Ken Allen saved thousands of dollars when he bought a house last week on Mount Sequoyah in Fayetteville. The Dallas man used the services of Rob Florida at Realty Epic, a flat-fee real estate brokerage firm.
"The flat fee means whoever is representing the buyer isn't incentivized to get a higher price," Allen said.
Home sales
County^January sales^January 2015 sales^January average price^January 2015 average price
Benton^328^262^$189,985^$179,128
Washington^178^185^$183,995^$195,404
Source: Arkansas Realtors Association
Florida started thinking about creating a different business model two years ago when he worked for Re/Max. He left the firm about 18 months ago and started testing his ideas. Realty Epic officially launched earlier this year. About 90 percent of his business is in Fayetteville.
"Epic came along because I realized people don't care what they pay as long as they know how much they are paying," Florida said. The traditional real estate transaction includes 3 percent commissions for both the buyer's and seller's agents.
Neither man would disclose sales or contract data, but Allen said he paid Florida a $1,000 retainer and the house cost about $300,000. Florida said he was able to negotiate a lower price, with Allen paying 70 percent of the original listing amount.
The idea of flat-fee real estate services is growing nationwide in several models.
Florida offers many pricing options and designed his company around a fixed $2,500 seller's fee and $5,000 buyer's fee. Clients have different needs, he said, so he provides a smaller slate of services for a lower fee and still does some standard commission sales when requested.
He created his own website, Invisalist, to market his properties, keeping most of them off the MLS. The multiple listing service is a membership-based database for real estate professionals to share information about available properties.
Florida finds many of his home sellers by knocking on doors in neighborhoods in which buyers say they want to live. Realty Epic gets about six prospective home sellers for every 21 cold calls, he said.
"The MLS is exclusive and antiquated. There are other avenues out there to market such as Zillow and Craigslist," Florida said. "It doesn't cost me any more to market a $300,000 than it does an $80,000 home."
Ron Stinchcomb, a Realtor with Coldwell Banker Harris McHaney & Faucette in Fayetteville and president of the Arkansas Realtors Association, argues the more expensive home should cost more to market. He has a listing for a $400,000 home with a marketing plan including 3-D photos and aerial shots from a drone.
"We should recognize how those customers access information and make decisions and market accordingly," he said. "It could be the money we charge for that commission could make that customer a lot more money."
Jackie Keene, a Crye-Leike Realtor and president of the Northwest Arkansas Board of Realtors, said she hasn't seen many flat-fee services offered in the area and isn't sure how it would be received.
"It's not full service. For most people it is the single most expensive investment they will ever make and they need professional assistance," she said. "I think I could pull my own wisdom teeth, but that probably wouldn't be the best option."
Stinchcomb and Keene agree the industry is changing and real estate professionals need to be open to new ideas.
Mike Maher said he hopes he found the right balance of old and new ideas. His fee-based Houwzer become Philadelphia's largest brokerage firm last year, generating $50 million in sales volume during its first year.
"We do everything a traditional agent would do," said Maher, co-founder and CEO. "Full-service is one of the reasons our model is working."
The idea for Houwzer started after Maher said he realized there was pricing inequity that created bad experiences for many sellers. Some homeowners have so little equity in their home they would owe more than the house is worth if they had to pay an additional 3 percent to a seller's agent, he said.
"We're shrinking the transaction costs. There is nothing better than to hear stories from people who say we helped them," Maher said. "There is power in that."
Maher's goal is to rebuild the real estate model from the ground up. His six agents work on salary, earning small commissions. The next step is to expand in the Philadelphia area and franchise into new markets.
"We look at ourselves as a startup company first and a real estate company second," he said.
NW News on 04/09/2016