Freedom of choice is a Liberty we should all have.

By
Real Estate Broker/Owner with Tutas Towne Realty, Inc and Garden Views Realty, LLC BK607690

 Today, I'm going to write about "discounters". First we need to come up with a name that is more fitting. Why? Well, commissions are always negotiable so "discounter" is not really accurate. How about "Alternative Business Models (ABMs)"? For the purpose of this post I'm going to use ABMs. OK? If you have a better name let me know in the comments section. I'm open for suggestions.

There are many different kinds of ABMs. One size does not fit all. Here is a list of a few different models to show you the differences.

Internet Companies: This business model is basically a virtual Real Estate Brokerage. Usually they charge less commission and offer less service than a traditional Real Estate Company. These types of businesses may be a viable choice for an educated consumer. In my opinion it would be a better option for a Buyer than a Seller. Personally, even though I am a traditional Broker, I have sold many homes sight unseen over the Internet. All, were my own listings and I was able to pass a savings onto my Seller which in reality saved the Buyer money because the Seller was able to accept a lower purchase price. These ABMs normally offer an incentive to the Buyers by way of a commission rebate and may offer the Seller an incentive by charging less. Redfin.com is a good example.

Buyer Rebate Company: This ABM is usually concentrating their efforts on working with Buyers. This could be in an Agency (Fiduciary) capacity or in a non-agency relationship (Transaction Brokerage). Their business plan is to entice Buyers to work with them by offering a rebate or credit at time of closing. They may very well offer the same Buyer services as a Traditional Brokerage. It's a numbers game. Lower gross commissions mean they have to do more business. By being on the Buyer side only, they may have lower expenses, since they are not in the business of marketing listings. It puts them in a good position to pass some of this savings on to the Buyer. In my opinion, this too is a viable business plan and has a legitimate place in the market. The downside to this business model is that they are very much dependent on a Traditional Brokerage offering "full" co-broke commissions. If we didn't they would have a hard time surviving. A good example is Buyer Rebates Realty.

MLS For A Fee: This ABM is exactly what the name states. They will list your property in the MLS for a fee. Normally it is a very small fee and then you can purchase additional services separately or as part of a package. Fees are normally paid in advance. These type of companies make their money off the Buyers. Their listings are the "bait" and the Buyers are the "catch". The business plan is to get as many listings as they can get to attract Buyers. Normally, in addition to paying the flat fee, for getting their property in the MLS, the Sellers are also required to offer a co-broke to the Selling side. If you like working with Buyers this could be a very profitable ABM. Some offer full service to the Sellers some offer very limited to no service to the Sellers. For a knowledgeable Seller, that has the time to do the work, this may very well be a viable business model. But again, this ABM is dependent upon a "full" co-broke being offered to make money. FlatFeeListing is a very good example.

Now folks, you're probably wondering why I'm giving attention to these ABMS and why I'm giving them links from my Blog. Well why not? I'm not threatened by them nor am I competing against them. I firmly believe the consumer should have choices. I believe in a free economy and I believe these ABMs have just as much right to do business their way, as I do, to do business my way. I offer full service and bring a lot of value to the table. My customers know that and are willing to pay me fairly for what I do. I charge a fair rate for my services and I'm successful, about 95% of the time, in helping my customers achieve their goals. I'm not the cheapest and I'm not the most expensive. My rate/fee/commission is just right for what I bring to the table. I provide value.

So here's the deal. If you own or work for a ABM, please don't build your business by cutting down my chosen business model. Build it on your own merits. If you see a niche that needs to be filled, then fill it. Do what you want, how you want and charge what you feel that's worth. And I'll do the same. I promise to not harp on your service if you promise to not harp on my pay. Even better, I'll make the choice right now to not bad mouth your ABM regardless of whether or not you bad mouth my business model. I will concentrate 100% on providing value to my customers. After all, that is why they are paying me. Let the consumer decide who to work with based on their needs. Isn't it supposed to be about them? What say you?

***Picture compliments of Mariana Wagner. Thanks Mariana!

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Comments (44)

Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Says me, "Another fantastic post and a real No-Spin look at what you properly label as Alternative Business Models."

"If you own or work for a ABM, please don't build your business by cutting down my chosen business model. Build it on your own merits. If you see a niche that needs to be filled, then fill it. Do what you want, how you want and charge what you feel that's worth. And I'll do the same. I promise to not harp on your service if you promise to not harp on my pay. Even better, I'll make the choice right now to not bad mouth your ABM regardless of whether or not you bad mouth my business model. I will concentrate 100% on providing value to my customers. After all, that is why they are paying me. Let the consumer decide who to work with based on their needs. Isn't it supposed to be about them?"

Enough said amigo, Great Work!

May 29, 2007 10:20 PM
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Well good morning everyone. I think we all get caught up sometimes in trying to defend what we do instead of concentrating on doing what we do better. The great thing about a free economy is the public gets to decide what they want and what biz models will be successful. Even with Traditional Brokerages there are many different biz models. It doesn't make any sense to just single out the ABMs. What they do is no different than what we do it's just at different levels of service and compensation. And even that is not always the case.

100% of our efforts need to be applied towards becoming the best we can be no matter how we choose to do our business. If we concentrate on that, instead of what others are doing, everything else will take care of it's self. Look inward NOT outward. 

May 30, 2007 01:20 AM
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

So here's the deal. If you own or work for a ABM, please don't build your business by cutting down my chosen business model. Build it on your own merits.

NOW do you see why we were all upset about Jeff's Civil War post?   

May 30, 2007 02:07 AM
Stephen Graham
Inactive - Atlanta, GA

Great blog, Bryant. As an agent who evolved from a traditional agent to a buyer's agent with an "Alternative Business Model", I operate a real estate business in Atlanta, Georgia that utilizes a rebate of commission for new home buyers. Prior to entering real estate a decade ago, my background involved the new homes industry and thus it was only natural for me to pursue real estate from the perspective of new homes. I immediately started working with buyers of new homes in the traditional fashion. I would drive them around to different subdivisions that met their criteria. However, as time evolved, so did I. The advent of the internet changed everything for me. I noticed that my buyers knew pretty much where all the new homes communities were before I met with them. The number of new home buyers that I was working with grew as well (referrals). It was this combination of factors that led me to the rebate model. I became very efficient because of the internet and e-mail so I could work with more people and pass the savings to them -- which in turn reaped even more business.

Let me first emphasize that this did NOT happen over night. I did not start out seeking to end traditional real estate as we know it, nor is that my intention now. I work with traditional listing agents everyday and I respect them and the jobs they perform. My progression to the rebate model was evolutionary, not revolutionary. It just simply made sense for me. All too often, I have seen others try to mimic my model and then quickly exit without success. I suppose that advertising expenses are too overwhelming. With that said, Redfin, Buyside & Rebate Reps have the same challenges. Overcoming the initial start-up period is difficult, as there is no way I could have started out in the business with my current ABM.

Stephen Graham www.georgia-new-homes.net

May 30, 2007 02:10 AM
John Evarts
Classic Property Management of Santa Clarita - Santa Clarita, CA
Bryant, very classy. I have a very good friend who uses an ABM and she takes A LOT of crap from the realtors around here. I get very angry with the "full-service" realtors who don't have anything better to do than sit around bad-mouthing ABMs. I do blame a lot of this on the "coaches" who are out there and mold the way our business is practiced. Sorry, I am pretty passionate about the way our industry conducts business, so I will stop.
May 30, 2007 06:06 AM
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Hi John, Thanks for stopping by. Personally, I'm too busy building my own business to worry how others are conducting their business. It's a shame others don't have that same attitude.

Stephen, That's very interesting. I think a lot of successful businesses evolve into what they are today. I started in property management of vacation rentals which led to selling vacationers vacation homes and finally led to resale sales. Successful entrepreneurs are every good at being flexible and changing directions when necessary. 

Brian, I always understood WHY you were guys upset. It was the reaction to that emotion that could have been different. But you know that now. Right? You have to include the sentence I put after the one you quoted: Even better, I'll make the choice right now to not bad mouth your ABM regardless of whether or not you bad mouth my business model. That's the sentence that matters.

May 30, 2007 07:04 AM
Jeff R. Geoghan
Coldwell Banker Residential Brokerage - Lancaster, PA
REALTOR, Marketing Manager
Competition is the bedrock of a free society - if any one group decides it needs to silence another then an upsetting of the balance is put in place. Works in business, politics etc etc.  We should be very interested in what the ABMs are doing - maybe we can learn something to make ourselves better competitors.  Trying to silence the ABMS will just make us look foolish and counterproductive.
May 30, 2007 07:30 AM
Phil Malhao
Elite Legacy Realty Inc. - Orlando, FL
Very gutsy of you to put their links on your post, but then again, only the weak have to worry about competition. If you do your job right people will get it. I can't say that I've had good experiences with agents that work for some of these discount companies, but then again some of the agents that work for full service companies need some etiquiete training as well. I think your last paragraph sums up what most of us full service brokers feel. Kudos.
May 30, 2007 07:39 AM
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

Even better, I'll make the choice right now to not bad mouth your ABM regardless of whether or not you bad mouth my business model.

That's fair enough, Bryant.  However, won't you take a stand when the ABM misrepresents the truth? (like you have here)

May 30, 2007 01:16 PM
Laurie Mindnich
Centennial, CO
Broker Bryant:  As an ABM, I am 100% with you.  We have been working on our seller page- should be finished this evening.  Choices are very much tied into market conditions.  It is difficult here to locate properties under the 450k range, and we present what we consider to be in line with our "value", and more importantly, values, with the fees that we charge.  It is not comfortable to get into the "co-op" fee without feeling as though there's a compromise somewhere to the value of the person that brings the buyer- AND SELLS THE HOUSE- and I am not looking to judge their perceived value (to me, it's huge, especially in a slowing market).  Understand, others, with ABM's, it's not about compromising a buyer broker's hard work, or over-emphasizing the savings.  It's about presenting well without disparaging other business models, and hoping like hell we get the listing in a perfectly reasonable way.  Thanks for the great post~
May 30, 2007 02:02 PM
Tim Maitski
Atlanta Communities Real Estate Brokerage - Atlanta, GA
Truth, Excellence and a Good Deal

I do agree that one needs to focus on their own business and provide the best service they can for a particular price.

The key is to create a business model that offers a very  unique package of experience and services that can't even be compared to anything else.  You always want to have an apples to oranges comparison.  Otherwise you become a commodity competing on price.  Being a local expert and knowing the inventory is priceless.

But you also have to challenge and rebut the distortions that the competition spews out.  Otherwise the pubic begins to perceive these distortions as fact.  Just like in politics, it usually isn't wise to let an attack go unanswered. 

May 30, 2007 02:35 PM
Kaye Thomas
Real Estate West - Manhattan Beach, CA
e-PRO, Manhattan Beach CA

I agree completely.. I don't care what business model you want to use as long as you don't expect me to subsidize your choice by either badmouthing me to try and streal business from me  or deciding that I shouldl do the work you are supposed to do while you collect the fee and tell everyone how I rip them off

May 30, 2007 03:22 PM
Portland Oregon Real Estate | Alecia Barnes - Broker
Portland, OR
Great post. I think that there is always room for competition, and a market for those who chose alternative routes. I believe that there will ALWAYS be a market for those of us who chose to continue to educate ourselves to be the best in our field, and I agree....proving value is tantamount to our continued success.
May 30, 2007 05:33 PM
Laurie Mindnich
Centennial, CO
Tim- I also agree with that, wholeheartedly.  It just seems that the problem with fees, fees fees is that the end result of any badmouthing is that the consumer hates all of us- no one comes out ahead.  Companies that open in small areas, with longstanding traditions (as we've found) have to be on the alert, but not react to it in a way that compromises everyone- there's already WAY too much of that going on.  And BB, use us as a case study- we are trying some of your advice- the beauty of owning your own!  I'll keep you posted on the progress of your generous input (you did say that we can all use your stuff, right?)
May 31, 2007 12:46 AM
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Good morning.

Brian, My strategy in the face of an attack has always been to present what I do in a strong, confident and intelligent way and then I let the consumer decide. There have been many times where I have gone to a listing appointment and the potential seller tells me that the REALTOR(R), that was there before me, told them that "I worked out of my home", "I don't work on Sundays", "I won't do open houses", "No one shows my properties because they are Range Priced" and blah blah blah. Instead of me then proceeding to defend myself or start bad mouthing the person that said these things I just agree that I do things differently and then show the Seller the results that I get. I NEVER lose a listing unless I choose to. The responses on the "Civil War Post" quickly turned into a personal attack(on both sides). When things turn personal the game is over. "The best defense is a great offense" Who said that? Am I making any sense here?   

Jeff, I agree that there are things we can learn by seeing how some of these ABMS are doing things. For one we could learn how to be more efficient. 

Phil, A few months back I had two closings in a row with ZIP Realty agents on the buyer side. Zip rebates and discounts. Both agents were awesome and the transaction closed without a hitch and they closed early. Everything was handled via emails and it really was a pleasant experience. They can sell my listings anytime they want.

Tim, "Challenge and rebuttal" is good. Attack and retaliate are bad. I just think we have to be careful how we react. Read some of the blogs relating to the Redfin interview. Some made us sound like whining little babies. They were written hastily and out of emotions instead of throwing out a counter point in an intelligent way. We don't need to defend what we charge, we need to show the value that we bring to the table. If the value is there the cost is not a factor. If folks have to defend what they charge then they are charging too much.

Hi Kaye, Good to see you. Just remember bad mouthing can be a two way street and that's the trap we need to avoid. Take the high road. Do the extra work involved and get the deal closed for your customer/client. They'll love you for taking up the other agent's slack.

Alecia, there is without a doubt room for all. There has always been ABMs and always will be.

Laurie, Very good Laurie. I know you are passionate about what you do and I have seen you slip over to the "dark side" on occasion. Why not make it your goal to change some folks perception of what it is you do? Maybe use AR as a platform to educate your peers on how your ABM works and what you are trying to achieve. Just don't use the "we charge too much" argument. Or the "I want to save the sellers money" argument. There IS a place in the market for your type of biz. Educate me.

May 31, 2007 01:28 AM
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

"The best defense is a great offense" Who said that? Am I making any sense here?

Always.  That's why I read you daily, BB.

May 31, 2007 02:43 AM
Laurie Mindnich
Centennial, CO
BB- the difficulty is that each market is so different, and anyone doing something "different" in NEW YORK gets a very ugly resistance on a fairly regular basis.  Not so, other areas- unfortunately, AR's forum can be (in my case, especially) full of valuable opinions that perpetuate, without intention, the NY issues.  God forbid this environment be present in other areas...I came from such a cool Denver agenda, and have been absolutely SHOCKED at the difference.  Getting over it, slowly...but unfortunately for some, my "dark" side will never go away, as long as I'm cognizant of the general perception of real estate professionals, and the idiots that compromise the biz daily...
May 31, 2007 02:55 AM
Katherine Anderson
Coldwell Banker Hobin Realty, LLC - Hampton & Rye, NH, USA - Exeter, NH
Managing Broker

I agree with you too.  (shock eh?)  Taking the high road is always a safe bet.  Besides, some of these folks (like MLS for fee) are licensed REALTORS.  (Code of Ethics)

May 31, 2007 06:48 AM
Ashley Drake Gephart
Drake Intel Group - Albuquerque, NM
I was telling my husband this the other day. I just wasn't able to say it so well. Now I can show him this and he will understand what I was trying to say. There really is room for all us isn't there?
May 31, 2007 11:00 PM
Irene Potter
ZipRealty Residential Brokerage - Maple Valley, WA
Creating moving experiences in real estate

Hi BB:

I've been out of the loop for 3 months, just coming back, wrote a post and then noticed you did one very similar to mine (although I tied to Redfin so I could be accidentally straddling 2 of your posts) before me. 

http://activerain.com/blogsview/118061/Are-You-Little-Red

So, anyway, here's my blog back to you:-)

Jun 07, 2007 08:19 AM