Along with other companies in the dotcom sector, real estate e-brokers have lost some of their cockiness, but some new refinements may prove the discount business model yet.

While some e-brokers such as Homebytes and eHome have announced significant staffing cuts and halted expansion into new markets, others such as zipRealty are announcing record sales, $110 million in home sales since its launch in August 1999.

But is $110 million something to get excited about? zipRealty operates in fifteen of the busiest markets in the country, including Atlanta, Baltimore, Boston, Dallas, Los Angeles, Northern Virginia, Orange County, Phoenix, Philadelphia, Seattle, San Diego, Sacramento, San Diego, the San Francisco Bay Area and Washington, D.C. In a year and a half, zipRealty's production per market equals that of a couple of RE/MAX agents' production. According to a RE/MAX report last year, the average RE/MAX agent makes about $93,000 in commissions. At 100 percent commission, these Realtors sell about $3 million a year, presuming that they share half of their production ($1.5 million) in co-op fees. If zipRealty is up against tens of hundreds of these pros in every market, from other franchise brokers to leading independents, it is easy to see why building market share is hard work indeed.

Local competition has a never-ending supply of personnel and advertising funds preventing the e-brokers to gain more than minimal traction, despite consumer demand for lower commissions which the e-brokers readily supply. What does this prove? Nothing, except that there might be a better road to profitability. The e-brokers are finding out what Glen Cohen, founder and president of YourHomeDirect.com thinks he already knew.

If you are going to open a brokerage, go deep, not wide.

While many of the e-brokers are marshalling their forces to markets already opened and retreating from some markets to build market share, YourHomeDirect.com opened nine months ago with a blitz in one state only, New Jersey. Since March, the company has listed 2,000 homes, sold over 830 homes for a total of over $100 million and has another $50 million in sales pending.

"No other real estate company has ever achieved these numbers in their first nine months of operation," says Cohen, an attorney and former broker. "If they have, I'd like to hear about it."

What Cohen has done is borrow a little hard-earned wisdom from some other dotcoms, but his early deployment suggests original thinking. While netting $14 million in venture capital, Cohen's plan was to spend it all in one place, developing market share in the state of New Jersey. To date, he has spent over $5 million in advertising alone and in every media - newspapers, Internet, billboards and more.

"There are only about three brokers who buy half-page ads in the top market newspapers," says Cohen, "and we're one of them."

YHD.com depends on advertising, not agents, to generate leads. Agents are salaried-plus-commission and are intended to provide service that steers all parties to a successful, happy closing. Inside agents operate the call centers in each area, while outside agents handle presentations, listing appointments and showings. When a home goes under contract a transaction specialist shepherds the closing. All agents involved with the home are paid commissions upon closing, so each is incentified to cooperate in a team spirit to reach the goal- closing a home.

Another point of difference is YHD.com's ability to serve the seller while simultaneously capturing the buyer. Sellers can choose from several plans which provide an alternative to MLS marketing. The "2%" plan allows sellers to show their own homes, complete with virtual tours, while being supported in other aspects of the transaction by YHD agents. The "3%" plan can include showings by agents, but neither includes a listing in the MLS nor coop money for other brokers. For an MLS listing, sellers pay a 4.3 percent commission, with 2.5 percent to cooperating brokers. Non-MLS customers simply bypass typical MLS marketing, instead relying on local advertising, and online listing distributions to HomeAdvisor.com, Yahoo! Real Estate and other leading online home search portals. Over 50 percent of YHD.com's customers choose the 2% plan.

Before the banking industry wooed the Federal Reserve into considering relaxing regulations so that bankers could offer real estate services, Cohen made sure his company beats the bankers to the punch. He has a trained staff of real estate agents who also double as loan originators to capture buyers who call in from listings. That puts the lending shoe on the other foot in more than one way. When buyers are prequalified, they are loyal to the company, not to an independent contractor who may send loan origination business in a dozen directions. Buyers who are prequalified are also likely to close. To date, YHDMortgage, which has only been in existence since May, has recorded more than $49 million in mortgage originations.

Yet, Cohen doesn't see himself as such a renegade. "I designed the business from ground zero to combine the best of traditional real estate with the future."

By traditional real estate, Cohen means old fashioned prospecting tools and service, and by the future, he means exposing homes in new ways and offering savings to consumers. The results are impressive - 800 calls a day, says Cohen, and 150 seller appointments a week. And, Cohen says that the company will be profitable by its 14th month of operation, when it will immediately go back into the red for expansion to the New York and Pennsylvania markets.

"We have a tremendous executive and technology expense, but we amortize that over all markets," explains Cohen. "We are doing volume and taking market share, and we went deep in one market to prove out our model. Some companies are in ten markets but they aren't deep. We have 85 employees servicing an area, not one or two people."

What about the next round? "When we go into new markets we want to go in deep and that requires a lot of money," says Cohen, "and we won't have any problems getting it. You aren't betting on the come. You are betting on something that's working."

Published: December 29, 2000

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.