It’s mostly about technology. But it’s also about online leads, listings and money.
Those are the first conclusions that can be drawn from Prudential Real Estate Affiliate’s acquisition of eRealty, the Houston-headquartered online brokerage that practically invented the listings-rich virtual office Web site.
ERealty was an attractive buy because it has “very good technology for the incubation of customers online,” Prudential chief Earl Lee told Inman News today.
Indeed, it would be odd to characterize the acquisition as an industry consolidation play, given that eRealty has only 160 sales agents spread among a dozen metropolitan markets.
Rather, Lee’s plan is to take eRealty’s technology nationwide and thus enable Prudential’s 46,000 real estate brokers and sales associates to take advantage of it. The goals are to improve those brokers’ and associates’ abilities to obtain business from the Internet, communicate with online prospects in their preferred way (i.e., through e-mail) and convert them into the closed transactions even many months later, based on eRealty’s experience with the technology.
“Finding customers upstream, knowing who they are and having the ability to communicate with them on their terms is clearly an advantage the system will have,” Lee said. “If there is a tool that we should provide (our affiliates) that will help them work with buyers who are six, nine, even 12 months away, then we are bringing tremendous value” to them.
The combination of the Prudential brand, franchise network and Prudential.com Web site with eRealty’s online listings display and leads technologies is intended in Lee’s vision to create a powerful way for Prudential brokers to capture a larger share of the home buyers and sellers who search for real estate information on the Internet.
The idea is to turn the Prudential Web site into a nationwide lead-generating and “customer-incubating” system, to use Capper’s description of eRealty’s technology. The system can and will display competitors’ listings alongside Prudential own listings where the local Prudential broker opts for that approach and the local MLS has implemented the National Association of Realtors’ virtual office Web site rules.
The use of brokers’ listings on the Prudential Web site will be implemented “in conjunction with” the Prudential affiliates and will comply with local MLS rules, Lee emphasized.
“If the MLS is not participating, we will show only Prudential listings” for that market, he said.
Taking eRealty’s technology national squares with Prudential’s broker-centric model of the real estate brokerage franchise business because the individual brokers will decide for themselves whether they want to participate and if so, they also will decide how to distribute the leads they obtain, Lee said. The leads will be distributed on a geographical basis, although the details have yet to be decided.
The terms of the acquisition haven’t been disclosed. Yet Lee said Prudential will incur a “not inconsequential amount” to expand eRealty’s system from a dozen locations to a national network. The company will pick up all the costs to implement and maintain the Prudential.com listings-posting and lead-generating system.
But Lee’s no dummy with an oversized capital expenditure problem. He also has a plan–in the form of a referral way–to recover the costs of his bet on eRealty’s technology. It’s the same plan franchise relocation companies have used for decades and dot-com real estate lead generators have replicated online in recent years. Lee said the percentage of the referral fee hasn’t been decided yet, but it will be the same across the board for all Prudential brokers.
“If a transaction occurs, a fee will be paid,” he said.
Lee has a timeline in mind to recover the initial investment and operating costs, but he declined to specify when he expects Prudential’s new eRealty system to reach the breakeven point.
Technology is worth only so much without the expertise to use it. That’s why eRealty CEO Russ Capper and his crew are staying on board to guide what might be characterized as Prudential’s eRealty technology arm. Pru brokers will have the opportunity to add the eRealty agents to their own rosters.
Those agents may be few in number, but they have a “different skill set” that adds value to the package, Lee said. After all, eRealty has spent five years learning how agents should communicate with prospective buyers and sellers who enter the system very early in ther process. That’s the expertise Lee would like to see Prudential brokers turn into new business opportunities.
“This transaction combines very good technology with traditional real estate entrepreneurs (in a way) that will enhance the real estate experience. We have the best real estate operators, and we have the brand name. We have people who are leaders in the industry. Bringing them additional technology resources is in line with our mission as a company,” he said.
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