Joe and Nickole Hayward got a check for $5,000 after they sold their home in Tucson, Ariz., and bought another home in the area using the same real estate company.
They worked with Two4One Real Estate, a company that has adapted a “buy one get one free” business strategy for real estate services.
The Haywards heard about the company from a friend, and the couple decided to use Two4One after checking out a couple of other real estate companies in the area.
“We’d be out $5,000 had we not gone through (this company),” Joe Hayward said.
Tom Wedic, another homeowner who used Two4One to sell his home and buy his next home, said he learned about the company through a printed advertisement he received in the mail.
“I just saw his ad. I was kind of skeptical but I tried it — it was for real,” Wedic said, adding that he received about $5,000 as a refund when he closed on the purchase of a new home. “I would definitely do it again.” Wedic said he was impressed with Dan Pool’s negotiations in the purchase transaction, and he has referred some other consumers to the company.
Two4One Real Estate, founded by Dan and Kelly Pool, refunds money to homeowners who work with the company to sell their current home and buy their next home.
In a typical real estate sale involving real estate agents, the seller pays a listing agent to handle the sale, and that agent shares about half of this payment with an agent representing the buyer. Typically, the listing commission ranges from about 5 percent to 7 percent of the home’s selling price, so buyer’s agents can expect to receive about 2.5 percent to 3.5 percent of this commission.
Two4One accepts a commission of about 6 percent for homeowners to list a property with the company, and offers half of this commission to a buyer’s agent who represents a home buyer. When the home sellers purchase their next property, the company refunds the other half of the original commission to the consumer while profiting from the commission received in the purchase of the next property.
If the consumer is downsizing by purchasing a cheaper home, the company keeps whichever commission share is larger while refunding the smaller commission share to the consumer.
Clients make an agreement with the company to give the company 3 percent of the commission “on the most expensive transaction we handle for them” – either the home sale or the home purchase, said Dan Pool. If the company’s clients are buying a home from a seller that is not offering at least 3 percent to the buyer’s agent, the client would need to pay the difference up to 3 percent. Two4One clients are expected to purchase their home within 60 days of their home sale.
The company’s unique approach to compensation is outlined in an addendum to the listing contract that clients sign.
It was a single transaction that led the Pools to pursue a new business model, said Dan Pool. The Pools began their real estate careers about a decade ago with a RE/MAX office, and they left about five years ago to start up their own company, Power Plus Realty, serving the Tucson area.
Dan Pool said he had a client at a local U.S. Air Force base who was selling his house to move into a larger house. But the buyer couldn’t afford to pay the listing commission and still afford to purchase the larger home. He told his wife, “Our listing commission is standing in the way of this deal happening. She said, ‘Why don’t we just waive the listing commission – sell this one for free and on the next home we’ll get our money there.'”
The couple’s brand of “two-for-one” real estate services was born, and they did several similar deals before deciding to pursue these deals as a formal business model. Now, the Pools are working to develop a franchise network of Two4One Real Estate offices, and the company has four offices and about 14 agents in the Tucson area. The office started using the Two4One name in January 2004 and launched its first franchise in March 2004. Pool said he and his wife sold about 82 homes last year.
“One of the things we did with our system – we never wanted to slight the buyer’s agent. Our listings are always at 3 percent (for buyer’s agent commissions),” Pool said.
Pool said the initial fee for the franchise is $9,500, with plans to raise that to $15,000. The company’s franchises are awarded based on a service area with a population of about 100,000.
In cases where clients are relocating outside of the Tucson area, Pool said the company offers a flat-fee listing service with a listing commission of about 1.3 percent to 1.5 percent, and a commission of about 3 percent offered to a buyer’s agent, depending on the marketplace. Two4One would then accept a referral fee in the next home purchase, and refund half of that referral fee to the client.
While Pool said some agents in the real estate industry will boycott listings that offer discount commissions to buyer’s agents, his business model allows prospective home buyers to decide whether they want to pay the difference when the seller’s agent is offering a commission that is less than 3 percent to the buyer’s agent.
“Our customers are in a position where they are having to make that call,” he said. “We don’t boycott the (companies) that are offering less – we present it back to the customer.”
Two4One, while it offers discounts in the form of refunds to consumers, is a full-service real estate company, Pool said. While he was at first worried to offer details to outside companies about his business model, he said he isn’t so worried anymore about industry copycats. One of his consultant friends told him, “Look, do you think that McDonald’s is concerned about somebody cooking burgers across the street from them?”
While some real estate companies expand by hiring mass amounts of agents and buying up large office spaces, Pool said his company is designed to run with a small team that does business by word of mouth and doesn’t need a huge ad budget. “We basically have cut out the wastefulness in the industry,” he said. “We’re just here to do what works for us.”
Pool said Phoenix and the California markets of Orange County and San Diego are potential candidates for new franchises offices as the company expands.
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