ever do in a lifetime in this business. I have dealt with horrible "ABM Agents" as well as Terrible Trad Agents. Bottom line is , If you are a true expert and Professional in your field, You will succeed regardless of your FEE.

I could go on and on , but bottom line is ......Stop Whining and Give Them a REASON to call you. Best of Luck to a Prosperous New Year.

JAN

2008

BB, I generally think this boils down to one thing. These are agents who either don't know how or don't want to work hard enough to get anything other than the easy fruit. They easiest sale in the world is the "I'm cheaper than...." approach. They don't have enough confidence in their skills to charge more. So, in essence, maybe their clients do get what they pay for? This business takes knowledge, skill, confidence, and lots of ability. If we have these things, then we are worth more, because we get better results, period. Not trying to come across as arrogant, just stating what I've experienced here. I've yet to come across a "discount" broker worth a dime.

Great point, BB. I ran a profitable ABM and what I found was that the service was much more important to my seller prospects than my price. As soon as I figured that out, I focused on selling my service and then closed the deal with my Very Reasonable price. Turns out I really didn't have to offer such a Reasonable Price - in almost all cases I'd have been hired (or not) based on the personality fit and service package. Good to know...

No Broker Bryant, you are not missing something. You hit it right on the head (BANG!)

Many agents that worked on deals with me sucked ..both full service and discount service...sometimes I wonder which one they really stood for. My question to some of them was.."Don't you want to be a part of this transaction?" Then why don't you get off your a-ss and contribute. I guess I didn't word it right but I guess it doesn't matter if their company is labeled one way or another...if they aren't willing to be part of the deal then they should be left off the contract and not get paid. Just because you bring a client to one of my listings and bring a contract there should be some tasks you should be doing on the clients behalf. It hasn't been that bad as much but I have had some real a-holes that just feel that their job is done once the contract is singed and because I need to make sure the transaction goes smoothly then i have to step in for the jerk that can't contribute. I would love to put an incentive clause in the contract stating that if the other agent doesn't do their part then they should only get paid for the amount they do give. I bet if you saw that they would have more incentive.

We each have to market whatever sets us apart from the others. If price is all a company has to offer, that is the thing they must promote. Someone else might promote their experience. This year, I'm putting more focus on being tech-savvy because I don't think that's an expectation someone has of a grandmother. I think many consumers who use ABM's are the same ones who might otherwise have gone FSBO, with the thought that they'll give it a try - and work with a REAL broker if it doesn't work.

The term in Virginia is "Limited Service Representative". The disclosure, "Limited Service Agreement" is required any time an agent/broker is not performing as a "standard agent".

The duties are enumerated. The law requires:

DELAYED EFFECTIVE DATE-JULY 1, 2007:
Agent Services: HB 316 (Albo) defines a "limited service agent" and requires those agents to (i) disclose to their clients that the licensee is acting as a limited service representative, (ii) provide a list of the specific services that the licensee will perform, and (iii) provide a list of the specific duties of a standard agent that the limited service representative will not provide to the client.

This would appear to require better disclosure of what "discount" really means in advertising.

I can see the points you're bringing up about advertising. I would have to agree, advertise the services and use the discount rate as icing. I'm not sure what the reasoning is, but it's something to think about. Thanks for sharing some great thoughts and making all of us think about our advertising methods and what we are trying to say to the public.

Limited Service Reps are a different animal and vary greatly from other ABM's. Most just post the listing in the MLS and the buyers Agent is required to contact the Seller directly for everything, which I consider an abuse of the MLS system.

What exactly is a "Standard Agent".???... someone who performs all the tasks above and beyond what is normally required to sell a home or someone who charges 6% (negotiable of course *wink*)

My question about " ABM's " is not one of why do they focus heavily on the discount. It is my belief they do that because of our sound bite society.

My question though is why most of there ads are an out and out attack on the rest of the industry. The shops that are often called full service shops. I agree with you 100%. The fact that an agent works in either shop does not make them automatically better or worse than one another.

The focus of advertising is one that is implemented by Company Heads. I have steered clear of making any negative comments about ABM's. Instead I have always focused soulely on my business and my production.

When it comes to what I charge it is based on what I need to provide the services that my clients are looking for. I do not discount my service.

Very well done and right on the money...'cause the old expression holds true, ALWAYS: "There ain't no free lunches out there." You get what you pay for.

"You get what you pay for" should really be "you should expect to get what you pay for." As an individual real estate agent we should deliver, regardless. The compensation will work itself out....ABM - I always thought that was anti-ballistic missile.....

>My question though is why most of there ads are an out and out attack on the rest of the industry

It was the traditional brokers who drew first blood. 'ABMs' have been attacked at by franchises since ReMax opened their doors.

>You get what you pay for.

I can buy almost anything for less if I shop. Even Nordstrom has The Rack.

I am starting my 19th year in this business. Up until September I have worked under the umbrellas of national franchises. I am no rookie. I know contracts in my sleep. I know how to negotiate. I could manage any office in the country or open up my own company. Please do not tell me that because I can streamline my business in a way where I can reduce my overhead by 35%, then pass that on to the consumer, that because you charge more, you are better or that my client gets less. It simply isn't true - and the consumer doesn't buy it.

Amen MLS! The years I charged less, I was every bit as profitable as I'd been before and my clients got the exact same service. It CAN be done.

WOW!! Great discussion we got going on. Thank you for stopping by and participating. Let me add some thoughts here:

First, a Limited service brokerage and a "discounter" are not always the same thing. Just as a "tradition brokerage" and a full service brokerage are not always the same thing. Actually in the latter they should be but we all know that's not true. There are many "traditional brokerages" or their agents than aren't worth anything.

I closed a couple of deals with ZIP Realty on the buyer side this year. ZIP offers seller discounts and buyer rebates. They are an ABM. In both deals the agents were awesome!! They were very tech savvy and everything we did was via email. They were extremely organised an both transactions closed with out a hitch. In fact they both closed about a week early. Their cost was certainly no reflection of their service. I'd happily work with them on every deal. I had in length discussions with both agents and they were very happy working with ZIP. ZIP provided them with tons of buyers and since their systems were so stream lined they were able to work more efficiently. Both were fairly new agents but were closing 3 to 5 deals a month with zero advertising costs. They gave buyers a 20% rebate then split 50/50 with zip. On a $200,000 deal that works out to $2,400 in the agents pocket. Do that 3 or 4 times a month and you have a pretty good business with very low costs. They were certainly full service at less cost to the consumer.

A few years back an independent broker opened a shop in my market. He named his company MLS4Less. There are two very local monthly papers in Poinciana that I have been advertising in for years. There are only a couple of RE companies that advertise in them. Well this guy started taking out full page ads really pushing his "discount". His deal was he would only charge the listing side commission if he sold the property and would charge the full "MLS 4 less" if it was a co-broke deal. Now we all know that about 90% of the time there will be a co-broke so he was basically working for the listing side. Anyway he started getting quite a few listings.

Because of his ads I went and bought the domain name MLSandMore and started running a full page ad using MLSandMore as the heading and then used the ad to pitch my service. He was pitching cost and I was pitching service. It was no contest. I won. He is actually still in business but changed the name of his company after about a year so he could charge more.

I STRONGLY believe there is room for all business models. The consumer should have choices. Let's not talk negative about the way others choose to conduct their business. Let's be successful on our own merits. It's so much more satisfying.

Competition is good for consumers and good for business. With ABM's and traditional brokerages it comes down to the amount of services that are provided for a fee. It is up to the brokerage/agent to deliver ob those promises which = actual service received. Then the effectiveness of the service/services = the results.

I agree that if you focus on the discount and not the results in advertising or selling your service your heading down the wrong path. The company/person that can justify their fee, discounted or otherwise, by showing how their product delivers results the consumer needs or wants to purchase will come out ahead every time.

>With ABM's and traditional brokerages it comes down to the amount of services that are provided for a fee

It comes down to results! If you sell a client's property in 2 days, are you going to rebate the cost of "marketing" and "services" that you didn't have to provide for that property?

I doubt it. What you'll tell me is that your fees are justified because those costs are amortized over all your listings.

Bob(San Diego MLS), I for one do not justify my compensation by the amount of money I spend. I believe that to be a very weak justification for cost. I am paid to get the property sold. My expertise, experience, reputation, knowledge and what I bring to the transaction are why I'm worth what I charge. If I sold a house in 2 days maybe they should pay me more for getting the job done so promptly.

When I hear folks justify their compensation by using the increase in postage and advertising costs I know right away their service is less than adequate. It's a ridiculous argument. It may be true but the consumer doesn't give a crap about my expenses. All they want are results.

Herb asked: "My question though is why most of their ads are an out and out attack on the rest of the industry."

Exclusive Buyer Agents did and do the same thing. They are looking for the person who hates the system as it exists. That is a "niche". If you HATE the way it IS, then we have something for YOU! LOL

I wonder if there isn't an opportunity for another model. One where the Real Estate Firm get paid close to the standard percentage and the Seller also puts in money for advertising their home. In this scenerio the Seller would have a stake in the deal (not just hoping the house sells at an inflated price that they think it is worth) then switching agents and lowering the price so they can get fresh advertising dollars spent on marketing their property. If they were spending marketing dollars up front I think sellers might be more apt to be realistic in original listing price. This is not to say that many sellers are not realistic - I have one listing right now that will sell as it is priced well for the marketplace -but I have seen so many homes now going on one year or longer that were priced on the high side of the market even when the market was better than it is now. I wonder if there is a way of selling homes with a different model that benefits everyone!

BB- Interesting.....and if I go back to the beginning....you don't have to put others down to justify your own costs/model. Ok.....that makes sense, and after all you comments, I think I will stick with that ....oh, and since I do not mail, print, or farm.....I have no problem with not using these costs as justification :)

Broker Bryant, nice analogy of models. I have found the consumers are very savvy when evaluating options and opportunities. Congrats on the feature.

Sounds negative because it is negative. It's hard to sell service with a discount mentality. And we're glad the "ABM's" here think that's what they are selling.

best

LOL...Can't we all just get along?? I don't worry so much about how much someone is charging. I worry more about what the consumer thinks they will get for that money. As long as everything is outlined, the fee charged doesn't matter.

BB Said, "Maybe I'm missing something here but these ads sound very negative to me. They are attempting to sell the cost before they have sold the service. In my World, that won't work. So what am I missing?"

We advertise the cost because, like Wal-Mart, that is what we are about. The client keeps coming back because the service is like Nieman-Marcus! (OK, maybe that is an exaggeration!)

BTW, I don't advertise with a print medium, no ROI. The reason I am a ABM is because I worked for a TRAD in NY, that basically was at 4%, because another TRAD wanted to "corner" the market. So the competition dictated the fee. I came to NC and saw all the TRAD's at 6% and figured I don't need to be charging that much, found me a small firm, that makes me feel good about helping to save my clients some $$$! All BA's get 3%!

Eh, I can appreciate your points but I don't know that I can say I fully agree with all of your assertions. I don't know how it is in your area, but In my experience within our marketplace, I can only say that most of the ABM brokers that I encounter choose this model are not doing it with the primary objective or bringing a "better value" or "alternative option" to the consumer. Rather, the focus is on doing more transactions and minimizing the cost per transaction, thus increasing the brokers bottom line. Just my two cents.

JAN

2008

I have to disagree with the Walmart analogy. People go to walmart for the discount, not for the service. People go to discount brokers for the discounts, not for the service.

"Rather, the focus is on doing more transactions and minimizing the cost per transaction, thus increasing the brokers bottom line."

LOL. You just described all the mega teams in my market, most that work for national franchises.

Hi guys. More really grat comments. Thanks!!!

ChiChi wrote this:

"I can only say that most of the ABM brokers that I encounter choose this model are not doing it with the primary objective or bringing a "better value" or "alternative option" to the consumer. Rather, the focus is on doing more transactions and minimizing the cost per transaction, thus increasing the brokers bottom line."

Isn't that the goal of all of us, if we are being honest? I enjoy what I do tremendously and I love helping folks out. BUT would I do it for free? I doubt it. Maybe if I were financially independent and didn't need money. But I'm not. I am however very fortunate that I can help folks and still be able to make a good income. Tutas Towne Realty is a "for profit" coorporation.

BB- Right on target. There are some great brokers in both models and some who should consider early retirement as well. Your point is very well taken that if price is not the key, then why is price the main pointyt of their advertising. Choosing a real estate professional on price alone is much like choosing a surgeon because you found a coupon in the newspaper. Is it really a bargain in the long run?

JAN

2008

these are some really good points that we all need to be aware of! thanks!

Bryant: Why do I get the impression that you might have expected me to comment on this post? ;-) Being the founder of one of the country's oldest "discount" brokerage I would like to compliment you on being open minded and fair with your points about some discounters or ABM's, as you put it, offering good service whereas some "traditional" brokers not really being that good. Most traditional Realtors can't see to grasp this concept.

Regarding most of us discounters leading with the "discount" aspect in our marketing, to me, it's about leading with your strongest card.

The truth of the matter is that all Realtors have pretty much the same tools available to them. Not that they all use the tools available, but they do pretty much have them available to them if they chose to use them. To me, it's about doing what's real in order to get the house sold.

Here in St. Louis there was an agent who put up billboards with picture of her bouncing a baby on her knee. The caption said, "I'll even watch your kids for you! Superior customer service!" Well, no I won't watch your kid for you, but what does that have to do with selling your home? It's not "real"!

That said, I do what is real to get the house sold. I put it on the MLS, I field the telephone calls, I show the property, I help in contract negotiations, once we get the contract negotiated I take care of all of the details of getting the transaction to closing. I also do open houses, though they are pretty much useless in terms of selling a particular home (it does make the seller's feel better and it is an opportunity for me to pick up a buyer and sometimes lightning does strike). I'm also big into marketing the home on the internet.

All of which a "good" conventional agent can do as well. The difference is that I'm 35% to 85% less expensive. That being the biggest difference, that's what I lead with!

Once I get the listing appointment, then I hammer home the fact that I've been doing this for over 20 years and the other competitive advantages that I and my company bring to the table.

Anyway, thanks for this posting!

Bob Mitchell

ValueList Real Estate Services, Inc.

Hi Bob, Very good comment. I think I get it. I can see where the "discount" would be a good lead in to get in the door. Just like in my business my only goal is to get the appointment, from there I can sell my service. I use the 45 day listing agreement and no cancelation fees to get in the door. Thanks for stopping by.

JAN

2008

I don't think they believe their own hype that they offer the same service or they would be advertising that and when someone asks about price, then that would be the second question.

Folks,

What can I say except "It pays our bills" doing a menu of option and a flat fee service.

We`ve been succesful because we actually believe it or not provide a service for these people.

Quite frankly we`re able to compete with the Traditional Real Estate companies and offer the same services each and everyone of you do!

I realize it`s hard to fathom,but if run correctly it does have its advantages.

BTW,

I truly disagree with the 45 day service contract. Maybe that works in smaller markets in our markets it`s not feasible.

Follow Ray Kroc, streamline your business.

JAN

2008

Scott. I take 45 listing agreements because it helps me get listings when I mostly deal with expired listings. They know upfront I can't sell their property in 45 days. It is really nothing more than a trial period for them to test my service. I always renew after 45 days. It just shows that we all have different models and they work for us. Getting results is all that really matters. You attrack sellers by lower costs I attrack sellers by flexible listing agreements. We both have our own niche. That's a good thing.

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Bryant Tutas Broker/REALTOR(R) Tutas Towne Realty, Inc

Poinciana, FL

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Bryant Tutas-Tutas Towne Realty, Inc

Address: 628 Grand Canal Dr, Poinciana, Fl, 34759

Office Phone: (407) 870-9003

Cell Phone: (407) 873-2747

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