More Industry Change: William B. May

Posted by urbandigs

Wed Mar 11th, 2009 03:50 PM

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.

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.
Below is the list of services being offered to newbies:

williambmay.jpg

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:
miller-samuel-manhattan-real-estate.jpg


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?

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