Once mere achy thorns in traditional realty brokers’ sides, discount and sell-your-own-home real estate companies have grown into sizable competitors. Some of these real estate franchises even doubled in size last year.
Help-U-Sell Real Estate added 230 franchises in 2003 for a total of 500 in its network. Assist-2-Sell beefed up its network by more than 100 franchises last year.
Growth is easier in a strong housing market. Yet the expansion of these particular realty franchises also suggests alternative pricing models are gaining ground with home buyers and sellers.
“People don’t want to pay what they used to (for real estate services),” said Help-U-Sell President Rick O’Neil.
Syosset, N.Y.-based Help-U-Sell is a fee-for-service brokerage. Sellers select from a menu of real estate services that includes signage, marketing, negotiation, prequalifying buyers, advertising the home on Helpusell.com and listing it on the local MLS. Individual brokers set their own fees based on local housing market conditions.
O’Neil attributed the expansion of Help-U-Sell franchises to better-informed consumers. Many home buyers and sellers now research for-sale homes online and know what services they want before they contact a real estate agent. They also know there are alternatives to traditional brokerages.
Before last year, a large percentage of Help-U-Sell franchisees were start-up offices, according to Franchise Sales VP Ann Reynolds. But the company last year started to attract more inquiries from brokers who want to convert an existing traditional real estate brokerage into a fee-for-service operation.
“When brokers convert to Help-U-Sell, they will in most cases downsize the number of agents,” she said.
Help-U-Sell brokers can operate in smaller offices since they rely on fewer agents to drive business, Reynolds said. That keeps overall operating expenses down and increases the broker’s bottom line.
The cost to open a Help-U-Sell franchise depends on the location. Conversion of an existing office is less costly since computers and furniture are already in place. The company looks at six-month operating and marketing expenses. Franchisees need to have at least $50,000 in available funds with access to additional if needed.
Not all of the company’s new franchisees are experienced real estate brokers. The outsider viewpoint on the business model makes it easy for them to appreciate this more non-traditional approach to selling real estate, in O’Neil’s opinion.
“We’ve had quite a few people come from different industries but with good business acumen, which is different from what I’ve experienced in the past,” he said.
Twenty-four existing Help-U-Sell offices shut their doors last year due to poor performance. Those “non-producers” had to be closed so the company could open stronger offices to strengthen its marketing efforts, according to Reynolds.
Help-U-Sell differentiates its fee-for-service structure from brokerages that offer cut-rate commissions, but both types of real estate franchises are growing. And both add pressure to the market-rate commissions full-service traditional brokerages charge.
The Reno, Nev.-based Assist-2-Sell franchise added 103 franchise offices last year for a total of 318 offices in 44 states and Canada. Formed in 1987, Assist-2-Sell started franchising in 1995.
The company’s founder and co-owner Lyle Martin attributed the growth in franchises to traditional agents who grew tired of competing with the discounted commission his franchisees offer so they converted.
“They can either fight us or join us,” he said.
Assist-2-Sell is a full-service brokerage that sells homes at discounted commission rates. The company offers flat-fee rates from $2,995 to $4,995, depending on the market. Sellers can use the company’s MLS service, which lists the property on the local MLS with a 4.5 percent total commission.
Martin said most of the new Assist-2-Sell franchisees are established real estate agents who wanted to build equity in their own business rather than continue to be affiliated with a national brand.
The expansion of this chain isn’t a result only of the hot housing market, Martin believes. He thinks Assist-2-Sell’s success has more to do with a positive seller response to the business model.
“We have offices in most every major market in the country. Not every market is enjoying a boom. Take Denver and Colorado Springs, for example; our offices are thriving in those areas,” he said.
The Web has helped as well. Sellers now know traditional brokerages have lower-cost competition and they can easily find out whether a discount chain has a local office.
“The Internet has struck a very significant blow to the multiple listing system and Realtors’ ability to control the (listing) information,” Martin said. “But that’s one of the things that’s driving the price down on commission.”
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