It never ceases to amuse me (amaze me?) what the press finds “interesting” for a real estate “news story”. Of course it is totally predictable what Inman News finds newsworthy – hacking away at Realtor commissions. Brad Inman has been on a mission from God on this issue for some years. So please don’t get the idea that only obviously crazy people are the only ones working on this vital issue. Here is a link to post I made on Inman’s blog last week. If you are interested, here is the link to the video on CAR’s website. Allan Dalton’s comments, especially the stuff in the last twenty minutes, are well worth any Realtor’s time. I especially liked his idea that yammering on about “we give great service” is NOT productive – and that no one really gives a crap. You will see what I liked so much if you watch it. The first part is quite boring but once Allan starts to talk – turn the volume up and listen.
Zip. A stupid name? I think so. But damn are they good at using the press! Here are some numbers they just released:
ZipRealty Inc. (Nasdaq: ZIPR) today announced third-quarter net income of $600,000, down from net income of $2.9 million in third-quarter 2005. For the first nine months of the year, ZipRealty reported a net loss of $386,000 compared with net income of $2.57 million for the first nine months of 2005.
The company employed 1,747 ZipAgents as of Sept. 30, compared with 1,383 at the end of third-quarter 2005 and 1,669 at the close of second-quarter 2006.
ZipRealty also announced that the total value of real estate transactions closed decreased about 11.8 percent in the third quarter to $1.2 billion, compared with $1.36 billion in third-quarter 2005, while the number of transactions closed fell 6 percent to 3,467 compared to the same period last year.
Please keep in mind this is a NATIONAL company. In my area (greater Phoenix area) there are privately owned real estate companies that have better numbers than Zip.
Local companies here that have about that many agents (just here – not all over the U.S.) would be: Realty Executives, West USA, 1st USA Realty Professionals, Dan Schwartz Realty – to name but a few.
I personally know INDIVIDUAL AGENTS who have quarterly net figures comparable to Zip’s (their entire corporation) quarterly figures.
But because Zip Realty is supposed to “help the consumer” and there are endless articles in the press about their “dynamic growth”. Every time they open an office they manage to get national attention. Compare the amount of national press the press gives to – just for example – Keller Williams Realty. KW opens more offices, recruits more agents, is growing at a significantly faster rate (both in rate of growth and in absolute numbers). In fact, in virtually every meaningful way, KW is way ahead of Zip Realty. This includes the average commission rates that KW agents charge the consumer. Read that last line again. The average consumer is getting a better deal from the average KW agent than from Zip. But that isn’t “news”. KW isn’t positioning themselves as a “discounter”.
No, writing about a “traditional broker” – hell, that just isn’t “news”. It isn’t “exciting”.
Just an educated guess but I’m thinking that a name, like say, “Re/Max” (if one wants to choose a national brand) has much more credibility in the consumer’s mind. Sometime – just for a fun exercise – get the actual commission rate that Zip would charge and compare that against what the average (especially with the mind set most agents have in this market) Re/Max agent would charge. I believe that the commission rates will be very close if not better (lower) from the Re/Max agent.
Zip is a public company. So the “normal” rules, like one has to actually make money tend to get suspended for quite some time – while the stock floats up and down. Where a real “boring” company like Keller Williams is physically owned by individuals who care about every little detail regarding the actual company – not what Wall Street thinks.
Do I think Zip will wind up “successful”? Not really. Unless there is something I am missing here, what real value proposition do they offer? Lower commissions? Not really – and lower commissions alone isn’t (at least at the rates they have to charge just to pay expenses) enough – as their rates really aren’t that low.
It is almost as though the various news media don’t evaluate relative importances very well. Could that be possible?
Benjamin says:
Hey Russel
I’m with a fairly new (just one year young) Keller Williams office in South Western Ontario, and we currently have the highest average commission out of offices in the area, averaging over 5%.
The ‘normal’ commission out here is 5%, and increasingly we’re seeing 4.5 and 4 become normal for listing residential; many realtors in my office still are signing people up at 6% because we do offer more value and service than other firms.
Does KW have the perception in the US of being a ‘discounter’ ?
Benjamin
http://www.benjaminbach.com
November 10, 2006 — 4:07 am
Phil Hoover says:
I am curious if anyone else equates “Zip” as being equal to “zero”?
Who are these marketing geniuses who pick these names, anyway???
As for commissions, I find being with RE/MAX to be a huge advantage because I pay to be there, then they get out of my way and let me run my business as I see fit.
I can charge whatever makes sense to both the client and myself, and that often means a flat fee that is directly related to the complexity/effort required.
November 10, 2006 — 9:33 am
Doug Quance says:
Russell,
I enjoy your posts and am glad Greg has you on the blog.
The last time Zip tried to recruit me, I looked at the stats for their Atlanta operation. In 2005, their top agent earned less than $25K regarding their share of the commission, if memory serves me correctly.
If the top dog is barely getting by, I don’t see how they are any real threat in regards to knowledge or service. As one of your previous posts explains so eloquently, we’ll see how these models do in a down market.
Anyone remember eRealty?
November 10, 2006 — 10:12 am
Tyler Sookochoff says:
“I especially liked his idea that yammering on about “we give great service” is NOT productive – and that no one really gives a crap. You will see what I liked so much if you watch it. ”
I watched the video, Russell,and found Dalton a very interesting/entertaining speaker. I take your above comment to mean that you agree with Dalton that you (as a real estate agent) are in the ‘skills sector’, not the ‘service sector’. What would you suggest are the top skills that an agent brings to the table that cannot be easily replaced by technology? What skills should an agent advertise/promote that are unique to him/her? (As opposed to talking about ‘service’.). Negotiation skills? Marketing skills? Valuation skills?
November 14, 2006 — 12:56 pm
Almost out the Door says:
To Happy Camper,
I am in the position where I’m really starting to think that Zip is no longer the place for me. I’ve been with them for over 8 months now and have only closed 2 transactions. True, I am new to real estate, and true, the training at Zip isn’t all that great. I was not prepared for what was about to happen, though I had great help from other agents and my broker in getting the transaction closed. I’ve closed a deal with KW also, in which they wanted to recruit me. I’m skeptical about leaving because of the lead generation, which I’m currently not paying for out of pocket, though I want higher commission splits. Being a single mother of two, and currently living with my mother, is not where I want to be! I love my job, and want to obtain the best training possible to compliment my skills and abilities. Though I have gotten both completely satisfied customer service reviews, this isn’t enough in my book.
I read quite a few posts, and there are many subjects I agree on. I don’t want to rant and rave about anything, because at one point, it was exactly what I wanted. On the other hand, I do feel it’s time for serious change if I’m going to be a successful realtor.
I would like to obtain more information regarding the company you work for with the residual income, along with your commissions. What is your split?
And also, regarding the splits that Zip offers, sucks big time! When you start out, it’s only 35%, then depending on how many deals you close, determines if you split increases, going to a max of 50%.
Help!
please send email to tcloves1@yahoo.com.
Thanks!
September 4, 2007 — 7:54 am
DD says:
I can certainly appreciate many of the opinions regarding Zip. There is a misconception that they are a “discount” broker and therefore offer “discount”, or less than Full service, and this is not true at all.
Although I would love to get into a discussion in regards to these misconception, I am really only interested in correcting “Happy Camper’s” information.
The start commission is actually 40%, of which you pay zero for business cards, flyers, advertising, leads, postcards, marketing material,desk fees etc. Once you close 4 transactions in a quarter you will begin to receive a monthly allowance (I think it’s $450) to use for gas, cell phone, etc. Once you prove yourself, the commission split goes as high as 75%, not 50% and you have the possiblity of receiving $1000 monthly stipend.
Now that I have that bit of information clarified I will leave you all to your Zip bashing. Good day.
September 18, 2007 — 4:48 pm
vickie says:
Dear DD,
Your statement that the start commission is actually 40% is incorrect… remember that an 8.33% technical investment fund (TIF) is also deducted from each closing, therefore the start commission is actually 31.67%.
Then subtract the home office expenses, car maintenance & gasoline for the long distance diverse driving of the many market areas to cover, which provides sufficient leads, to finally arrive at a gross profit of about 27%-28% of 3%. Basically, new Zip Agents earn slightly less that 1% of the 3%. Not complaining… just a fact of the matter.
October 11, 2007 — 1:11 pm