More Industry Change: William B. May
A: Didn't I tell you the times they are a changin'? The Real Deal reports on the latest brokerage firm, William B. May, to provide all of the commission earned to the agent; a subscription based business model of sorts that lures brokers over by delivering greater earnings power with lower sales volume. Trust me, more change is coming!
Via The Real Deal:
Brokerage William B. May has changed its business model so brokers can receive 100 percent of their commissions. Charles Rutenberg Realty adopted a similar model in 2006, as reported by The Real Deal, in which brokers pay fees to the brokerage, but don't have to give up any of their commission. At William B. May, brokers will be required to pay a one-time $1,500 fee, and $500 per month, according to managing partner Craig Lamb. The brokers don't have to pay a fee per transaction, which sets this system apart from Charles Rutenberg Realty's commission model.Below is the list of services being offered to newbies:Lamb said he has been working on implementing this model for about two and a half years, and it comes just in time, as brokers are making fewer deals because of the recession.
"I don't really think brokers can afford to have the type of [commission] splits with the major houses anymore," Lamb said, adding that at most brokerages, brokers have to give up 25 to 50 percent of their commissions. "There is pressure on the marketplace in terms of people wanting to pay reduced commissions, and fewer people wanting to use brokers. And in this [economic] environment, it's very hard to justify giving [a chunk of your commission] up," he said.
It's not a bad idea given the bet that sales volume is unlikely to return to the parabolic 2007 levels. I certainly don't see that happening again for a long time. For those that don't know how crazy 2007 was in terms of volume, refer to the following 10 years of total sales volume provided by MillerSamuel.com:
Talk about 2007 being an outlier for sales volume with 13,430 transactions taking place at the height of the boom! I would not be surprised to see 2009 total volume come in under 7,500 when its ultimately released; being the lowest in 10 years. Switching to a monthly fee based model, at least promises the employing brokerage firm a clear and hopefully sustainable cash flow; something commission-only based firms don't have. Lower the overhead, offer virtual agent services, and collect your monthly fees. There will never be the upside though with this model, only more consistency assuming the firm is successful in procuring more agents willing to pay the fee.
Not the way I would do it, but you never know what changes/trends are seen/discovered to make one adjust a business model. I still think there is an open slot for a different type of brokerage model altogether, one that better suits the consumer (buyer + seller), not the agent. I'm yet to see that. For now, change has been focused on how to better service the agent, and get them over to your firm. In an industry where new agent signups may not fall as one would expect in a downturn, due to the likelihood of those losing jobs getting into real estate thinking they can make ez money for a while, that model may work for a bit. Time will tell. In the end, as time goes by and the correction ingrains deeper into this real estate crazed city, I think a totally new idea will emerge; one that provides more transparency and efficiency to the consumers. The question is, will it work and be used by the marketplace?
Comments (16)
It's a compelling business model but have a look at their agents page. Two Diane Gordons? Two brokers without headshots (or listings!)? A total of less than 10 listings? Pathetic.
Posted by Will B. Way | March 11, 2009 7:49 PM
This is called renting desks. This is what you do when you have a decent storefront or office but your firm is doing lousy. You rent desks and office services and a right to hang your agent license for a month to month fee.
This is the bottom of the barrel for a realtor.
Posted by Anonymous | March 11, 2009 8:05 PM
I think Charles Rutenberg is better.
Posted by Ivan Pintor | March 12, 2009 12:46 AM
NOAH, johhny is back...
Just wanted to say that i hope Stella is dooing better and wanted to hear your take on the Interstate land sales full disclosure acts .... the new tool to get out of contracts from buyers in that new york times article on the 6th ... any chance this has legs !!!
gold higher ..trading 928 spot right now.. still in tandem with stocks but was saved, it appears, in part by Freddie Mac announcing that it flushed another $30 bn or so of the US taxpayers' cash down the sewer in just three months. That, plus a 12.1% drop in Japanese GDP in Q3, has ended the nice dream that equity investors were having about "the worst being over". Cash has started to flow back into the SPDR gold ETF. Although the price of Citibank's CDS's fell earlier this week the vast bulk of the global credit market remains unnaturally illiquid.
Posted by johnny | March 12, 2009 10:35 AM
Ummm....how about a business model that a) supports lower commissions and/or flat rate selling; and b) increases entry barriers or purges real estate brokerage of the thousands of dirtbags who currently troll the industry.
Tinkering with the way the industry divvies its pie while saying nothing about the interests of property sellers doesn't interest me. It's like the UAW bickering among themselves. Just make good cars at a good price - don't bore the rest of us with you internal nonsense.
I appreciate your boldface comments, which essentially say the same thing with your usual, admirable diplomacy. My last transaction was a nightmare; it made me wish me and my agent were 12 years old so I could simply kick his ass and not go to jail. Unfortunately, I had to speak (read: argue) with him frequently.
Not feeling diplomatic toward agents at all....
Posted by Zip Cuzo | March 12, 2009 12:47 PM
Welcome back JOHNNY! I stil got my gold, that is a hold for me for at least another year or two, or unless it gets silly.
Thanks for comment zip! Anon is right. They are basically trying to cover costs and eek out any profit possible by leasing desks. It certainly is not a sign of strong business, more a sign of the times.
I hope to be one of the players that helps to make this business more efficient for buyer/seller. It wont be easy, and big boyz will do anything to crush innovation, but I'll still try.
Posted by Noah | March 12, 2009 1:38 PM
Charles Rutenberg IS better. 100% commission - the Sales transaction fee is $1000 for sales under 1.5MM over 1.5MM only $2000 - Pay out only $100 per month (email, cell # transfer, VM, OLR, support from the former head of Elliman etc.)!!! and Rental transaction fees from $200 and top out at $800 for a 5K rental- Hello - If you like to hold on to your earnings CR is the way to go! No intro fee or desk fee- work from home or go in and get a desk- personally - I don't need a desk- I pay rent and get my monies worth from working at home- and my doggie need not be alone :)
Posted by Natalie E | March 12, 2009 2:05 PM
the rest of the country has been doing biz like this for years. NY'ers are recalcitrant and all too often FEARFUL of change. The old turks will die in place before changing. This model will attract the new turks which will grow and eventually take over the market.
Posted by michael | March 12, 2009 3:30 PM
looking like a triple top high in gold on the monthly and weekly. careful with that position guys
Posted by cfranch | March 12, 2009 4:39 PM
cfranch - holding some deep out of the money puts, just in case. Im only holding 500GLD, 600DGP, GLD calls on long side. But Ill prob hold that for a breakout. If there is going to be an asset class that shocks on upside, I deep down think it will be precious metals. It may get silly.
Posted by Noah | March 12, 2009 5:18 PM
noah ..any comment on the law suits ..just curious if you think this will not benefit buyers by getting out of their deposits...
20 Pine , 75 Wall etc.
Intertstate land Sales Full disclosure act ....
Aparently non of these buildings followed the proper procedures
from curbed :::::
1) More and more buyers are lawyering up to break contracts and get their deposits back, but what's their strategy? Some, including buyers at 20 Pine, District, 75 Wall, One Hunters Point and One Brooklyn Bridge Park, are attempting to use a legal loophole called the Interstate Land Sales Full Disclosure Act. Others are looking for slight discrepancies between the offering plan and the finished product. Will any of these plans work? TBD! ['What Contract?']
Posted by johnny | March 12, 2009 5:35 PM
noah ..any comment on this ..was curious to see your opinion ..was expecting a post on UD !!
from curbed :::::
1) More and more buyers are lawyering up to break contracts and get their deposits back, but what's their strategy? Some, including buyers at 20 Pine, District, 75 Wall, One Hunters Point and One Brooklyn Bridge Park, are attempting to use a legal loophole called the Interstate Land Sales Full Disclosure Act. Others are looking for slight discrepancies between the offering plan and the finished product. Will any of these plans work? TBD! ['What Contract?']
Posted by johnny | March 12, 2009 5:37 PM
Not sure if you guys saw this, but it doesn't bode well for Finance in NYC...
http://tinyurl.com/ag7vtl
The Times
March 12, 2009
London woos foreign firms with rent-free office for year
Posted by Eastvillboy | March 12, 2009 11:21 PM
Noah-
yes trade makes sense. also like TBT for the inevitable bursting of the treasury bubble
Posted by cfranch | March 13, 2009 9:20 AM
i think less criticism and more accolades are deserved. it takes alot of courage to make changes in the manhattan real estate industry and there's room for plenty of companies with different business models. why not give this a chance and allow these guys to be what we still believe in here in this country, business people and entrepenures ! when the big houses, like corcoran and halstead started, they were the mavericks, people thought it wouldn't work. william b. may will get there. you'll see.
Posted by Ima | April 3, 2009 12:05 AM
This is the concept that buyers and sellers as well as agents want and need to see. A flat rate/flat fee real estate concept is what makes sense and is the way to maintain marketshare!
Posted by Flat Rate Realty | August 12, 2009 1:54 PM