While I applaud your efforts to radically change the real estate business with a new and innovative business model, I strongly believe that there is a better model. I like the idea of having employees, rather than agents on commission, and I completely agree with a centralized office serving a large area with agents in the field, representing a territory. One other element that would add value is for all agents to drive redfin branded vehicles (all of the same model and year like a mini or something like it) with laptops and printers. In regards to representing the buyer, offering a rebate is excellent, so long as the agent is familiar with the territory (home values, schools, etc). Real estate is a local business and will always be and it is extremely difficult to only rely on information systems/technology to obtain this information. Also, research has been done by a consumer marketing company that concluded using the word “match” or “matching” is more effective than the word “rebate”. In regards to representing sellers, I think your model will be much more difficult to execute successfully. Cooperating with other agents and brokers is so important – remember the goal is to sale the house, not change the world. The Help U Sell model of charging a flat fee does not mesh well with the traditional system. A more effective approach is to push the commission structure to the outer limits. For example, if the prevailing local commission is 6%, charge 4% with 2% as a cooperating commission. Even more innovative, is to have a tiered commission schedule offering 2% to “for sale by owners”, 4% to the typical home seller (average house in a neighborhood), and 6% to those who want to pay more for whatever reason or for more complicated transactions like land, commercial property and investment property (apartment buildings). This way the customer is making choices in regards to service and commission, and can take into consideration the cooperating commission aspect if desired. The most successful company that has a similar business model is Foxtons in New Jersey, formerly known as “YHD” or “Your Home Direct”. This model allows for you to save your clients money, it allows one the ability to cooperate with other agents, it allows for agents to make a career in real estate (higher compensation), and it allows for you to establish yourself more quickly and the potential to lure away agents from other companies as one grows – this will only happen if you are willing to cooperate (albeit to the extreme) within MLS and if you are able to prove that your system works not only for the client but for the agent in terms of leads and customer service. The flat fee model is too heavily dependent upon breaking the current system (counter product when the system is highly fragmented and relies on cooperation to a very high degree) and it is based on volume (transactions). Consequently, a model that pushes the envelope is probably the most effective way to go.

Regards,

Michael Kirch
Broker/Owner
http://www.4krg.com
California/Nevada