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Flat-Fee must be really flat...

For anyone not paying attention to Inman News, or some other source, you might have escaped noticing that Help-U-Sell's franchiser filed for Chapter 11 Bankruptcy recently (reported Friday, August 15th, 2008).

Since 2006, their franchise offices have shrunk from 820 to about 450.

Go read the story before it drops behind the Inman curtain... And then let's think about something.

Ready?

Those that are touting discount brokerage have been calling on the death of the "traditional" real estate brokerage for some time. When the market started to slide, they knew that discounters would prevail and full service brokers would fall by the wayside.

After all, times are tough and equity is scarce. People that are selling don't want to give all of their equity to a real estate agent. Obviously, saving money is the better plan...

But...

That hasn't been how it worked. And the discounters should have known this. Help-U-Sell went through bankruptcy during the last downturn, in the mid 1990s. So, why? Easy... when the going gets tough, sellers need a brokerage that can deliver. The discount model doesn't deliver in a tough market. One simply can't deliver appropriate marketing for a property in a tough market for $599. In fact, one can't deliver ANY marketing for a property for $599. By the time they pay their fees, they don't have much left...

And then there is the "Secret"

sshhh... don't tell anyone. They don't care if you sell your home. Doesn't matter. They still get paid. BuyOwner.com still gets paid. Help-U-Sell still gets paid. FSBO.com still gets paid. They get paid to list your property. They don't get paid to SELL your property. The traditional agent ONLY gets paid if they deliver. They take on the risk and expense. **I have been notified by a franchisee that Help-U-Sell doesn't charge upfront for their services. I can't confirm it through their website, but I'll take his word for it.**

It'll be ok...

Help-U-Sell will probably emerge from this BK like they did the last one. Until the market soars... and they soar again... and then the market poops... and they poop again.

I'd love to hear from you...

Posted by Lane Bailey - REALTOR & Car Guy on 08/16/2008 12:25 AM

Comments (14)

Flat Fee Brokerages in the Sales Strategies / Tactics Channel

discounters, fsbo, honesty, business of real estate

Originally posted at: Looking Out From the Garage: Flat-Fee must be really flat...

Post is included in group: No Writer's Block Allowed!
Post is included in group: Almost Anything Goes

14 Comments on Flat-Fee must be really flat...

AUG

2008

I saw the article, and appreciate your historical info! There are more FSBO's appearing here in Haywood County. Things that are selling are at the lower end. We have the leaf-lookers to look forward to, and then it's winter.

Interesting, I did not even see this on the business news.

I read it on Inman this morning, thanks for the recap here. A guy in my neighborhood owned the Help U Sell Franchise, now all his signs have changed and it is called something else, can't remember what, but I'll talk to him now and see if this was the reason for the change.

Lane - Since this is not what the media wanted to see, they didn't want to publish it. If anyone thinks that news media is unbiased, they really need to pay attention.

I was just discussing this topic with some colleagues of mine. I completely agree that the fsbo companies will be back in full force when the market turns. Of course, the consumer will still be feeling the pinch from tough economic times, so we will have to work very hard to remind the consumer why they should go full service instead of trying to save a buck. After all, we are a nation of do-it-yourselfers. Right now, they need us more than ever because they can't do it themselves. So the question will be (and not the old show our value answer-yawn) but what can/should we do now to prepare ourselves to compete in a market that won't be as strong as it was previously, with a consumer that has lost all of their equity (I think this will be the key difference), and who (if priced right, in good condition and location) can sell it themselves? Whether or not they actually make more money in the end (studies show they don't) is somewhat mute, because it is their perception that they do, and perception is reality.

Susie - It was an interesting read.

Sindee - In the big scheme, they are a pretty small company.

Missy - It would be interesting to know.. I'm curious.

Larry - I think it might have just been under the radar. I think Realogy has that many franchises in Atlanta...

Kelly - They will, but the big point that I took away was that many of the FSBO advocates were saying that in THIS downturn, the limited service brokers would destroy the tradition brokerage business.

AUG

2008

Lane - You are spot on with this. Nice recap. The big discounter in the New York/New Jersey area was called Foxtons. They went the route of Help-U-Sell back in October of 2007. See link below.

http://www.inman.com/news/2007/10/5/foxtons-faces-bankruptcy-and-lawsuit

-Al

Al - I remember that... and I didn't connect it. As I recall, there were a lot of people hung out when they failed, too.

AUG

2008

Wow. You must be a real estate expert Lane. I mean, you've obviously done your research and you know that nearly 2/3 of all of the people in real estate have closed or gotten out of the business in the last 2 years. That NAR stat is not relavant to any brand affiliation either. I guess based on that, Help-U-Sell is doing better then the national average. Hmmm. Also interesting that Help-U-Sell does not charge and has never charged upfront fees. In fact, the Help-U-Sell franchise agreement requires its franchisees to offer a 100% satisfaction guarantee on their services. Do you offer that? Better yet, how many traditional brokers offer that? So before you continue to sound like an un-educated jackass, get your facts straight and do a little bit of research. Help-U-Sell is facing the same challenges many folks in real estate are facing, a significant downturn in transactions. There are lots of good brokers, traditional and alternative alike in very challenging markets. What a shame there's traditional brokers out there that are so fearful of change they lie and mislead the consumer.

Brian

Broker of successful Help-U-Sell broker

Bri - You must know that about 15% of agents have gotten out of real estate in the last two years, so I don't know where you are getting your numbers... Heck, if 2/3 of the agents had bailed from the business, the ones of us that are left would be rocking.

Help-U-sell must still be rocking, right? After all, RE/MAX, C21, Coldwell Banker... they all went bankrupt, too, right? Oh, that's right, they didn't. The biggest franchiser to BK is Help-U-Sell... ok, Foxtons folded, too... they're also a discounter.

So, back to that research thing... Don't toss out unsupported numbers, followed by some rambling crap, and then call ME a jackass. If you think I'm wrong, give a supported argument and we'll talk about it. But, you can expect that I will want cited sources. I cited mine...

Oh, one other thing. The local Help-U-Sell franchises don't seem to offer the 100% guarantee. If they do, they don't say it on their websites... you'd think that they would, no?

AUG

2008

Lane your comments are loaded with inaccuracies. The set fee is not nearly as low as you state. The fee is paid at closing in escrow, just as your commissions are. There is a guarantee on most all published items and in the HUS listing agreement. The fact is that most of my clients will pay at or nearly at what they will with a "traditional" company. I, generally, get 2% for listing (and marketing) the home. My fellow Realtor who brings a buyer will often receive 4%, the highest in my market.

The big difference with my HUS and most local offices is the amount of marketing I do. Most and I do say most of my local Realtors idea of marketing is a sign, some black and white flyer's and sticking the listing on the MLS in hopes that another agent will find a buyer.

Lastly, if you check with the HUS offices that are no longer around, most are doing the same thing just as an independent. There is no doubt that there has been great upheaval in the corporate office. This lack of communication has left many of us upset and many have left the company.

Ted - I'n looking through HUS's website, as well as the (100% matching) site of some local affiliates, I can't find anything that says that you pay up front, so I will correct that. I can't find anything that doesn't, but I will take your word for it.

But, the websites specifically says: "Help-U-Sell differs from traditional brokers, not in the scope of services provided, but in the dollar amount that you pay for those services." So that tells me that something is wonky. You are saying that people DON'T save money, and HUS says they do. You say that you do more than a traditional broker, and the HUS website says you don't. BTW, Redfin did a study on Buyer Side commissions... over 3% generally doesn't raise the seller's net because buyer's agents often see it as a sign of an over-priced listing...

But let me ask you this... Why is it that each time the market turns down, there is a rash of brokers fleeing HUSs franchise model? There is a flaw somewhere. Other models are losing franchisees, but they aren't losing 40% of them, and it isn't driving them to BK.

Great questions Lane. I appreicate the disscussion on them. Many times the sellers save nothing more than with traditional offices, many times they do. At my officewhich is the same in many if not most offices, the seller is probably going to pay a 4.5% commission, 2% for HUS and 2.5% for the SOC. I talk to my sellers about a higher SOC. They can go to 4% and still not raise the price of the home to compensate for that. My commission stays the same. As for the Redfin study they have got to be kidding me. As a professional it is my job to let my buyer's know the real value of a property. But if I can find them the same deal where I make an extra 1-1 1/2% commission I would be nuts not to direct them to that home. At the same time I will take 3% over nothing.

As for the number of HUS offices that have left the company. Many, I do not know the numbers, left not due to the market conditions but to the leadership in the company. The management was in turmoil before the market downturn. As for the idea that HUS can not survive a bad market, on first blush it would appear that way. However, understand that HUS started in 1976 in the midst of the Jimmy Carter adminstration. And it thrived. Due to the founder and company management.

All this being said, I never want my sellers to focus on my pricing. I always ask them to focus on my marketing. That is what I do better than others in my market.

Thanks Lane for the questions and letting me explain. Have a profitable day.

Ted - The Redfin study actually hits pretty close to what I see. When people see a commission that is out of line, they wonder why... Usually it is because there is something that makes it a tough sell... and we both know that everything can be fixed by price.

I have to assume that Inman has the number of offices right. And 40%+ drop is serious. If it was the first time, that would be one thing. But, this is the second time in the BK game.

So, the question becomes... Why have they had this problem twice now?

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