Three former employees and one of the founders of failed dot-com brokerage Homebytes are picking up the torn flag of flat-fee brokerage and carrying it forward with a new name and company. And, they believe that this time they will be successful as long as they stay as far away from venture capitalists as possible.

Claude Davenport, John Lumpkins, Steven Lowrie, John Lumpkins, and Donna Austin have hired seven former Homebytes staffers and opened self-funded flat-fee brokerage Insight Realty, Inc. to serve the mid-Atlantic states. The company plans to start slowly and steadily, opposite of the rapid and unsustainable growth agenda of venture capital-led Homebytes.

"We don't have preconceived notions of growth," says Lowrie, vice president of marketing. "We just have to prove that we are successful and profitable, and that's why we aren't setting goals like we have to be in 30 states by December."

Why try again? "We're junkyard dogs," laughs Lowrie. "The people who are making Insight Realty work were all on the operations side of Homebytes, not the IT side or the senior executive side. We were the people putting out the product. We were in the trenches, not determining policy. That's why we know the flat fee concept works, because we were the ones serving the consumers. We were the ones who brought revenue into the company."

Insight's business plan is similar to Homebytes, but with some subtle enhancements and minus the overhead and debt. Charge a flat fee to the self-motivated seller, and assist with an MLS listing and some marketing materials (fliers, yard signs.) While Insight gets a flat fee, the selling brokerage gets a full commission at the going rate. What's different? A slightly higher fee of $750 (Homebytes charged $599) which is used to pay for virtual tours on all listings and appointment-making support. "We will put our number on the sign instead of the seller's phone number," explains Lowrie. "We'll facilitate the setting up of appointments, because we've found that is helpful to the sellers and to the other Realtors."

Insight plans to market to for-sale-by-owners, but the brokerage will offer full service brokerage in Richmond, Virginia, the company's home base. Reconnecting with sellers shouldn't be a problem, says Lowrie. "This is basically a telemarketing sales model," says Lowrie. "We are targeting the for-sale-by-owner type of seller. And that is the biggest part of our outbound effort, plus just listed/sold postcards."

A Web site is in the planning stages, but the company is not putting a lot of resources into it. "We are not assuming our Web site will drive large amounts of business," says Lowrie, "but it is more about where they can get information. We are not a dot-com company."

"We aren't going to make them do their transaction online," sums Lowrie, "we're more like a traditional brokerage. We're just offering a range of services for a fixed fee rather than a percentage."

Traditionalists believe that the slim margins of flat fee service models are unsustainable, particularly since flat fees don't absolve brokerages of fiduciary responsibilities to consumers. That offers little incentive for mainstream brokerages to try the model. Former National Association of Realtors president Dennis Cronk, a Richmond-area competitor, told a news agency that flat-fee service models have been around for years. "They come and go," he was quoted as saying.

But Insight Realty is under no illusions. "Homebytes spent quite a bit of money looking at the legal issues so we are absolutely clear on that," says Lowrie. "This is limited representation, but our name "Insight" means we have the ability to see clearly and intuitively into the nature of a complex subject. We have the team and the experience to do flat fee brokerage correctly."

And having a real estate attorney (Lumpkins) as one of the founders doesn't hurt either.

Published: June 20, 2001

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