By Kathy Bevan
One Percent Realty
One Percent Realty in B.C. is now one of the “veterans” of Canada’s non-traditional brokerages. With a network of 140 salespeople serving most of B.C., the firm’s business model has changed very little since it first started up in 1998 in Vancouver. The company’s share of commission is still its namesake one per cent, but as of January 1, the minimum charge increased to $6,000 from its original $5,000. The firm also charges $900 per listing for MLS fees, title searches and a set amount of advertising; if the vendor wants more ads, there’s an additional fee.
“I come from a project marketing background where the developer paid all your costs, so that’s where the business model came from,” says company founder and broker/owner, Ian Bailey. “I’d show them a book and say, ‘Here’s what an ad in the Real Estate Weekly costs, here’s what a virtual tour costs, what do you want to do?’”
Bailey points to the addition of Schedule A to B.C. listing agreements, about four years ago, as a big plus for his business model. “Schedule A basically says what you’re going to do – are you going to hold open houses, have a lockbox, advertise, what’s the deal? It’s been perfect for us, because prior to Schedule A, other Realtors could say, ‘You don’t get the level of service that we offer’,” says Bailey. “It puts everything on the table and that’s what we’re all about. Realtors don’t really like discussing what the commission is, but we do. We talk about everything, what we’re going to do, what you’re going to get for that.”
Bailey says One Percent had about 2,000 sales last year – a recovery year for the B.C. market – and notes that his business model does particularly well working with consumers in small towns. “These are people who, if we’re saving them $10,000, know what that looks like and how long it takes them to get that $10,000.”
Donald Hewie Real Estate
Ottawa Realtor Don Hewie had been working in real estate sales for more than two decades when he decided to start up a flat fee brokerage in 2006. His business model was based on unbundling all aspects of the real estate transaction.
“I estimated that, from the time I listed a house to the time it sold, on average it took about 11.5 hours of my time per listing.” Hewie then came up with an hourly fee of roughly $150/hour and let his clients choose which services they wanted him to provide.
“I wanted to be the Canadian Tire or the Home Depot of Realtors,” says Hewie. “If a real estate company is a pure real estate company, they would be offering whatever services consumers wanted. They’d be selling the marketing tools, the signs and the lockboxes – providing consumers with whatever services they could to help them sell successfully privately. If I go to Canadian Tire, they’ll either fix my car or they’ll sell me the parts and show me how to fix it myself. So does Home Depot. I want to be that for real estate.”
Hewie revised his business model in 2007, when CREA introduced its MLS interpretations. Today his three-person office offers three different fee structures, with the highest commission at 3.5 per cent for full services – Hewie retains one per cent and selling agents get 2.5 per cent.
Hewie says, “In real estate, we’re all the same – we have the same tools at our disposal, there is no difference with MLS, the sign, the lockbox. So in order to distinguish ourselves from everyone else, we have to market ourselves. That’s why you see a lot of agents marketing themselves – the girl with the hat, the guy with the dog. There’s this team, that team. We’re all the same, there’s no difference. My marketing strategy is, I offer lower fees and that resonates with consumers more than the girl in the hat and the guy with the dog.”
ViewPoint Realty
Bill McMullin
Halifax-based ViewPoint Realty is one of the newest non-traditional real estate operations in Canada. The company launched its technology-driven real estate services in January, after more than 12 months of software development and data acquisition. Its full service listing package is priced at three per cent, of which two per cent goes to co-operating brokers and one per cent goes to ViewPoint. The company has three people working as Realtors, including founder and CEO Bill McMullin, plus a half-dozen people working behind the scenes in technology support. A key differentiator for ViewPoint Realty – all salespeople and staff are on salary, none are working on commission.
“We don’t believe in the commission model of real estate, we really don’t – there’s a simple reason for that,” says McMullin. “We don’t believe Realtors can sell houses – and I want to be clear: Realtors can help market a house, but we’ve yet to find a buyer who ever bought a house because of something the Realtor told them or some sales pitch the Realtor gave them. Almost 100 per cent of the time buyers indicate they bought because No. 1, they knew it was for sale – that’s a marketing challenge. No. 2, it was in the right location. No. 3, it was the right price. It obviously met their needs, of course. None of those involve selling.”
McMullin describes his firm as a traditional real estate brokerage focused on streamlining the transaction process for consumers. “Everything the consumer wants to be easier, we want to make it easier – that’s our mission. Not to get rid of the Realtor, because the consumer will decide, okay, I need a human to help me with that negotiation and a human to help me with pricing and a human to deal with a scenario or situation in a counter-offer,” says McMullin. “You’re not going to have a self-service checkout where you take your house, put it on the conveyor and go through with your debit card. I really do believe there’s going to be a role for the professional for the foreseeable future. All we’re doing is streamlining the front end – the explore stage for buyers and sellers – and the back end.”
Looking ahead
McMullin doesn’t foresee ViewPoint Realty changing its business model, regardless of any future ruling by the Competition Tribunal, but he questions what a changed MLS would look like. “This national central MLS works really well; it’s an efficient system of disseminating information. If we break up that, how does that help the consumer?” McMullin asks.
He adds that he’s seen the MLS changes CREA had shared with the Competition Bureau in January. “I’m still at a loss: what is the Competition Bureau looking for? I’d like to know. I’m not skeptical or critical, I just want to know – what is it, what outcome do they want? Because, except for taking the Realtor completely out of the listing process of listing MLS, I don’t know what’s left.”
Ian Bailey of One Percent doesn’t anticipate his business model will be impacted by any changes to MLS access, as long as the MLS information itself remains intact. “What I hope it doesn’t do is destroy the data. What if you’ve got all these For Sale By Owners on there and they’re not reporting their sales? What’s wonderful right now is our access to information. We know what every house sold for, we can look at the pictures, the digital photos for everything that’s been on MLS for the last 10 to 15 years and go and see the guy’s living room. You know the dimensions of the place, you know everything about it and what it sold for in 1996 and 1998 and 2002. And now, it could turn into a mess, which would be a shame.”
Meanwhile, Donald Hewie of Donald Hewie Real Estate is anxious to see changes to MLS access, so his business model can work the way he wants it to, offering everything “from full service to no service”, serving FSBOs as well as full-service clients.
This is actually an excellent comment, Peiman, and an excellent analogy to which everyone can relate.
Cordially,
Carolyne L
Carolyne Realty Corp. http://www.Carolyne.com
Serving Burlington and Brampton
This is goes out to our dear writer CANDACE.
I can assure you that the oil Midas uses in a Kia is very different than the one they will put in a Ferrari.
I can get an oil change from a place like Midas for $19.99 at any given day but the dealer for my car charges me $450.
So you are telling me that I should offer them $20 and say keep the change? It’s the same amount of work right?
Peiman Beigbabai http://www.peimanb.com
I have always wondered, Nik, about the large retail stores, chains that have racks of clothing, whole floors of appliances, etc. all with pre-priced tags and tickets on from the manufacturer, often saying: list price. But unless the store has a sale on, the price is the price on the ticket, even if it is the store's ticketed price, (right across Canada or wherever), whether you buy it or I buy it or twenty people in line behind us buy it. And there is, typically, no negotiation on the floor with the clerk. Is "that" not a form of price fixing? Should we not be able to go into any store any place and negotiate with the clerk for items on the floor? Yes, in some cases that can be done, but not often at the big stores, and chains of retailers.
It is different if someone who fixes things and wants parts and the manufacturer will not sell the pieces to enable the work to be done. Being older than dirt I recall in the late 50's or early 60's there was a fellow who wanted to repair printing machines. He went from shop to shop to shop fixing the small presses.
Then he came upon a situation where a manufacturer refused to sell parts to him to fix "their" machines as he came upon them at print shops. If the press broke the owner had to call "only" the manufacturer to repair it. Real Print shops, not the instant print places we know today (although the concept would be the same). What did he do? He contacted the (then called) Combines Investigation People, and guess what happened? The big print machine manufacturer had to sell their parts to him, otherwise it was a restriction of trade. He could not do "his job" if they refused to sell parts to him.
In the real estate world no one is preventing the public from negotiating or choosing to hire whomever they please, at whatever price they can agree on for the commission. Likewise if the agent does not wish to work for 'x' amount in fees, he can walk away also.
Carolyne L
Carolyne Realty Corp. http://www.Carolyne.com
Serving Burlington and Brampton
It is amazing how the competition bureau allows the oil companies to run amuck with no government interference. I would love to know where I can find a cheaper gas station, be it Esso, Shell or Petro Canada in Ontario? They seem to all sell gas at the same price, BUT oh no, of course not we have no collusion here. At the same time the competition bureau is now ready to ruin the lively hood of every Realtor that has been licensed and has paid into the MLS system year after year. Competition is fierce as it is among Realtors; ask yourself the average net income of a Realtor, I think that stat would amaze most. How many Realtors remain as such after 2 years of being in the business? No one is stop FSBO from using their own signs, advertising in local papers, using cheaper companies that provide signs and web ads, knock yourself out, but to want to tell Crea how to use their property is ridiculous. Maybe other companies and industries should be able to use Canada Post's red boxes for their own purposes too, HECK I want to sell my sofa, I think I will go place it in Leon's show room.
Klaus…interesting point. The word "discount" when described as a noun by "Webster's" is…"a reduction made from a regular or list price". However, when described as a verb?…"to sell or 'offer' for sale at a discount". Therefore, when used in Mike's statement…"…a discount brokerage", the word 'discount' is used as an 'adjective' describing the brokerage in comparison to other brokerages that charge more than so-called 'discounted' fees. I don't mean to be picky, but I think the jist of Mike's point is that discount brokerages (as he describes them) fully intend to promote their offerings of commission rates as just that, at a rate lower than what some/many others ask for. The key words here are "ask for"; no one 'charges' anyone anything in the real, non-theoretical world, that anyone does not want to pay. No guns are being held to anyone's head(s). Melanie, take note. (I wonder if any of these comments ever find their way onto Melanie's desk?) But your point is well taken Klaus. I'm just a stickler…like you. Brian.
There is no such thing as a discount brokerage. In order to discount there must first be a norm or standard or regular. These don't exist in the real estate industry either. To say or acknowledge otherwise would invite and be deserving of investigation and prosecution by the competition bureau.
A real estate brokerage is simply a real estate brokerage.
While reviewing my previous post, I should clarify that Realtors could offer low commission rates, regardless of where they are employed. They would not have to got to a discount brokerage, as I had previously suggested.
Also, Realtors are not all the same. As a buyers agent, the market knowledge and negotiating skill of the Realtor can both find the best houses and negotiate the best price. As a listing agent, handling multiple offers, avoiding law suites and protecting the sellers can all demonstrate your skills, or lack there of. Salary is fine, but you will still have different skill sets, strengths and weaknesses.
Lastly, the question I asked was, why can they tell CREA how to offer their products? If I am selling my car, is a dealer obligated to let me put it on their lot?
On Competition… I think there is a lot of commission concepts and a lot of different services offered by the professional Realtor. I worry FSBO's on the MLS will ruin the quality of the MLS system. It has integrity now. Realtors have taken many courses get a license, and also take continuing education throughout their career. At a time when we are trying to increase professionalism in the business, I don't think opening up the MLS system to FSBO's is a good thing.
Lastly, I thought that CREA owned the MLS system, and Realtors have to pay to use it. Why are they being told how to use their own product? That seems anti competitive. "You will give it away" If people don't want to use MLS and the service of a realtor that comes with it, then don't. They have other options and FSBO's sites that are gaining respect and popularity. Realtors who want to offer discounted rates can join a discount brokerage or work for a FSBO company. I just don't understand why they can't control the use of the MLS to maintain integrity. It will ruin it for everyone.
I thought of a funny analogy. I don't like the price a restaurant charges for food, so I want to pay for the cost of the food, but I am going to go in the kitchen and cook it myself. That is a great business idea, but you cannot go into a full service restaurant and demand that they let you. It will turn to chaos when the real cooks are trying to serve customers, and you have other people fumbling around on the line.
Don Heweie: You say that…"we are all the same, there's no difference." I respectfully disagree. I think that this is the one area where there is a difference…the individual differences between our attitudes, reason(s) for being in the business (aside from making a living), and our backgrounds can make for significant differences in how we go about our business and how we treat our clients. Could you elaborate on your statement?
Bill McMullin: You make a very interesting point when you state that:…"A key differentiator for ViewPoint Realty-all salespeople and staff are on salary, none are working on commission." How are the sales staff paid if there are no sales for a period of time? The model does allow for one to be fired if one does not produce or if one acts unprofessionally; this is potentially a good thing. You also say that…"We don't believe that Realtors can sell houses…we've yet to find a buyer who ever bought a house because of something the Realtor told them or some sales pitch the Realtor gave them." According to your article you have been engaged in your new venture since January (2010?). I can only speak for myself and my own observations, but it seems to me that clients (especially those clients who have a limited understanding of the business) who place their faith and trust in their Realtors, rely heavily on what their Realtors say when it comes to "which way to go/which property is best amongst those in the running, so to speak." This is why we hear horror stories from consumers as well as statements of recommendation regarding the results, or lack thereof, of the efforts of their Realtors…don't we?
I think that you are quite right, though, when you state that…"the consumer will decide, okay, I need a human to help me with that negotiation…
pricing…counter-offer." My question is: Do you think that a Realtor will put as much into it when acting as a negotiator, for example, if he/she is to be paid a set amount for success (whatever that amount is) vs a potentially larger amount via commission? What has been your experience?
You're not the only one at a loss regarding…"what is the Competition Bureau looking for?" How does a "Higher Profile" sound?
I am a skeptic. Brian.
Sadly, these type of companies are few and far between.
Question though, why does a Realtor earn more for selling a $500,000 house vs. a $200,000 house? The work is EXACTLY the same…. Could you imagine taking your Lincoln to Midas for an oil job and being told it costs $250.00 for an oil change and the next day taking your Kia for the exact same service and pay $50.00? Who would agree to that? Substitute oil change for virtually any service and the company would be reported to the BBB.
Somehow this concept is okay in Real Estate. Makes ZERO sense for the consumer.