IPayOne.com, a San Diego-area real estate company, launched in March 2004 with a 1 percent total commission program for sellers and offered $1 to agents from outside companies who brought in buyers. Its sales force of real estate agents and loan officers were employees. That was then.
The company still offers its 1 percent program — it seeks to represent both the seller and the buyer in a transaction for this reduced commission rate — and has added higher-commission options through which outside agents can earn more traditional commission rates for bringing a buyer to the table, Also, ipayOne is offering rebates to buyers who work with its agents, and members of its sales force are now independent contractors rather than employees.
“In the early days, when we first came out, our approach … was a little arrogant. That’s what I’ve heard and as such I think there was a backlash. That has abated, but in some cases ill will takes a long time to resolve itself,” said Michael Jackman, who has hired in May as the new president and CEO for ipayOne.
Other young real estate companies have similarly tweaked, evolved, adapted or conformed their services, technologies and operating structures in their quest to survive and thrive among far bigger fish. Some of these companies have seen several management changes. Company representatives say there are still obstacles to overcome though they have made progress in establishing alternative business models in an industry that has at times appeared reluctant to embrace newcomers.
While leading ipayOne, that company’s founder and former president, Burke Smith, had told Inman News that the company had received nasty letters and phone calls from other agents who were upset at the company’s approach to the real estate business. Smith left ipayOne to work for Prudential California Realty, a large real estate company.
Another pioneering low-cost real estate company, Foxtons, alleged that its competitors were boycotting Foxtons property listings and offering unfair shares of commissions because of the company’s commission practices. And ZipRealty, another relative newcomer to the industry that was founded in 1999 and became a publicly traded company in 2004, has noted that there are still U.S. markets where the company cannot offer rebates to consumers because of restrictive state policies.
Jackman, of ipayOne, said the company is now extending its hand to other real estate companies. “Established real estate companies have a vested interest in the status quo but they’re also our partners. We can’t sell our properties unless all real estate agents are willing to show our properties. At one point in time we weren’t operating much in the way of a market-level cooperating commission,” he said, though the company now offers sellers the option to pay a higher commission so that the company can share this commission with agents from other companies who bring in home buyers.
As the real estate market in the region has shifted from a strong seller’s market to a buyer’s market, it also made good business sense to reach out to buyers, as the business model had primarily been marketed to sellers, Jackman said. “So we’ve evolved the model to include a buyer’s reward.”
IpayOne also seeks to sell mortgage products to its real estate clients and vice versa, and Jackman said the company has plans to train a team of “hybrid agents” who can function in a dual role for clients as real estate and loan professionals. He said that ipayOne, as an integrated real estate services organization rather than a standard real estate brokerage company, is examining ways to simplify the transaction process by creating more of a one-stop shopping experience for consumers.
The company also has plans to roll out a new Web site within the next couple of months, he said.
Foxtons, a low-commission real estate company that operates in the U.S. markets of New Jersey, New York and Connecticut and shares its name and ownership with its British counterpart, has also made several changes to its operations, said Les Newlands, the company’s senior vice president of sales.
All of the company’s property listings are now featured in a multiple listing service — the company’s business model did not formerly provide for the MLS display of properties. And the company has formed a group of “Realtor agents” in addition to its supply of buyer-specific agents and seller-specific agents. These Realtor agents specifically work to encourage other Realtors from outside companies to bring their clients to Foxtons listings, Newlands said.
“The Realtor agents will obtain feedback from (outside) Realtors and share that with the seller,” he explained.
The company, originally founded as YHD Realty, changed its name to YHD Foxtons after an investment by Foxtons in 2001, and dropped “YHD” from its name in 2003. Foxtons had earlier promoted a 2 percent total commission rate for its U.S. real estate brokerage services, though later changed to a 3 percent model in which the company keeps 2 percent of the commission and offers 1 percent to cooperating brokers from outside companies that bring in a buyer.
Newlands said that the company does not accept the label of “discount broker … we hate being put in that space. We’re a full-service broker.” He also acknowledged that there are real estate professionals who do not appreciate Foxtons’ low-commission business model. “That’s the reason why we’re hated (by other companies),” he said.
Newlands said it is clear that consumers want full service for a low cost. While Foxtons is in some ways an unconventional company, he said that it “still has so many of the elements of the traditional Realtor. We still believe that real estate is not going to go totally online. We have boots on the ground to interface with buyers.”
And while the company has at times met resistance from some other real estate companies, Newlands said it appears there is now “more acceptance of Foxtons — maybe (they are resigned) that we’re not going away.”
In addition to its low commissions, Foxtons hires its agents as employees, paying them a salary plus a commission and benefits. The company also has a fleet of branded Mini Cooper vehicles that its agents drive around, and there are about 450 agents, Newlands said.
While Foxtons has seen the departure of founder Glenn Cohen and industry veteran Van Davis over the past few years, Newlands said there is no plan to hire a new CEO to oversee U.S. Foxtons operations. The senior management team reports directly to Jon Hunt, the founder and CEO of London-based Foxtons, he said. “There is no plan — at least that I am aware of … to bring in anybody. He is effectively the CEO here and there.”
ZipRealty, a technology-centered real estate company that operates in 19 major metro areas in 12 states and Washington, D.C., has announced several new Web site features this year that are intended to provide more detailed property information and allow more user interaction and enhanced search capabilities.
Pat Lashinsky, a senior vice president at ZipRealty, said that the company has had a “buyer-centric model since day one,” and that should bode well as the housing market shifts toward a buyer’s market in many parts of the country. The company has had a mix of about 80 percent buyers to 20 percent sellers as clients, he said, though the company has seen a growing concentration of sellers.
ZipRealty was a pioneer in rolling out comprehensive Web-based real estate information for buyers, he said, and the company has added the ability for users to post comments on the site about specific properties.
While ZipRealty had initially sought to have a centralized force of sales agents, Lashinsky said the company tweaked that to allow agents to work out in the field and to supply them with real estate leads where they live and work.
When ZipRealty first launched, he said, “I think that real estate was really, really behind the times.” Now, the industry appears to have widely accepted and adopted new technologies, he said, and there has been a new wave of innovation.
“We see this huge swell of technology. We’re back in a time of innovation and we’re happy to see it,” he said.
Lashinsky and representatives for Foxtons and ipayOne agreed that consumers are more tech-savvy than ever, and they are searching online for real estate information like never before.
“Getting information is much, much easier than it was in the past. It is significantly easier than it was two years ago,” Lashinsky said. He added that the availability of information and technology might be an enabler to new innovators.
ZipRealty offers rebates to buyers and discounts to sellers who list their properties with company agents. The company announced last week that Richard Sommer, former CEO of online real estate marketing company HomeGain, will join ZipRealty as CEO on Sept. 6. Former ZipRealty president and CEO Eric A. Danziger stepped down Aug. 1. Scott Kucirek, the company’s co-founder and executive vice president of new market development, left in November and was hired in January as general manager for Prudential California, Nevada and Texas Realty.
