Almost one-third of Realtors don't pay referral fees, and those that do average a payment of only $400 a year, according to the NAR's latest member profile. Yet online referral company HomeGain says it is building a business matching online consumers with real estate agents.

But the company is also trying a new experiment in the Dallas/Fort Worth market - setting consumers up with reduced fee, limited brokerage services.

HomeGain calls its "Limited Service Offering" (LSO) a pilot program to help convert the "10 percent of FSBO or limited service home sellers who visit the site," according to the company, into full service brokerage customers.

"Rather than watch them take their business elsewhere, we decided to test the viability of an LSO offering at HomeGain," says HomeGain spokesperson Mark Marymee.

HomeGain's LSO is priced at $495, for which the home seller receives:

• A local agent who helps with pricing

• Help from a local agent to field inquiries from other brokers and agents

• Listing the property on the MLS

• For an additional $495, the home seller receives an agent's help in negotiating the purchase and sales contract

HomeGain's effort at a reduced fee service is supported in its theory by research from Gomez, Inc., which has done surveys that find, not suprisingly, that consumers prefer lower fees for real estate services.

"In July, Gomez Inc. released its latest snapshot of online home seller behavior and in it, homesellers, 'if given the choice of alternative services in selling your next home,' desired: Selected Services (50%), FSBO (15%) and Full Service (35%). The market segment is already out there; we're testing to see how serious they are and what product is effective with this group," explains Marymee. "At the same time, nearly 90 percent of our home sellers select a full-service real estate agent to help them sell their home. Our primary focus continues to be helping consumers evaluate the qualifications of top-producing, local real estate agents before selecting that agent to help them sell or purchase a home."

That means "no change in our business model," says Marymee.

According to Marymee, the average home price of a home sold through HomeGain is about $200,000. Agents who are associated with HomeGain quote an average commission of 5.5 percent, but the average commission paid by home sellers is 5.4 percent. HomeGain agents pay a one-time registration fee of $49 and 20 percent of their side's commission, based on a minimum of a 2 percent side.

"We're a privately held company and we don't release revenue information," explains Marymee. "We also don't comment on speculation or estimates of same. I would add, however, that we do have additional sources of revenue by monetizing our consumer and agent traffic."

According to Marymee, the company has 25,000 registered real estate agents, and a recent press release from the company puts homeowner (consumer) traffic at 2.3 million. Traffic is attracted to the site by a number of strategic alliances, paid advertising spots, and listings site and partnerships which drive consumers to look at homes.

And that's where HomeGain's model breaks down according to some brokers.

"So if business is so good, why come out with a limited service model?" wonders Ed Krafchow, president of Prudential Texas Realty.

J. Lennox Scott, president of John.L.Scott Realtors, explains that he will not co-pay HomeGain commissions because he views the site as selling John.L.Scott leads back to the company. "HomeGain is now a direct competitor of real estate agents," said Scott. "This exposes their ultimate intent to be in the real estate business and compete against professional real estate agents."

Marymee says that HomeGain does not have its own agents, and that the LSO test is a referral source for agents.

"We've heard in recent days from agents who are far more interested in new tools like LSO to help them get through (what looks like it's going to be) a recessionary period," explains Marymee. "Some have told us they're seeing more consumers either looking into or heading toward the LSO or FSBO route. Agents definitely seem to be looking for methods to convert FSBOs in a down environment."

Published: October 8, 2001

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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.