Why We Need a New Model
for Real Estate Brokerage

by
Edward Ginsberg

The Real Estate Industry is in a State of Crisis

The business of real estate brokerage is undergoing a radical transformation. Real estate has become a $1 trillion industry, attracting the attention of global corporations, banks and investors. Not too long ago, it was a neighborhood business controlled by Multiple Listing Service (MLS) data and local information. The Internet has changed all that forever.

But The Traditional Business Model Still Prevails...

Traditional full-service real estate brokerage models are still the prevalent way in which homes are bought and sold throughout the nation. Brokerage companies provide a full array of services including market evaluations, negotiating assistance, relocation information and marketing services.

...Despite Its Need to Control, Control, Control...

This model is based upon broker control of listing information, access data and exclusive marketing rights:

1. The seller is required to sign a long-term exclusive listing agreement for a period of three to six months.
2. Broker compensation is based on commission, typically ranging from 5%-6% of the sale price of the property.

High Rates of Commission Attract Agents for Buyers and Sellers...

The listing broker places the home in the local multiple listing service, making the property available to other agents, with the understanding that should one of them sell the property, the listing broker’s commission will be split with the selling agent on a 50/50 basis.

Example:
On a $500,000 sale with a 6% commission, the seller will owe $30,000 in commission at the closing, with $15,000 going to the seller’s representative and $15,000 going to the buyer’s representative.

Most sales are conducted in this manner, with the majorty of all sales accomplished through the use of cooperating brokers. It is also highly unlikely that the agent who lists the property will actually be the agent who finds the buyer. It is more probable that another agent within the listing agent’s brokerage company will make the sale. And, the commission rate is the same whether the home takes one week to sell or stays on the market for six months or more.

...Yet, Real Estate Agents are Still Using
Tired Systems of Marketing...

In addition, traditional brokerage models rely heavily on old technologies such as print media advertising, open houses and broker tours. Agents are trained to use tired systems of prospecting and direct marketing. Advertising focuses heavily on brokerage company and agent promotion, emphasizing company and agent identities and logos rather than addressing the needs of the people who are buying or selling their homes. Guarding and withholding information to manipulate and control prospects remains a common practice.

It's No Wonder Consumers are Rebelling!

And Some Brokers Have Responded With
The "Discount" Theme:
Less Service for Less Money

As a result, many brokers have resorted to discounting as a means of competitive advantage. A number of variations of the discount theme currently exist in the marketplace. The common thread which links these all together, however, is less service for less money. It is still based upon exclusive right-to-sell agreements and broker control of the process.

The Major Problem with the Discount Model
is that Buyers' Agents Feel Cheated
and Won't Show Discounted Properties

The fallacy in these models lies in the fact that the major source of sales – co-brokering with buyers’ agents – is either eliminated or limited by the reduced fees charged. What incentive exists for a buyer’s representative to show a property when the compensation may be only 1% when compared to 2.5-3% in the offerings from traditional brokers?

In Order To Survive as an Industry,
Real Estate Must Adapt to New Realties!

I have been involved in the real estate industry for almost a quarter of a century. In that time, I have developed residential communities, built many new homes, and have owned and managed some of the most successful brokerage companies in the region. After having spent the past five years as General Manager for Prudential Serls Prime Properties with responsibility for sales, relocation and training for the entire company, I have become convinced that traditional ways of doing business is not meeting the needs of consumers in our technologically advanced world. Other service industries such as financial investment and travel have had to adjust their practices or face obsolescence. So far, real estate has resisted change. But, in order to survive as an industry, it must adapt to the new realities.

Introducing A Revolutionary New Way to Sell Real Estate

My model for real estate brokerage is that of professional consultation. A plan is devised in consultation with the homeowner for pricing and marketing the home. A budget is established which includes compensation for the buyer’s agent. The homeowner is not locked into long-term contracts or forbidden from selling on their own. Negotiation assistance is available. Target marketing is utilized to identify and communicate with the source of buyers for specific properties. It is not a discount model. The objective is to save the homeowner money spent in traditional brokerage and to utilize it more effectively to obtain a buyer. I call the program the Seller’s Edge. ...Click Here for all the Exciting Details.