Last week, the mood of upper Cendant Real Estate Division management was as sober and resolute as the sailors standing at attention aboard the USS Nimitz as it sailed out to sea from the San Diego harbor. Realtors, in San Diego for the Cendant franchise brand conventions, watched the aircraft carrier pull away with a mixture of pride, tears, and trepidation. Inside the convention center, their franchise leaders braced themselves for a different kind of battle.

Cendant Real Estate Division CEO Richard Smith spoke at each of the consecutively scheduled Coldwell Banker, Century 21and ERA conventions during the general sessions and at Top Broker break-out sessions, as well as private individual meetings. His message was consistently the same - there is a new danger to broker profitability coming from the Internet.

Acknowledging that "no single device has had a more significant impact on American business," Smith said the Internet is a powerful tool for the real estate industry, with over 40 million adult users or 36 percent of all Internet users searching the Web to research home purchases. (source: Pew Internet and American Life Project)

Two-thirds of home-buying consumers use Realtor.com, 41 percent a real estate company Web site, and 23 percent use an agent's Web site, said Smith, which is a reassuring sign that the "real estate industry remains connected with homebuyers and sellers. But, he cautioned, "an opening exists into which competition outside of traditional real estate can - and will- enter."

"Third-party interlopers have learned that they cannot replace us," said Smith, "but they do believe that they can regulate us to a position of less importance. Using YOUR listings, they believe they can siphon off a large percent of our industry's revenues.

"Their point of entry, we believe, is through the virtual office Website (VOWs,)" he declared.

According to Smith, certain companies plan to "showcase brokers' listings before consumers, obtain a potential buyer and then sell this customer back to you for a 25 to 35 percent referral fee."

"Those who seek to exploit VOWs are interested in only one thing -" warned Smith, "aggregating your listings from local MLSs, sharing them with consumers and rewarding themselves with a hefty referral fee - simply for posting the listings."

The problem with this business model to Smith, is that the "interlopers" have "no interest in your business development, no interest in increasing your profitability, and no investment in your continued success."

Smith then rallied the brokers to action - to contact both state and national Realtor associations to express concern and to push the NAR to adopt an industry-wide policy toward VOWs that will not allow "those with no vested interest or investment in the continued success of the industry from undermining a key component of our nation's economic health."

"Every person on earth could be part of the affinity group," Smith told Realty Times. "There could end up being a referral fee attached to virtually every transaction."

Smith acknowledged that getting Cendant Real Estate Division's opinion out to all brokers and agents is going to be a challenge. Getting most brokers to agree is an even bigger one.

He knows that some brokers who have signed up with some online referral companies to share their listings and pay large referral fees for essentially 'success-based' advertising are Cendant brand brokers with Coldwell Banker, Century 21 and ERA.

"They may not understand the ramifications of what they are doing," says Smith. "But I have seen the business plan. These companies want to manage the customer, and then allow the broker to play only a small part in the transaction, for which the broker pays 25 to 35 percent of their income."

He says one large publicly-held company's representatives came to him to pitch their referral plan and to ask Cendant brands to be the exclusive provider of listings, he says that Cendant could easily have gone for the short-term sell-out of its broker network. Instead he told them, "Obviously, you don't understand the franchise business. We're here to help our brokers to make money."

But Smith's concerns about revenue diversion isn't just about the Cendant and NRT brand brokers; there is a very real threat to the Real Estate Division itself, which offers mortgage, settlement and other services to brand brokers to help them diversify and improve their revenue streams.

Many online referral companies using VOWs or VOW listings to attract consumers not only ask the agent to pay a referral fee, they also offer the consumer discounts on services such as mortgage and title. If a broker's commission is cut by 35 percent via referral fees, and he/she allows title business to go to a competitor instead of Cendant Settlement Services on the same transaction, Cendant has been weakened in two areas instead of one.

Cendant, therefore, has a huge job ahead of it - to not only educate brokers about VOW referrals, but also to educate them about how much more money they can make by diversifying their income streams to include mortgage, title and other services. Cendant benefits when all the affinities are kept 'in the family,' giving the broker a lot more reason to 'just say no' to referrals that could divert further revenues to other service providers.

Published: March 18, 2003

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. 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. To contact Blanche, email her at . For more articles by Blanche, click here.