As predicted on this board months ago

[sdrealtor]

Ipayone is belly up! I’ll be happy when they start calling it the Sports Arena again although I never stopped calling it what.

http://news.yahoo.com/s/sddt/20070405/lo_sddt/ipayonesellingoffassetsnolongeracceptinglistings

[sdrealtor]

The article is a classic.

“Its a shame but we just ran out money.”

“Everything was fine when it was a seller’s market.”

Unfortunately they left out this part

“and houses sold them selves so we could get paid for doing nothing. But now that we actually have to figure out how to get a house prepared for the market, properly priced and marketed as well as escorted through escrow well we just dont have a frickin clue how to do that!”

[(former)FormerSanDiegan]

I have a new business idea.
It’s called IPayTwo (TM)

This approach would provide double the gross income that these losers generated. (And they thought 7-minute abs was a bad idea).

[Anonymous]

Regardless, discount realtors are the way of the future. Anybody who pays full 6% commissions to buy/sell a property is a fool.

[PerryChase]

good call sdrealtor.

ipayone was too early. I agree with deadzone, discount brokers are in our future. Real Estate is a high ly inefficient business so it’ll take some time.

Webvan went out of business and investors lost millions. But now you can order from vons.com. It’s makes no difference to the consumer who sells and delivers the products so long as he’s got the service he wants.

[Anonymous]

Question guys:

If sellers agree to pay 6%, how does a buyer like myself gain by going in without a realtor? Either way, 6% will be paid, right? I realize that the realtor may agree to take less. I have been looking in a small (50k population) Midwest city the past 2 weeks and I came in thinking I would handle the purchase myself and use the 3% they wouldn’t have to pay to a buyers agent to negotiate. Two realtors have looked at me like I am crazy, and I also feel like I may actually get value by using a realtor to help me uncover potential values. They both maintain that the sellers will have to pay them the 6% anyway. Homes are actually selling in the city at an average clip since it is a university town and also has many govt. workers.

[sdrealtor]

Ipayone wasnt too early or too late. There have been many iterations of the same concept and will be many more. Some level of discounting is possible but the bottom line is that there isnt as much money to be made in RE brokerage as you think. You can leverage all the technology in the world but you will never replace all the hand holding, negotiating through difficult personalities, investigating issues with properties and much more. It’s an expensive business because every deal is essentially a custom product rather than an assembly line industry.

[Wiley]

SD,

Your points are well taken and since I’m in a similar business I agree. One of the things that gets me is that realtors commission have doubled in four years (in terms of the prices of houses have doubled).

So unless or until there some serious price reductions the margins are very high relative to four years ago.

[sdrealtor]

No question that commssions have essentially doubled but the number of individuals chasing has also doubled. I know, I know…thats no excuse and why should you care but unless quality people in this business can earn a good living you won’t have quality people in this business. A good commissioned sales person is worth $100,000 easily in any industry particularly one handling transactions of this magnitude. Given the current structure that makes us all independent contractors that translates to earning about $150,000 in net commissions to be comparable to a sales person employed by a corporation. I can tell you without question that far less than 10% of agents earn this. Now that sales volume is down there will be an inevitable shake out among our ranks.

The bubble in RE agents means that per agent earnings havent changed all that much on average. With longer selling times, marketing costs rise and the risk of not getting paid (i.e. selling your listings) increases. There is definitely room for some improvment in selling costs for consumers but there is only so much volume an agent can handle before the quality of service falls below a level I would not accept. I’m sure there will eventually be a better model but my belief is it wont happen anytime soon so you are left with 3 options: accept the current system, try to beat the system on your own or don’t participate.

[SD Realtor]

It has been pretty hard not to post on this thread… Looks like I lost the battle to temptation. That hard part is how to post without sounding like a shill of which I will surely be accused of….

In short I think that with the price of homes today, one can provide a high level of service to consumers and charge a lower commission. I don’t think it matters if it is on the listing side, or the buyers side. I believe that one of the largest misconceptions of consumers has to do with the amount of money a realtor makes. The reality is that the commissions are split up many ways and only a smaller percentage of top producing realtors make the big money. The bigger the corporate entity the less money realtors get.

At any rate I run the business as a second business yet I do not believe I provide any lesser service to my clients. I feel that I give them as good if not better representation then they would get from anyone else in the industry. I don’t claim to be a 20 year veteran or anything like that. I am simply an electrical engineer who had some rental properties and got tired of paying my Coldwell Banker agent (who is also my sister in law) full commission whenever I bought or sold a rental property.

The stories of both I Pay One and Help U Sell are interesting case studies. I owned a Help U Sell and quickly sold it because I saw MAJOR problems with the corporate structure. To say that it was poor is an understatement. I Pay One was never constructed for real estate. The main driver behind that entity was to get the loan business. The amount of money that they spent on advertising was staggering. They poured a ton of coin into the 1090 Padre broadcasts, you would hear several commercials every game. To purchase the naming rights of the Sports Arena was one of the stupidest things they could have done.

I often wonder how things would be if I did this 100% of the time. I am sure I would boost my revenue but probably not to the same level of what I make through engineering and having the real estate brokerage as a second business. I do agree that at some point, quality of service falls off due to having to many clients. Yet I have yet to field complaints about my level of service. I believe if I can provide this service, then anyone else that is motivated and intelligent can as well. I am somewhat familiar with the Assist to Sell . It is very similar to Help U Sell but Assist to Sell has not saturated the county like Help U Sell did. I guess we will see what happens with them.

SD Realtor

[Bugs]

Juice,

Full commission on a $200k sale is a totally different animal than full commission on an $800k sale. Use the broker, pay the little extra ($6k?) and don’t look back.

[sdrealtor]

SD R
I’m glad you weighed in here and absolutely agree with you that it can be operated at some level of discounting also but as a niche business. I think the fact that you operate it as a second business while your wife works and also has a second business speak volumes as to the profitability of this industry. I’ve seen your transactions on the MLS and have no doubt you are doing a great job for your clients dare I say probably on par with the top agents out their (service wise not productionwise). My point is that if this was your sole source of income on a full time basis it would be difficult to do a good job for your family. If you did it full time, the volume you would need to support your family would likely exceed your ability to deliver the same level of service. Your family woudl grow frustrated by your absence at nights and on weekends. As a part timer it is easier to preserve your time as your own. I also don’t think there are enough electrical engineers that got tired of paying to buy/sell rental properties to support this industry. Being in this business requires an entrepreneurila slant which you have but most people dont.

A couple of points on Ipayone. You are correct that it was never constructed for Real Estate. I went to one of their first recruiting meetings and met the CEO/Founder. What I heard come out of his mouth was exactly the same words that I heard come out of the mouths of dot com/tech start-up companies. He in fact came from a failed tech company. It was clear to me from day 1 that his intention was to build something of adequate size that he could sell off to one of the major players in the industry.

As for spending big bucks on advertising I do not believe that was the case. Two of the biggest investors in Ipayone were Hahn (owner of Sports Arena) and Lynch (owner of 1090). The advertising was no doubt provided by them as their investment into the company. My guess is that the naming provided a great write off for Hahn and that the ad spots on 1090 were whatever was unsold inventory (and thus no cost to Lynch).

[masayako]

FormerSanDiegan,

“I have a new business idea.
It’s called IPayTwo (TM)

This approach would provide double the gross income that these losers generated. (And they thought 7-minute abs was a bad idea).”

Man, you have a way to put them words together. Impressively well said!!!!!

You know what could be better: IPayNone (to sell my house)

Masayako

[sdrealtor]

A classic single page website marks their grave kind of like a tombstone!

Home

[SD Realtor]

sdr agreed…

I didn’t know Hahn and Lynch were IP1 investors. That explains the volume of commercials. Radio time is not cheap at all and when I counted the number of IP1 commercials in a single Padres broadcast I could not figure out how in the world they could pay for it. Now it is easy to see.

I think you may be correct in the sense that if I did it full time I don’t believe I would match my engineering income. I may come close depending on the market conditions but it is doubtful. Also if I had higher operating expenses then no way.

I think the thing that is most interesting is we see sooooo many posters complaining about the costs associated with transactions. Like everything else it is much easier to complain then to do something about it. I complained alot as well but did something about it. I had a friend who I was going to hang my license with after I go it and then I could simply by/sell on my own in order to save a side of the commission. The idea to start the second business got spun up because I had a bunch of engineering friends who wanted homes and didn’t want to pay as much either. Also the rental numbers in San Diego didn’t make sense anymore. So it goes from there.

The HUS story is one you probably already know. HUS has some great people. The franchise owners were all good. The regional guys were pretty crooked (in hindsight) and you may know them or of them. They completely over saturated San Diego. When I bought my franchise there were 22 of them and 3 months later there were over 30 of them! The guys I sold my franchise to already have closed it up. Many other of the HUS franchises have as well.

I often wonder why more people have not done what I have done. I am not sure if it is the entrepenurial slant or just the time involved. I can honestly say it is much more time consuming then anyone here realizes. There is so much free work that you need to do and more often then not potential buyers or sellers bail on you. MINIMUM 80% of the time to say the least, at least in my case. My wife says I am way to accomodating to leads and she is definitely right. So everyone thinks that they are getting ripped off by commissions but they don’t think of the other 8 people that the agent took out to see homes, or ran comps for, or dedicated time to but who walked.

A few weeks ago I posted about a listing appt I had in Coronado and how the guy wanted to list but was not willing to price competitively. The guy completely ran me through the ringer and in the end he ended up simply using me as leverage to get the commission lowered by his agent that he has always used. Those are the breaks though right?

Nobody forces them to use agents. Call a real estate attorney, FSBO it yourself, or go get a license and hang it with a broker.

SD Realtor

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