There’s always something to howl about.

A Different Business Model For Your Consideration

At Brown and Brown, we’re undergoing moderate to extreme changes in our business model. Extreme at home, mild to moderate away from home. We’re leveraging our Rainmaking ability through these changes. Below, I’ll address what we’re about to launch in our own backyard.

At home we’re eschewing the 3% listing side fee for a relatively modest monthly fee.

The fee will be $500-1,000 monthly, ’till sold. The buyer’s agent will still get 3%, sometimes more. Properties sold in 90 days or less will save, on average, five figures. This model is custom designed for our specific client profile locally, which is an income property investor who should be taking that equity to places out of state. (Preferably by around 4:30 yesterday afternoon.) Our niche has been 2-4 unit properties, but we’re gonna market hard to SFR’s/condos/townhomes also, if they’re rentals.

It’s my belief this model will work incredibly well for house agents. Here’s how I see it working for them.

1. Massive Old School and 2.0 marketing. The methods really aren’t important as long as you’re hanging cat skins by the dozens on the wall. Once the pipeline is full, entrance and exit, it’ll become almost self perpetuating. Not really, but close enough for jazz.

Thought

The marketing? We’ll be using postcards/snail mail with warm call follow-ups. ‘Course we have a distinct advantage when calling. House agents can’t convince a homeowner to sell. We can. They don’t live there. If we can convince them they should sell/exchange through our experience, expertise, and general all around charm, they’ll list. We’ll be using other methods, but that’s another post.

2. As many buyers’ agents as required. In the current buyer’s market, maybe more than I’d need when things normalize. Then again, depending on your market, ‘normal’ may mean the explosion of pent up demand lookin’ for a place to light.

Thought

Another advantage for Brown and Brown in San Diego. We have no need whatsoever for even one buyer’s agent. We think it’s silly to invest here, so we won’t be representing buyers. We couldn’t sleep at night if we put folks into San Diego investment property on purpose. The rare exception would be when the buyer intends to live in the units. Still, buyers will be generated — lots of them. The investors will be counseled to buy where the seller is heading.

(Note: For Brown and Brown — Our most conservative projections indicate what each listing will be worth in terms of commission dollars per listing. Assuming $200,000 net proceeds, each exchanger would generate an absolute minimum of $48-52,000 commission dollars. This doesn’t include what buyers, generated by that listing’s marketing, would buy. Our last five years experience tells us that would be an additional $30-70,000 — per buyer.)

3. Listings will act as magnets for serious buyers. Each listing will lead to 1.5-4 closed sides at normal commission rates. This is the power plant. In a market with a $200,000 median value, the buyer side at 3% means each listing is worth, in new buyer sides, $9,000-24,000 in gross commissions to the team. A house agent in San Diego would be selling homes in the $400-600,000 range, depending upon location.

(Note: Median price in San Diego for our niche properties averages $400,000-900,000 depending upon location and number of units. A recent client sold his fourplex for just under a million bucks earlier this year.)

4. Buyers’ agents will be paid 40% commission splits. (Maybe less.) In San Diego that’s $4,500-6,000 per buyer side. If we use just $5,000, and they’re doing only two deals monthly, that’s six figures per buyers’ agent. Please name the buyer’s agents you personally know, working on a team, who make six figures. They exist, but they’re not exactly flooding the land out there.

5. Because the listings will be physically prepared, and marketed using most if not all of the Method de Swann, the Team’s reputation will allow for the ‘cold’ showing of listings. Ditto with pricing. No stone will be left unturned in the marketing of our listings. If your Aunt Minnie in East Toilet Seat, Wisconsin is interested in investing in SoCal real estate, she’ll know about our stuff.

6. Only very serious home owners will list with you, due to the monthly payment for fees. This makes arriving at the right price & terms, and the owner spending money getting the home pretty again, far more likely. Since you’d tell me serious sellers are the only ones you’d deal with anyway, I’m not seeing the problem with this approach.

(Note: When the client/owner of our upcoming first listing asked us where the monthly fee goes, we told him. First to marketing, then to the company Starbucks card.)

7. This model feeds on itself in a very cool way. Many buyers in your local market will need to sell their own place. Duh. They first see how well your sellers are prepared, then they learn about the huge listing side discount. Hhmmmm. Wonder what they might conclude their next step should be? (Jeopardy theme music playing in background.)

8. Significant referral fees will be a side effect of this new model. Some of the buyers will no doubt want homes in different areas than they first thought. If I was a house agent in San Diego’s East County, and a buyer wanted to be in Scripps Ranch, (another world altogether) I’d go to the Yellow Pages and…wait a minute — doesn’t, what’s her name? Kris Berg — I’d refer that buyer to her. She’d then owe me 20% of the listing side plus dinner at some La Jolla place with west facing windows and no prices on the menu. Whining would be involved.

9. This model will, if you’re so inclined, provide for consistent opportunities to sell your own listings. (Give Greg some water, he’s looking a little faint.) More double-ends will be possible with this model than most I’ve seen. If you’re not comfortable with that notion, you’ll need to plan for how you’ll handle those particular buyers. Understand though, over time there will be buyers generated by this model wanting to offer on your listings. It’s inevitable.

We’re launching this new ship after July 4th with our first round of mailing/calling. We already have our first listing ready to go, as soon as the tenants bail. The seller is an existing client who has invested with us (currently) in out of state property. He’ll be acquiring even more with the exchange of this rental home. He’s looking forward to it. We’ve already accounted for a complete remodel of the master bathroom. Any and all deferred maintenance will be addressed. Landscaping will be freshened up, so the place shows a little leg when the buyers drive up. Anything in or out that doesn’t move is getting painted, all carpet is being replaced, and all this using the talents of a really sexy interior design babe I know. (Greg would be proud.)

I’d love to get feedback.

Don’t be shy. The only dog I have in this fight is one who knows how to skin cats. 🙂 We’ve taken this model apart and put it back together a dozen times. It’s not my original idea, but then I’ve never made a secret of my admiration of Japan. I steal with dignity.

Seriously, this model is new to me, not the world. That said, I’ve only found it in current use by one broker. It’s been producing for him. However, it’s my contention he’s got a V-12 engine while only using four cylinders. Josh, the other Brown, agrees — though he’s far more critical of the quality of this broker’s execution. Still, the guy’s doing very well in a cruddy San Diego market.

We’re convinced we’ve discovered how to make it blow the doors off. Again — Japan. They looked at Detroit’s cars, and came up with Hondas, Toyotas, and Datsuns (Nissans). We’re betting a whole bunch of dead presidents the results will reward our faith in this model.

Please — your thoughts.