There is a lot of talk about new real estate business models, with rebate or discount brokering getting the most attention because of Redfin’s high media profile. Are there business models in other industries that could be applied to real estate? We wonder.
Would consumers buy a Real Estate Policy, modeled after an insurance policy, where, for an annual premium, their real estate needs would be met? It might keep clients loyal to a brokerage since once a deal is done, the client is gone. Or would they get the policy, do the deal, cancel, and leave anyway? Would it be a harder sell because the benefit is delayed or would the consumer see long term value? If the premium was low enough, consumers might go for it. But then it becomes a numbers game. And you still have to pay agents…geez, my head is starting to spin.
The broker might have to give the policyholder some more value when they are between deals (it could be years) —homeowners coverage, whatever. Any thoughts? Or should this be tossed on the scrap heap?
Common Real Estate Business Models Today
Could it compete with any of the present real estate business models?
1. Full Service “Traditional” Broker. Compensation is a negotiable commission computed on the gross sales price. Custom and practice has traditional brokers negotiating from the 6% commission (now averaging about 5% based on NAR’s recent reports)
2. Full Service Discount Broker. Same a 1. except the fee is reduced by up to 3% against the going rate of the full service brokers in the local market.
3. Rebate Broker. The broker rebates a portion of the broker’s paid commission to the client. Services may or may not be reduced. Rebates to consumers are illegal in some states.
4. Fee for Service or “Flat Fee” Broker. Fees are paid based on a sliding scale of services, ranging from mere listing in the local MLS (about $500) to showings, offer and contract negotiation.
Related Post:
2010: A Real Estate Odyssey, our futuristic vision of a real estate office serving up REM.
Further Reading:
Competition in the Real Estate Brokerage Industry (A Report by the Federal Trade Commission (FTC) and U.S. Dept. of Justice, April 2007)
A Critical Asssessment of the Standard, Traditional, Residential Real Estate Broker Commission Rate Structure (AEI-Brookings Joint Center for Regulatory Studies by Mark S. Nadel, October 2006)
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