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Real Estate / Real Estate Business Model
« on: August 05, 2011, 10:39:01 PM »
A business model is the theory and basic plan, as well as the structure, for operating a business. There are usually many business models in an industry. A model is chosen as a preference of how the owners want to operate, and as a response to their market and customer requirements. Real Estate business models include:
• Independent brokerage
• Real Estate Franchises
• Associate brokers
• Flat Fee
• Commission Percentage
• Fee-for-service
• Buyer Brokerage.
Independent Brokerage as a Business Model
As a business model for the practice of real estate, Independent Brokerage is operating outside the framework of a larger business entity, such as a franchise.
Sometimes called boutique brokerages, the independent broker operates on their own, without the oversight or help of a larger franchise or parent organization.
Real Estate Franchises
As a business model in the practice of real estate, a franchise is a business structure with a parent and franchised smaller subsidiary operations. These are still independent companies, usually locally owned.
However, the franchisees receive support, training, marketing help and power, and training from the franchise parent. The franchisees operate with standards and rules set out by the parent and contribute a portion of their revenues for the benefits of the franchise.
Examples:
• Century 21 Real Estate
• Coldwell Banker Real Estate
• REMAX
Associate Broker
A real estate person holding a broker license that chooses to associate or affiliate with another sponsoring broker rather than opening their own brokerage office. They want the added knowledge and status of a broker, but do not desire to operate an independent office.
Flat Fee Real Estate Brokerage
As a business model, real estate flat fee brokerage is relatively new on the scene. It has evolved with downward pressure on real estate listing commissions. Generally, the name explains it very well. A flat price is placed on the delivery of listing or buyer brokerage services.
There is no percentage of the sales price involved, only a flat quoted price for the list of provided services. What is provided can vary by law and by the choice of the company doing flat fee brokerage.
The Standard Percentage of Selling Price Commission Model
Almost since the inception of real estate brokerage, the universally accepted business model has been to be compensated when a transaction closes successfully with a percentage of the selling price. Generally, the seller is said to be paying both agents the agreed-upon percentage, however, it's with the buyers' money.
This model is under attack as being excessive compensation in some cases. Other models are challenging its dominance, though none are even close to the universal use of this business model.
Fee for Service
Fee for service in real estate is a financial model that charges the client for real estate listing or buyer services based on services performed, rather than a negotiated percentage of the selling price.
This pricing model can take various forms. It could be an a-la-carte price list or a base dollar amount with additional charges for showing trips or other services. It can even combine a small percentage for certain core services and additional charges for more work.
Buyer Brokerage as a Real Estate Business Model
In the old days, all the real estate agents worked for the seller, and in their best interests only. Now, representing buyers is not only accepted, it's mainstream in the business of real estate brokerage.
The pure buyer brokerage only represents buyers, and they do not take listings. This allows them to serve their buyers without any possible conflict of interest or dual agency issues. The buyer brokerage advertises their specialty and markets their business as a benefit to buyers in getting their interests served in the transaction.
• Independent brokerage
• Real Estate Franchises
• Associate brokers
• Flat Fee
• Commission Percentage
• Fee-for-service
• Buyer Brokerage.
Independent Brokerage as a Business Model
As a business model for the practice of real estate, Independent Brokerage is operating outside the framework of a larger business entity, such as a franchise.
Sometimes called boutique brokerages, the independent broker operates on their own, without the oversight or help of a larger franchise or parent organization.
Real Estate Franchises
As a business model in the practice of real estate, a franchise is a business structure with a parent and franchised smaller subsidiary operations. These are still independent companies, usually locally owned.
However, the franchisees receive support, training, marketing help and power, and training from the franchise parent. The franchisees operate with standards and rules set out by the parent and contribute a portion of their revenues for the benefits of the franchise.
Examples:
• Century 21 Real Estate
• Coldwell Banker Real Estate
• REMAX
Associate Broker
A real estate person holding a broker license that chooses to associate or affiliate with another sponsoring broker rather than opening their own brokerage office. They want the added knowledge and status of a broker, but do not desire to operate an independent office.
Flat Fee Real Estate Brokerage
As a business model, real estate flat fee brokerage is relatively new on the scene. It has evolved with downward pressure on real estate listing commissions. Generally, the name explains it very well. A flat price is placed on the delivery of listing or buyer brokerage services.
There is no percentage of the sales price involved, only a flat quoted price for the list of provided services. What is provided can vary by law and by the choice of the company doing flat fee brokerage.
The Standard Percentage of Selling Price Commission Model
Almost since the inception of real estate brokerage, the universally accepted business model has been to be compensated when a transaction closes successfully with a percentage of the selling price. Generally, the seller is said to be paying both agents the agreed-upon percentage, however, it's with the buyers' money.
This model is under attack as being excessive compensation in some cases. Other models are challenging its dominance, though none are even close to the universal use of this business model.
Fee for Service
Fee for service in real estate is a financial model that charges the client for real estate listing or buyer services based on services performed, rather than a negotiated percentage of the selling price.
This pricing model can take various forms. It could be an a-la-carte price list or a base dollar amount with additional charges for showing trips or other services. It can even combine a small percentage for certain core services and additional charges for more work.
Buyer Brokerage as a Real Estate Business Model
In the old days, all the real estate agents worked for the seller, and in their best interests only. Now, representing buyers is not only accepted, it's mainstream in the business of real estate brokerage.
The pure buyer brokerage only represents buyers, and they do not take listings. This allows them to serve their buyers without any possible conflict of interest or dual agency issues. The buyer brokerage advertises their specialty and markets their business as a benefit to buyers in getting their interests served in the transaction.