NEW YORK — Real estate discounters are down but not dead, and more traditional companies are struggling, too, under the weight of a wounded economy and hobbled housing market.
That’s the word from Glenn Cohen, founder and CEO of Expert Real Estate Services, an online real estate marketing and lead company, who spoke during a panel at the Real Estate Connect conference last week in New York City.
Discounters are especially challenged in a slumping real estate market "because in a down market people are desperate to sell," Cohen said.
"And in their mind (consumers) believe — whether it’s true or not, and in some cases it very well is — that the local agent of the big brand name can do a better job for them and they’re less likely to trust the sale of their home with a discounter."
He added, "I don’t say (discounting) can’t work, and there always will be a small place, I think, for flat-fee MLS and for discount. And if you develop some best practices around it you can do really well, but frankly you can’t make a whole lot of money as a flat-fee discounter, at least the way I view the business model. So it’s not all that enticing for an entrepreneur."
Cohen has personal experience with two discount real estate companies. He created YHD.com, a discount real estate company that would later become the U.S. real estate operations of Foxtons. Cohen was bought out of the company by Foxtons, in March 2004, and in 2007 the U.S. operations of Foxtons ended in bankruptcy proceedings.
After his work at YHD and Foxtons, Cohen launched Expert Realty, a discount company in Florida that has ceased brokerage operations and morphed into its present form.
"Two years ago in South Florida we saw some really ugly things happening and said let’s step aside — step out of the brokerage business," Cohen said.
The traditional real estate industry is definitely not immune to the market woes, either, Cohen said.
"Clearly the traditional industry has problems today. Let’s not underestimate the problems that they face. Many, many big-sized brokers are on the brink of being in business or not being in business — let’s be real here," he said. "We believe that brokers who stay in the status quo will be extinct."
Cohen cited Better Homes and Gardens Real Estate, a franchise network launched last year under the banner of franchise giant Realogy Corp. (GMAC had formerly held franchise rights to the real estate brand), as a company that is working to "step out of the box."
Sherry Chris, president and CEO for Better Homes and Gardens Real Estate who also was a panelist, said that her company made a concerted effort to "launch with strong Web 2.0 principals and philosophies" in building brand presence, and to capitalize on the Better Homes and Garden publishing company’s consumer reach and appeal.
Chris said she believes the brokerage industry will become increasingly technologically oriented and sophisticated. She said she sees an evolving role for agents in offering more services to consumers, and she believes the pool of agents must shrink.
"The consumers in general are wounded because of today’s economy and they’re going to be gun-shy coming out of this. They’re going to need a different kind of consultative agent — and agent who provides different types of services to them. We can’t just wait for business to come to us anymore," Chris said — she expects more partnering among companies within the industry, among other changes.
"We’re at risk as an industry of dramatic changes taking place because of the state of the economy and the state of the market now and new entrants coming into the business. I see … companies that would never partner with one another start to" in the months and years ahead, Chris said.
"There are too many real estate agents in the U.S. today," Chris also said, and that productivity will be important going forward. "I make my money through royalty fees and if we don’t have productive agents and brokers joining the network … if I had 2,000 agents and only 1,000 productive (agents), that does nothing for me. Having a smaller group of productive people who are meeting and exceeding consumers’ needs in the future — that’s what’s key."
Yuval Degani, a panelist who is president of Chicago-area Chicago’s Dream Town Realty, said his company has worked to simplify agents’ jobs by sending them a stream of leads and providing them a customer relationship management system and other services to allow them to spend more time with clients.
"We do everything for agents," he said, noting that the company has worked to build an inviting environment for agents and even offers a meditation room and massages. "We understand that our agents are the most important thing. Their well-being is a priority for us."
Cohen, meanwhile, said that the industry should be focused on moving from an agent focus to a consumer focus — "that’s what’s going to win the day."
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