Most people see the current group of real estate professionals neatly split in two. On one side are the traditional, full-service real estate agents, with in-depth services (and standard commissions, which often run about six per cent). On the other side are the relatively new companies, charging a flat rate so both buyers and sellers save, but also requiring a lot more do-it-yourself participation from buyer and seller alike.
Conceivably, the ideal world would be one where the full-service agent provides their expertise for the flat rate. Economics, however, would suggest that this is a pipe dream. Yet one company is turning that pipe dream into a market, and their sights are on the East Bay.
Enter SELLSMART(R). Founded in 1999 and commencing business in 2002, the brand name became a full-fledged franchise late last year. While the majority of SELLSMART(R)’s offices are based in Southern California, the company clearly has its sites set on Northern California and the Bay Area.
With offices already in operation in Emeryville, Modesto, and San Ramon, as well as many in the Sacramento area, the company seems poised to add a notable third option in real estate. (The franchise also operates in Florida, Nevada, and Washington, DC; however, the bulk of its 40 to 50 offices are in California.)
Touting its services and business model as “consumer-driven,” company co-founder Lynda Cook stated in a recent press release that, “Sellers have been waiting for an alternative to traditional high commissions. Our competitive set fee structure fills a long-awaited niche in the real estate industry.”
San Ramon franchisee George Pavana agrees. “It’s a consumer driven program,” he says, noting that SELLSMART(R) addresses customers’ awareness and knowledge of online resources when it comes to buying and selling real estate. “Today’s consumers are pretty savvy, and they know they can save money.”
As an example, Pavana cites the flat fee for a $500,000 home, which can be sold by SELLSMART for $4,950. “The savings are pretty substantial,” he says, “particularly here, where homes frequently go for $800,000 or $900,000.”
But doesn’t it sound too good to be true?
Pavana says, while the situation seems so, there are sound explanations for why SELLSMART is working. “We’re a cut above other flat-fee services,” he says. “They tend to charge one per cent for this, two per cent for that. By the time you add that up, you’re at full standard commissions.”
By contrast, Pavana says, his office provides the same full service as regular real estate agents would. “We sell the home, we show it, we market it,” he explains.
With a growing network of SELLSMART offices, Pavana says the agency usually tries to sell the property internally first. “We try to market it ourselves, initially, and that saves the seller quite a bit of money. If, after about 30 days, the home doesn’t sell, then a broader marketing campaign is undertaken.”
Unlike other flat fee services, Pavana says they will market homes on the Multiple Listing Service (MLS), the common listing service in each area. “That is the only time we charge an additional fee,” he notes, “and at that point, we charge an additional 2.5 per cent because other, outside brokers will bring in buyers. But sellers can also choose to avoid the MLS altogether and not pay the additional 2.5 per cent.”
But how does such an operation offer so many services at a fraction of the cost?
Pavana claims that many full-service agencies spend a lot of time and advertising promoting individual agents. By promoting solely the SELLSMART(R) brand, Pavana says he saves quite a bit on advertising and promotion, since he’s more concerned with the franchise name than marketing each individual agent. “We don’t do that, and we save a lot of money that way,” he says, adding that agents working for SELLSMART earn a portion of the flat fee from each transaction.
In addition, the agency often obtains discounts on closing cost items, and passes that on to SELLSMART(R) customers. “We give up to a 20 per cent discount on a buyer’s closing costs,” he notes.
Where SELLSMART doesn’t skimp, Pavana says, is on the important items, like errors and omissions and other liability-related coverage. “We cover just like a Century 21,” he says.
Although his San Ramon office just opened in August, 2004, Pavana has seen great success with the SELLSMART(R) model, and is eager for more offices. “I’m in the process of expansion talks with SELLSMART(R). I’d like to open more East Bay offices,” he says, adding, “The Sacramento area is all sold out.”
That sold-out area isn’t surprising, particularly since Pavana is clearly not the only person who wants to join the SELLSMART(R) empire. The company claims it has opened about one office per month in 2004, and in 2005, it has already announced an additional office in Nevada City, California.
Is this a new market niche? The new order in real estate? Or simply an idea that will come and go? Stay tuned.