By streamlining and automating certain aspects of online homebuying and selling, certain e-brokers like eHome.com have an advantage with cost-conscious consumers. But are they carrying price-cutting too far?

A Fort Lauderdale broker and regional manager of FBC Alliance company, Mercie D. Brumfield says they are. A new competitor in the region, eHome.com, has been blanketing the Florida/Fort Lauderdale area with banner ads that boast "0% commission and 100% service, says Brumfield. She says that e-Home claims that they are fee-based, not commission-based, and that the low fees may be reason to inquire about a possible anti-trust violation.  

"This is 100 percent misleading to the general public, as their (eHome's) services are still paid through 1.5 percent of the selling price if sold through a cooperating broker - the consumer still pays the cooperating side - usually 3 percent for a total of 4.5 percent," complains Brumfield. "Otherwise, if the sale is closed entirely within the eHome infrastructure, the consumer pays 50 percent less than through traditional brokers. This translates to 1.5 percent for the listing and another 1.5 percent for the buying side - 3 percent total."     

"These are nice 'discounted' numbers to throw out at your consumers ... but the old system is still in place.  This structure is not commission-free  or "fee-based" as eHome advertises, it is still a commission based on the sale amount.   Fee-based, should mean a fee for the service or transaction being performed, plain and simple - regardless of the dollar amount of the transaction.  It is our perspective that this situation merits further investigation and regulation" warns Brumfield.

Brumfield's point has already been made, but not in the way she might think. According to eHome's director of marketing Tina Flammer, eHome has not only recently changed its fee structure to a low-cost commission base, but the change has been in effect since April 2000, regardless of what any renegade banner ads might say. And as for anti-trust issues, the site says it can defend itself on that front, too. eHome can pass along savings to consumers because they have streamlined advertising and operating costs. Here's how.

"We are a full-service brokerage," insists Flammer. "We have local experienced, licensed Realtors in the community. Unlike traditional brick and mortar Realtors, we have a regional center, staffed by desk agents that are licensed, and they serve as transaction managers."

Flammer explains that eHome also has field agents that are licensed and give local neighborhood service and support. Field agents are paid a salary that is attractively set to compete with what local good agents are making, approximately $60,000 a year, plus paid vacation, health benefits, service-oriented bonuses and stock options. Agents further benefit by being relieved of self-promotion and advertising costs. eHome shoulders all advertising costs, preferring to use the newspaper medium to drive consumers to the brand's Web site instead of buying display ads to steer buyers to individual homes. That's where the savings is most apparent - clients' homes are advertised online, not in the newspapers, saving the brokerage thousands of dollars of advertising costs monthly. Once buyers arrive at the Web site, they are met with virtual tours of every home and a customer service support system for buyers. Homes are also showcased on Realtor.com, HomeAdvisor.com and other site partners.

Despite its dependence on Internet marketing and its online transaction management engine, eHome is at heart a traditional broker, not an e-broker. They use the MLS to co-broker with other agents, put signs in the yard, and send out flyers and mailers throughout the neighborhood. "There are people who are doing it more virtually," suggests Flammer.

So why did the e-broker swing back to more traditional roots? When the site debuted, eHome did offer a fee-based model, a flat-fee based on the sale of the home and collected at closing. "We changed our pricing because we wanted to deliver full service," explains Flammer. "Rather than compete online, we found that clients wanted full service and support and to have a better reach, so we changed our fee structure.

The fee structure had been tiered - $ 2,500 for zero to $250,000 home, $3,000 for a $225,000 to 275,000 home and so on. "On April 1, 2000 we changed to the commission structure and the recommended listing side was 1.5 percent," says Flammer. The change may have also had something to do with the site's planned IPO. Stock followers are looking much more closely at revenues, particularly after April's "Tech Wreak" when the NASDAQ started its roller-coaster ride all summer. The new commission structure will result in higher revenues.

Does the e-broker worry about other competitors coming in and cutting costs now that they have raised their prices? "Certainly commissions are compressing," says Flammer. "And there is always somebody coming in cheaper, but we do deliver full-service. There is someone to hold the client's hand every step of the way."

Spoken like a true traditional. But other traditionals are only slightly mollified and still worried about what the future will bring.

"The subject of discounted fees is truly a riveting issue in this market. It's our perspective, that all this slicing and dicing often leaves the consumer with diced results. However, from the FSBO to the "would be" full-service consumer .... everyone is always looking for a better deal," acknowledges Brumfield.  

Published: August 16, 2000

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