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Published in U.S. 1 Newspaper on April 5, 2000. All rights reserved.

E-mail: BarbaraFox@princetoninfo.com

Real Estate Future: Less than 6 Percent?

Residential real estate is going into its dotcom

phase. Last year brokers began to list homes for sale on the web in

a big way. This year dotcom companies are listing homes for sale on

the web plus they are offering bargains — cutting the traditional

six percent commission down to three percent or even two percent.

The Internet is dragging the residential real estate business kicking

and screaming into the 21st century. The E-realtor in the news right

now is YourHomeDirect.com (YHD), the brainchild of Glenn Cohen, a

former land broker who has a new paradigm for home sales. From his

base in Long Branch he has opened four other offices, including one

at the Carnegie Center. He has enlisted the forces of Lenox Drive-based

Gillespie Advertising for a $5 million advertising campaign.

In the first 14 days of the ad campaign began, his company sold just

two houses. But, says Cohen, "I’m getting 10 resumes a day from

all the top real estate companies in the state. They see the future,

and the future is not at six percent."

If Cohen is right, residential real estate will never be the same

again. Here’s how it works:

1. The "Web Direct" plan charges a flat fee of

$1,499. The home seller gets online and offline exposure to potential

buyers. After these buyers have seen the seller’s home on the website,

these buyers are screened and prequalified. The homeowner handles

everything else, including the home showing and the negotiating. Web

Direct sellers can at any time move up to the Sellers Choice or the

MLS plan.

2. The "Sellers Choice," or what Cohen jokingly

calls the "Vanna White" plan, involves a two percent commission.

YHD lists the home on various listing services (not including the

standard multiple listing service used by other realtors), does advertising,

and puts a virtual tour on its website. It also prequalifies potential

buyers and makes appointments for them, but the homeowner is the one

to show the home. Then the YHD consultant does all the negotiating.

On the sale of a $500,000 home, the homeowner would save $20,000 with

this plan.

If the homeowner wants the YHD consultant to take over showing the

home, the commission goes up to three percent.

3. On the MLS plan, if the homeowner opts to put the listing

on the "regular" multiple listing service (MLS), that costs

an additional .9 percent or a total 3.9 percent commission. (Outside

brokers who bring in the buyer will be offered a 2.5 percent commission

and the YHD commission is reduced to 1.4.)

YourHomeDirect’s core administration numbers 12, and there are 40

agents so far. "My goal in the next 12 months is to enter five

more serious marketplaces," says Cohen. Next he plans to expand

to Pennsylvania and New York. The ad campaign involves outdoor signs,

radio ads, fly-overs, web banners, direct mail, and print ads. Outdoor

advertising is running only in North Jersey so far, but listeners

to the Howard Stern and Don Imus radio shows may have heard Cohen’s

voice with the tag line "net more for your home."

Cohen, who is single, went to Boston University, Class of 1983, and

has a law degree from California Western. He grew up in Lakewood,

and his father worked at the family chicken farm in Farmingdale as

a chicken vaccinator before opening what would grow into the largest

landbrokerage in New Jersey. With his first company, which grew to

be the largest subdivision broker for new home builders, Cohen’s timing

was excellent: "The most success I had in the land business was

in the early ’90s when things went south and I sold a lot of properties

for banks, $60 to $70 million in less than a year."

Cohen’s most obvious cost-paring measure is his salary plan. Under

the traditional plan each agent is an entrepreneur bearing his or

her own costs, and each shoulders part of the administrative load

of running the office. One or two clerical jobs may be on straight

salary, but shifts of agents man the phones. When agents sell a house,

the individual agent typically collects two percent of the total sale,

which, for instance, for a $400,000 house would be $8,000.

On the Cohen model, the salespeople take a lower commission, and both

the agents and the back office personnel get shares in the dotcom

company. "They have a salary and a performance-based commission,

and we also give them a piece of ownership of the mother ship,"

says Cohen. "That’s what people want today."

The YHD model also includes more people and technology supporting

the sales team. "YHD’s use of the Internet technology will allow

them to process more transactions per realtor," says Harold Denton

of General Land Abstract on Research Way, the state’s largest title

insurance firm. "Processing costs will go down, and I assume an

individual realtor could handle more cases."

All sales agents have their own laptops and digital

cameras. When a home is listed for YHD, the information and pictures

of the virtual tour go up on the website. Each branch office shares

a T-1 line from its building to the headquarters. Cohen claims to

have the only real estate company with all of its offices connected

by high speed dedicated lines on a frame relay network.

Cohen enhances profits by training all his agents (he calls them home

consultants) as mortgage brokers. When you call to see a home, the

person answering the call "qualifies" you by taking your financial

information. That very same information can be used for your mortgage

application. "Then the local agent from your area gets onto the

network and it is all done for him. We input it into the system just

one time," says Cohen.

Cohen has a separate method of dealing with new home buyers. "We

can make an appointment for a new home development right through our

call center and E-mail a registration card. We think people really

would prefer to buy new homes if they could." He plans to have

signed up 30 to 40 new-home builders within the next month.

One major builder, K. Hovnanian, is an initial investor, and Cohen

is in the institutional venture capital stage of fundraising. "To

do this right — and we are not finished raising money — tens

of millions of dollars are required," he says. "We are going

to be advertising our realtor services in all of the Hovnanian sales

centers."

Mike Kane is his chief technical officer and Les Newlands is what

he calls his "Tony Robbins of real estate training." The senior

vice president and general counsel is Anthony Caruso. Robin Ervin,

YHD’s home consultant at the Carnegie Center, lives in Lawrence

with her husband, metal sculptor Clay Ervin. Ervin’s father was a

captain in the U.S. Navy and she majored in fine arts at the University

of South Florida, Class of 1979. She has 18 years in real estate;

she started out in the mortgage business and moved to new construction

— at the Cherry Valley development for Gale Wentworth & Dillon,

and before that in Basking Ridge and Bedminster.

Ervin says the boot camp training for YHD consultants started in early

December on a part-time basis and went full-time in February. "When

we take a listing we act as our own photographer with a digital camera

and a special lens that allows us to meld the pictures together into

virtual tours of homes," she says. "There was quite of bit

of practice with the camera. Then we learned the mortgage application

process, in-putting listings, using our site, and getting on track

with the technology and becoming proficient."

Cohen cites statistics of up to 40 percent of prospective homebuyers

doing online searches as compared to seven percent in 1997. His major

competition is the status quo, Realtor.com, the official site for

almost all New Jersey real estate companies’ listings. A future contender

is the nascent website instigated by an analyst from Salomon Smith

Barney and owned by five of the nation’s big home builders, including

Pulte Corp., based in Michigan but with a branch in Bernardsville.

The builders will spend $2.5 million to launch the site this year

and hope to take it public.

Cohen realizes that many other companies are trying to get into his

boat. That’s why he’s spending money up front for market share. But

he doesn’t expect the "old fashioned" real estate companies

to follow closely in his wake. "They would have to redesign their

compensation plan and restructure their whole business. It’s like

really big ocean liners, it is very difficult for them to turn those

boats around, whereas we have the luxury of designing from scratch."

"We are taking people from the FSBOs (the "for sale by owners")

and we are taking people from the traditional brokers, a little bit

from each side," says Cohen. "I don’t know how `little’ it will

be."

— Barbara Fox

YourHomeDirect.com, 103 Carnegie Center, Suite

100, Princeton 08540. Robin H. Ervin, home consultant. 609-750-9070;

fax, 609-750-9074. Home page: www.yhd.com.


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