If you are a small or mid-sized independent broker, you may be outgunned by large franchise organizations who have more offices, more technology, more agents and more market share than you do. But there are plenty of ways David can beat Goliath.

One independent broker, David "Dave" Davidson, co-founder of U-List Advantage Real Estate Services Inc., has found a way to make fee-for-service brokerage work for him in his market, and keep large franchise competitors from squashing him as well. Instead of throwing a rock at the giants, David has figured out an ingenious way to keep large brokers happy with constant peace offerings (large co-op fees) and grow his market share at the same time.

Davidson has devised a series of plans for sellers which offer them a menu of choices from full service brokerage to reduced fee/reduced service to a simple listing in the MLS. His plans are so attractive, according to Davidson, that he has yet to have a seller take him up on the full service plan. With something for everyone, Davidson is able to provide service to FSBOs and other sellers who pick and choose the service plans for which they want.

Where he beats the large franchises to the punch, says Davidson, is the large brokers' inability to explain or to reduce their commissions to sellers who don't want to pay them.

"Our concept is just beginning to catch on and that's the way the small independents are going," says Davidson. "Competing against the large franchises is tough."

Davidson's partner, Brian Coughlin, and he did studies on how to compete so they could remain independent. Their studies reached the same conclusion - that people simply don't want to pay big commissions.

"They don't feel Realtors are worth the money," says Davidson. "If you ask, "What are you going to do for me for $9,000?, these agents can't justify their fees."

"If you call me, we'll list your home for $595 regardless of the house's value," declares Davidson. "You pay upfront and get on the MLS. It's a very basic service for MLS exposure and you can assist with the process."

Davidson's plans makes pricing allowances for three basic scenarios:

• The seller brings the buyer,
• Davidson's company finds the buyer, or;
• A competitor finds the buyer

The commission escalates, depending on whether the seller wants to pay up front for service.

"What happens is the homeowner may find the buyer. We'll meet with the buyer and put the offer together, and we'll charge 1 1/2 percent. The next thing to happen is that we find the buyer, we get paid 3 percent. Or the last thing is if another agency finds the buyer, we pay them 3 percent and we take 1/2 percent," explains Davidson.

The least the company makes on a transaction is $595 plus 1/2 percent of the sales price.

"We always pay 3% to the brokers," says Davidson. "If we discounted the selling commission, then we'd have trouble. But paying a fair commission, other agents don't mind showing our properties."

Consumers can view the various plans and make their choice. They can add other options if they wish. For an open house, for example, U-List tacks on $75.

"This is a choice that the consumer has," says Davidson. "If you want more advertising, you can pay for it. If you want a lock box, again, you can pay for it. It's in the consumer's hands to reduce the fees and commission. But Realtors can also reduce their base level of service if they want to."

U-List's most successful plans are those in which the seller can assist. "If the seller has a neighbor or friend who wants to buy their house, why should they pay 12,000 over to an agent to sell the house? With our plan, the seller gets to participate."

"The whole point of offering the services for less is to generate the calls," says Davidson. "If I were doing the same thing as my competitors, I would be fighting an uphill battle. We get calls on our advertising. The trick is to get the appointments. When these people sell, they have to buy a house, so you can be a buyer's agent. Depending on the value of the property if they sell their house with me, I'll refund the $595 that they paid originally."

"That's incentive for sellers to list with us and let us represent them as a buyer. As a seller you are not going to give someone $600. That's incentive for them to price their homes correctly and when they are motivated to sell, their homes sell faster," Davidson says.

What difference has fee-for-service made for Davidson's business?

"My partner and I both had struggling companies," replies Davidson. "We probably have increased our earnings by 50 per cent. Our market share is definitely going up and is going up all the time."

Is that a problem for the big brokers?

"They are primarily concerned that we don't cut their fees," says Davidson. "They gave us a little bit of trouble at first, but as long as they are making what they want to make, things are calming down."

Published: November 1, 1999

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