Realty Times: Help-U-Sell: The Timing's Finally Right

August 14, 2000

Help-U-Sell: The Timing's Finally Right
by Blanche Evans

In 1981, Help-U-Sell Real Estate was ahead of its time as the first fee-for-service franchiser, but that isn't necessarily a good thing when you're trying to buck a fundamentalist system in a tradition-based industry. Suddenly, after twenty years of slow, but respectable growth, the company is seeing a change of attitude and acceptance of its fee-for-service business philosophy by consumers and top brokers. What's changed and why?

Help-U-Sell has franchises in 33 states, but the company has seen 40 percent of the company's overall growth in the last year alone. Twenty years is a long time to spend lifting off, but the company had a lot of drag on its wings - an industry that didn't want the highly lucrative commission system to change.

A slow market evolution

What took so long for the industry to accept fee-for-service brokerage as an alternative business model? There were several influences, but these four had the most impact:

In the eighties, almost all agents were agents of the broker and the broker was the agent of the seller. Buyers had no fiduciary representation. The release of the FTC's negative report on the real estate industry in 1983, which exposed the duplicity of dual agency, caused a consumer backlash against Realtors. Although the industry is still tainted by the report, it has grudgingly allowed the development of new business models such as buyer's agency and fee-for-service brokerage to emerge.

Twenty years ago, the industry was broker-centered. Agents were paid a percentage of the total commission with the average split about 50-50 between a broker and his or her agents. The introduction of the 100 percent franchisers such as RE/MAX, Realty Executives, and others meant lower splits and higher costs for brokers who suddenly had to expend more money and effort to recruit and retain top agents. Over time, the industry saw a shift from broker-centered companies to agent-centered companies. Recruiting packages became about how much market share a broker could bring to his or her agents, as well as how many tools a new agent could have to attract and close leads.

Mega-brokers were local stars in the past. Throughout the eighties and nineties, mega-franchises penetrated key markets and bought their way to market share by buying out local brokers and their locations, or installing new offices in hot areas. National brands such as Coldwell Banker, Prudential, and others began to dominate local markets over marquee-name brokers. The national brands offered a national network as well as sophisticated relocation companies which enabled their brokers to compete more effectively against small business owners.

Open information consumerism, driven by access to the Internet, had yet to impact the industry two decades ago. Throughout the eighties and most of the nineties, listing, property and neighborhood information was closely held by the local Realtors. The Internet allowed consumers to have more access to home buying and selling information, and the Pandora's Box of fees was opened, never to be closed again.

As the nineties drew to a close, the timing was right for Help-U-Sell to really take off. Today, the real estate industry is experiencing a seismic shift from being agent-centered to consumer-centered, with agents and brokers trying to maintain footing. Business models such as online discount brokerage and fee-for-service brokerage are finding a much more favorable climate, but they seem to be trimming the fat on the listing agent side of the commissions.

Now the company is trying to distinguish itself from discounters. Both discounters and fee-for-service brokerages offer add-ons for a fee, which is where the confusion comes in. Discounters tend to cut commissions for full service brokerage services. Fee-for-service proponents offer full service, too, but through a menu in which the consumer can select which services he or she wants. "We try to separate the terminology," says Ann Reynolds, Help-U-Sell's vice president of franchise sales. "We've unbundled services."

Help-U-Sell In the Internet Age

Help-U-Sell franchises target the educated, computer literate consumer, and tries to appeal to the fifty-year-old property owner and up. The older homeowner is dominating real estate, says Reynolds. "They are moving up, getting a second property, moving down, assisting elderly parents in a home sale, and they are the first generation which will help a lot of their children buy their first home.

About 57 percent of baby boomers are computer-literate, says Reynolds. "They want value," she explains. "Consumers don't understand why six percent commissions have any merit to their home sale."

The fee-for-service concept is resonating with consumers and brokers. Entrepreneur magazine named Help-U-Sell to its Top 100 list of fastest-growing franchises across all industries. In the real estate category, Help-U-Sell went from number 499 to number 177.

Reynolds maintains that there is a groundswell of brokers who are expressing interest in franchise opportunities with Help-U-Sell, particularly agents who are interested in a life beyond listing and selling. There's no retirement for commission-paid Realtors, and they can only count on referrals or repeat customers for a few years. The only solution is to open their own businesses in a different kind of market.

"Everyone is looking at unbundling," says Reynolds. "In any marketplace where you can do a market study, you'll find that three or four brokers dominate the market by over 50 percent. The rest of the marketplace will have a share of about two or three percent apiece. Where would you break in if you wanted to have your own office? You would break in on a completely different playing field."

See Part II, How Help-U-Sell Works.

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