sir's/ladies

i am in west gta market, ontario, canada...the market is starting to cool off a very tiny bit...there are a lot of agents currently getting licensed and there have been a lot of agents who have joined the field over the last 2-3 yrs...

I wish to open a brokerage but i am scared that if the market keeps on cooling, it may be difficult to get the agents and also new agents might not be getting into the business...

what do you think

my brokerage can offer a good split, training and good corporate name

thanks

Keep in mind, the next new thing in Real Estate is not another Remax on a city corner!! Look into the discount brokerages!! This is the way of the future in Real Estate brokerages.

In our area one of the Re/Max franchises is a discount brokerage!

Well the CEO of Remax did say he predicts commissions will average 4% in the coming years. I have noticed that Century 21 is offering a flat fee service now in many states.

It would appear that the discount model is having its toll taken on the big guys. Times are a changing!!!

I have looked at starting aa discount brokerage myself, but people still like the brand name or atleast the agents with these companies say that....what would be a good name for a discount brokerage....

I am not seeing the "Discount Brokerage" phenomenon in my market that Rick seems to think is all the rage.

There is just no statistical backing for the claim that commissions will be averaging 4% in the coming years.

My MLS search software does not let me search based on commission. However, I have a friend over at REInfolink who checked into it for me. The average commission is actually pretty high right now - not the highest it's been in the last 10 years, but just a shade under. The lowest it's been was in '97. In general it seems to track with general market activity.

In just my little area, there are currently 164 listings. Only 45 of those are less than 3% to selling agent (IE: Assume then that the total commission is 6% - not always the case, but usual). Only 5 are less than 2.5%. Of that 45, 38 are selling for over the average local home price (18 of them for over 1 million) - if someone discounts, it is most commonly done on properties that are listed above the average home price for the area. This trend has ALWAYS existed. I can recall this being the case even way back in the late '80's. The idea of discounting has always been around - it's not the "New Idea" that so many would like you to believe it is.

Now do this yourself with your local data. Just do a search on solds, expireds, etc. and add the commission rate to the data display. I then imported it all into a database to crunch the numbers - you can do the same with any spreadsheet. Ask these questions when looking into discounted properties.

- Do these properties take longer to sell? (And no, I don't believe it's because some agents won't show low commission homes. Too many agents for that to have enough of an effect)
- Do these properties tend to fall out of escrow more often? (This is assumed when history of listing shows it going pending then back to active)
- Do discounted commission homes end up being cancelled or expired then re-listed with other offices for full commission more so than other homes?

Find the answers for yourself then think about why. For the purposes of my research, I only looked at properties in my county with 2% or less going to selling agent.

Maybe it's my market, but I don't see anything that even vaguely indicates that the discount brokerages are or will "take over" much of anything.

Now, in fairness to the discounters, there are areas in my county where discounting is more common. However, that has always been the case. My point here is that historically, there is no trackable trend that indicates discounting is becoming more and more common.

R

Discounters don't have a major presence in my market either. Once the RE market cools, I think discounters will be extinct entirely since their entire business model is based on volume.

And that is where you are completley wrong. Since the discounters work on volume they can afford to have many listings not selling becuase by virtue of shear numbers they will at minimum have some selling. In contrast the average agent with a couple listings better hope to god that one of those sells or they are up the creek. The discounters can afford to pass on the unreasonalbe sellers in a buyers market and just deal with the people who actually want to sell. They leave the overpriced listings to the newbies....

Keep dreaming Rick. In some markets you may be correct but not the majority of markets. Time will tell but I believe some discounters will survive but most will dry up and blow away!

Having many listings that don't sell is always good real estate practice for any brokerage



A good agent that doesn't take every listing that comes their way, is selective & counsels the seller on pricing etc will have no problem selling their entire inventory

Wait. Didn't you just state that discounters can afford to have many listings that don't sell yet you say you can pass on unreasonable sellers? So are you in the habit of taking listings that won't sell because your volume dictates that some will sell or do you pass on unreasonable sellers?


My experience with discounters in this area is they take ANY listing & let the seller price it. They will work with anyone that will let them list the house & for however much. I actually train my agents to prospect discount brokerage listings when they expire because their agents don't know how to price a house, often let the seller price it at whatever they feel it's worth & never do any seller counseling.

I think discounters are great because they weed out the sellers we would otherwise not want to work with. Specifically those that are only concerned with saving a buck (which most times isn't the case & the discounter costs them more) & who aren't expecting much from the agent/company. That is not the seller I want to work with.

We have some discount brokers, but they're not affecting my business. I wish them the best and have no problems with them. The ones in my area seem good and like they care about the customer. I still think they're pretty small compared to the full-service brokerages.

Since this thread as migrated to discount brokers, let me ask this question or throw out this concept. Why must you be a full service or discount broker? Why cant you do both based on what the client's needs and wants are?

Maybe Im missing something here but having programs whether they are full service, limited service, or flat fee would provide the client options to fit their particular situation. This dose not preclude educating the client and defining their needs, that is always a requirement.

You just described Help U Sell. They have an ala cart menu of services you can pay for.

I wouldn't be looking to open up an office of any type in the current market conditions. I believe if you have to have your own company, look to aquire one. Discounter or traditional: they both have expenses. You can make valid arguments on both sides. There is opportunity to take over offices because of the current market conditions. Let's face it - it has been a great ride for the past few years and things are tight now. Who is looking for an exit strategy is the way to think in my opinion. Start up will take you 9-12 months to see profit - hopefully. You will be lucky to make 7 -10 cents per dollar you bring in. Do the math. Your agents will be wealthier than you.