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Business Observer Friday, Jul. 5, 2019 1 year ago

Realtors find a better model to sell homes

An independent Southwest Florida real estate agency went looking for a strategy to compete with national brands. Although change wasn't easy, some benefits are percolating.
by: Andrew Warfield Lee-Collier Editor

Veteran Southwest Florida real estate brokers Greg and Kathy Zorn faced a business-altering decision in 2017: continue as the independent, dual office Florida Home Realty they had operated for decades or disrupt their business model by aligning themselves with a national brand.

They had operated their real estate offices in Naples and Bonita Springs under a hybrid-100% commission structure and charged agents only rent along with fees related to marketing. The Zorns grew that model into a brokerage with more than 200 agents, declining to disclose sales volume. 

Moving to a franchise model with a national entity would require a shift in agent compensation to a shared commission model. That means less money for an agent per sale. But it would also provide needed technology, marketing power and — most importantly — leads.

“We knew there would be some downside for us initially, but if we didn’t make the change, we felt we were going to melt away because, in our previous model, we were not able to afford the things our agents were going to need to compete.” Greg Zorn, partner, Better Homes & Gardens Pristine Realty

The pair, after two years of research, chose to go national. They dropped Florida Home Realty to become Better Homes & Gardens Pristine Realty.

“What we realized is we needed to have the power to compete with the Zillows and Trulias,” Kathy Zorn says. “How do you do that when you're an independent? Not everybody believed in it when we made the change, but the things the agents were asking for — websites, mobile apps, a name that's recognized globally — when you look at the things they wanted, we got them.” 

Of course, in aiming to provide those things, the Zorns had to change something the agents coveted: the old compensation model. That's why about 80 of their more than 200 agents left the fold after the switch.

The 100% commission model is popular in Naples, the Zorns concede, but is not as practical outside that lucrative market. In order to expand the business to markets with a broader price range, they knew a commission-share approach, plus royalties to Better Homes & Gardens, was better suited not only for expansion but also for survival.

“We understood we would lose agents because some would be walking away from $30,000 or $40,000 with the book of business they had in the pipeline,” Kathy Zorn says. Greg Zorn adds, “We knew there would be some downside for us initially, but if we didn’t make the change, we felt we were going to melt away because, in our previous model, we were not able afford the things our agents were going to need to compete.”

The Zorns’ research led them to the Better Homes & Gardens brand owned by Realogy Holdings Corp., whose holdings include other national brands Coldwell Banker, Century 21, ERA and Sotheby’s International. In addition to the Better Homes & Gardens core values aligning with their own, they chose the brand in part because of a marketing strategy that replaces traditional canvassing mailers with complimentary subscriptions to Better Homes & Gardens magazine. “The magazine has a shelf life of years,” Greg Zorn says. “I think it’s the best marketing tool in the world.”

The Better Homes & Gardens franchise offers additional tools to the agents the prior model could not, the most important being lead generation technology, the Zorns say. It can leverage the infrastructure power of Realogy and its 30,000 agents worldwide to bring online home shoppers directly into its database, which provides a point of contact with prospects based on web search data once they have registered.

“The agents have access to the infrastructure and tools — such as paperless systems, support, marketing and training — all at no cost to them,” Greg Zorn says. “We're looking for agents who recognize the value in that. Before we just charged a monthly fee. In this model we share in the commission, but we provide a lot more, and they don't have monthly bills, which is especially important in the slower months. I think it's the best of all words.”

Going on two years, has the switch worked? Although they declined to disclose revenues, in May the Zorns began reaping the benefits of the change when they opened their third office in Cape Coral. The Zorns also say agents who remained with the agency following the transition have increased their volume by as much as 30% from their previous years as a 100% commission agent, largely by utilizing the tools and marketing opportunities the brand offers them.

Kathy Zorn says another plus is an upgrade in personnel. “The caliber of agent we attract with the brand is much higher than before,” she says. “And they are selling at higher price points with the brand.”

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