Alternative Real Estate Lives!
The idea for Inman Park Realty came from several sources. But, the underlying premise was to always challenge and hopefully change the traditional real estate sales model. Simply put, the way we buy and sell homes is dated, inefficient and costly to consumers. Or, put in another way, people are getting ripped off. Yet sadly, this isn’t news.
People have been complaining about the industry’s 6% commission “standard” for over 5 decades. And, for most of the United States, that 6% isn’t going anywhere. America is strategically stuck to the National Association of Realtors, (NAR). Except Atlanta. Atlanta, Georgia is the largest city in America NOT forced to adhere to the NAR monopoly. We are actually, “allowed” to restart the real estate sales model.
The National Association of Realtors owns and controls most of our nation’s MLS companies. (They don’t in Atlanta) MLS data is the industry’s life blood. NAR sets the rules and controls the sales format. The traditional chain store business model, founded in the 1970s, has been painstakingly preserved and remains pretty much intact, even today. So, how does a wildly illogical business model survive for 50 years in the face of unprecedented advancement in technology and communications? It does so, with hundreds of millions of dollars. Make no mistake, keeping progress at bay doesn’t come cheap.
In 2016 NAR spent $65M on governmental influence. That is more than Blue Cross/Blue Shield ($25M), the Pharmaceutical Manufacturers of America ($19M) and the AMA (19M) COMBINED! In the last 5 years alone, NAR has spent $238M on lobbying efforts making them one of the largest contributors to the beltway economy. You would have thought somewhere within their recent quarter billion dollar governmental investment, NAR could have done something to help homeowners lower their costs? But no, that isn’t where their interest lie.
Over the last the decade I have literally written, and I am using the word correctly, hundreds of articles regarding our broken real estate system. They’re easy to do and most write themselves. But, because this is Atlanta Georgia, we can do more. Anyone holding a real estate license can create a unique, locally-focused “alternative” to the traditional real estate sales environment.
So what is Inman Park Realty?
It’s an “alternative” real estate sales channel exclusively for people who live in Inman Park. The goal is to change the way homes are sold in Inman Park. The objective is to create a repeatable business model that any agent can use anywhere else. We believe that by shining a light on the sales process, we will have a better than fair chance to actually change the sales process. No one really believes a $600K seller should pay twice the commission of a $300K seller—it’s ink on paper!
Why Inman Park? Statistically it touches all the bases. Look for highly defined population areas with an existing brand presence and an active Neighborhood Association whose housing turnover rate can support a livelihood. Inman Park is very well-defined, off-charts popular and historically sells around 100 properties a year. If an alternative sales approach were ever to take root, it would probably do so in a Community exactly like Inman Park. So where is the alternative?
Historically, the real estate industry has always been self-centered. “I am the only agent who makes the really, really best deals”. And; “Only I know how to sell in this area, believe me”. We have been trained, for generations, to accept this, me, me, me, vanity inspired popularity contest. (Insert family hearth photograph here) This approach isn’t only silly, it’s costing homeowners thousands.
Statistically, we know Inman Park will have around 100 sales transactions every year. If the folks of Inman Park got together and asked themselves, what’s the most cost effective way for us to sell a 100 properties a year? No one, would say, “Let’s hire 77 different, disconnected Listing Agents who may or may not know a thing about our area”. But, that is exactly what your Inman Park ex-neighbors did in 2016. There were 92 sales by 77 different Listing agents. Common sense is screaming!
The 6% commission, “standard”, is in large part the result of the industry’s self-directed, me and more me approach. When someone says; “Realtors make too much”, it’s always a Realtor who is quick to point out the amount of money it takes to be a successful Realtor in today’s world. And, they wouldn’t be kidding. Popularity contests are like non-stop elections. And, just like elections, the non-stop part of it requires serious money to be competitive.
Of course homeowners, looking to sell their property, could care less how much it costs an agent to, “fill their sales funnel”. Shouldn’t the sales process be more about selling homes and less about the expense of recipe cards or billboard ads? The consumer has forever wanted a flat fee. For now, the homeowners of Inman Park have the only community-wide, flat-fee ($995) capability in Atlanta.
In order to offer a flat fee, the sales strategy had to move away from the, “look at me” individual approach to a strategy that focuses on the Community. Franchise-style real estate promotes thousands of agents, all competing against each other, chasing down and calling every possible lead, with a pulse or not. This approach will never lower the agent’s cost; it’s not designed to. Yet, this is the rut that NAR promotes. But, if the Community becomes the central focus, an agent can build a sales environment where the consumer or seller comes to them, creating the first step toward eliminating the 6% mandatory commission. By lowering an agent’s customer acquisition cost, a Community-based solution can focus on what’s really in the best interest of those who live in the Community.
Today’s technology gives agents all the tools and apps they need to create platforms for engaging the consumer and homeowner. Creating sales platforms that can speak for a niche, such as a neighborhood, seems like a very logical way to reduce costs, enhance visibility and improve efficiency. Yet this style of real estate isn’t commonplace.
Even in Atlanta, big franchise still dominates. Why? Consider the cost of buying a real estate franchise. From the relatively discounted Remax, $250K, to the more upmarket Sotheby’s, $619K, buying a chain store realty isn’t a cheap proposition. Needless to say, these heavily-invested Brokers have zero interest in allowing strategies that lessen homeowner costs or agent manpower. Big franchise, even in Atlanta, drinks and promotes the, frozen in time NAR narrative. They have little choice.
Real change never happens overnight and Inman Park Realty is in no hurry. We have been open for nearly 6 months and have yet to attract any Listing customers. We’ve had lots of calls, emails and discussions, but no contractual customers. Still, we are extremely encouraged by the feedback. From buyers and sellers, our feedback has been universally positive. From fellow agents, the feedback has also been universal. That said, we take most of the ridicule as positive. The traditional agent community isn’t supposed to like what we are doing! We are changing their game and not playing by their rules.
In a few years, if we can’t see a road to measureable market share, we will admit failure and document the journey. But, we are banking on the ability of our team, continued improvement in technology and a true Community focus to develop a compelling story that will prove to save the homeowners of Inman Park thousands of dollars of their home equity. In short, we know we offer homeowners a far better deal than the chain store format.
Everyone knows what you get from a Chain Store. But, if Inman Park Realty is successful, homeowners will save thousands of dollars and the IPHA will realize an ongoing revenue stream. The traditional real estate approach clearly favors, the “system” or the franchise. And in reality, no one cares about the franchise. Inman Park’s alternative sales approach favors the Community and those who live in it.
Last year’s 92 Inman Park transactions accounted for over $41M in home sales. At a franchise 6% commission rate, those 92 ex-homeowners paid over $2.4M in agent sales commissions. That is a heck of a lot of money to pay in commissions to agents whose clients have been waiting for the properties to come on the market. A really depressing fact is, if nothing in the real estate sales model changes, we know right now Inman Park sellers in 2017, 18, 19 and FOREVER, are going to continue paying over $2M on agent commissions every year!
If you knew something bad was going to happen, wouldn’t you do something to try to stop it?