A chasm is developing between the e-brokers and the traditional brick and mortar brokers, but they aren't as far apart as they think. Transaction technologies are about to level the playing field in new and interesting ways, and it will be the brokers who can leverage those technologies that will capture the most market share.

The difference isn't fees, it's technologies that reduce fees

While the e-brokers boast commission savings and/or rebates to their customers on both sides of the transaction, traditional brokers are claiming that the e-brokers are cutting service to deliver lower prices. More traditionals are raising the point of difference that they are "full-service" brokers, causing the e-brokers to counter that they are full service, too. Is the definition of full-service brokerage changing? And do consumers consider lower costs a service, too?

The argument between the two camps seems to boil down to the interpretation of what full-service really means - providing the services that brokers want to provide as opposed to those that consumers want to receive.

According to e-brokers such as eHOME.com cost efficiencies that are passed onto the consumer in the form of fee or commission savings are a service. The e-brokers are able to leverage the efficiencies of technology to deliver streamlined services to the consumer online and in person at a reduced cost. Those reduced costs are passed along to the consumer in the form of rebates at closing, reduced fees which are paid up front or a combination of both. Among the efficiencies most often cited are centralized officing, Web-based transaction management platforms, and salaried service personnel who have specific, not general, duties to the customer. Customer needs are served by teams: a field agent, a call center agent, generally with added experience as an agent or a broker, and call-in technical and customer service support. Instead of putting a store-front operated by a managing broker on every corner, the companies operate from a centralized office, with brokers licensed in multiple states. Agents serve the brokerage and have no self-promotion costs, yet they are rewarded for customer service excellence and productivity with bonus plans. Agents are trained to perform certain duties, and to pass more difficult questions and issues onto the call center agents. Company advertising dollars are generally spent on building the brand, not for individual homes or top producers.

To the traditional broker, full-service means having highly visible store-fronts and individual name recognition. Agents of the brokers are contract laborers, who can benefit from the broker's name recognition and affiliations, but they bear the cost of building their own names in the marketplace. Full-service brokers offer a turn-key operation in which the buyer or seller is on the receiving end of services and does little to lift the load themselves, such as showing their own homes or paying for their own newspaper ads. The full service broker and agent may provide a wide menu of selected services from providing virtual tours on each home listed to coordinating the customer's moving company, utilities, and home security systems.

The result is that consumers are finding that it is difficult to choose a Realtor, whether a cybernaut or a traditional market expert, because they don't know which services offered will be of the most value. All they know is that they want to sell or find a home and save money. And they don't mind using their own skills, including Internet mastery, to capitalize on the savings.

One full-service agent pointed out that in her market area, the e-broker listings don't sell as quickly as the traditional agent listings. When she approached an expired listing which had been with an e-broker, she told the homeowner, "You've already had the half-measure. Why not try full service?" She then whipped out her bag of tricks for the aggressive marketing of the home, including a virtual tour. "I already have all that," replied the homeowner.

Point by point, the agent showed the homeowner a marketing plan that eerily mirrored the plan the expired company had laid out for the homeowner. The agent was surprised to learn that the e-broker offered the same services, including holding open houses, as her brokerage did. In fact, the online broker offered additional services that the full-service agent's brokerage did not including an open transaction platform in which the homeowner could track the events of the transaction. Anticipating that he would be cutting the price of his home to get it sold, the seller said that he didn't want to add to the bleeding by paying a higher commission rate on top of a reduced price. Unwilling to cut her fees, the agent didn't get the listing. It's little consolation to the Realtor that the home is being shopped to other agents with fees as the primary focus.

The point to this consumer was clearly made. If the e-brokers are offering full-service why should he pay more for the same service? A look at one e-broker's online fees shows the same full-service bullet points as the traditional broker made in her presentation.

eHome offers three reduced commission plans for sellers. For a 4.5% Total Commission, including three percent to the buyer's broker, the seller will recieve:

• Placement in the local Multiple Listing Service (MLS)
• Virtual tours and online exposure
• eHome yard sign and high quality color flyers
• the listing uploaded to major online real estate Web sites
• Prequalified buyers
• Licensed real estate professionals to handle all negotiations and management of your sale through closing
• Personalized eHome Web page containing messages, updates, calendar and documents
• Personalized marketing plan

In case traditional brokers and agents are homing in on the personalized marketing plan where they can gain the advantage, that is the plan that is flexible and includes advertising the home. Patrick Husting, a founder of eHome, further frays the security blanket held by many traditional agents, that the e-brokers generically manage every property the same way. "You can't treat every property the same," says Husting, explaining the personalized marketing plan. "We have a core marketing plan, virtual tours, uploading to the listing aggregators, yard signs, etc. We may do an open house. The advertising core is the same, MLS, signs, etc."

If the e-brokers are offering the same services as traditional brokers, has the definition of full-service brokerage changed? According to Husting, it has.

"It's delivering service to the client through their medium of choice - how and where they want it," says Husting. Sounding a lot like a traditional broker, he adds, "Full service is meeting the needs of the client, delivering service to that client, based upon the individual needs of the transaction. Full service for one may be different from client to client. One is more needy than another. One client is content to just e-mail and they don't want constant personal interaction."

So the e-brokers provide the same services at a reduced cost. How do they do it? By leveraging the transaction online, an advantage that will shortly be shared by traditional brokers, too, if they are willing to take the technology plunge. Part II - The Importance of the Transaction Platform.

Published: October 25, 2000

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