Empowering Consumers By Eugene L. Meyer
A fee-for-service real estate network challenging the traditional commission system with a lower-cost model just might be an idea whose time has come—again. The explosion of the Internet along with a shifting housing market have positioned Help-U-Sell® to continue its phenomenal growth as more savvy homeowners seek to retain greater equity when selling their properties.
Founded in California in 1976, Realty Information Systems, dba Help-U-Sell, has grown to encompass 1,000 offices in 44 states. Entrepreneur magazine ranked Help-U-Sell 15th in 2005 on its list of the 100 fastest-growing companies.
Help-U-Sell says it opens a new office every 48 hours on average and has grown 900% since 1999. It broke the 300-franchise mark in January 2003 and has averaged 200 new franchises in each of the last three years. Help-U-Sell has set a nationwide goal of over 2,000 offices nationwide by 2008.
“Let’s make one thing clear,” says Steve Ozonian, who took over in January as Help-U-Sell chairman of the board. “Help-U-Sell does everything a traditional Realtor does, but allows the consumer to choose the services he or she wants.”
Ozonian believes that the company is poised for even greater growth as a slowing real estate market forces consumers to be even more conscious of the monies exchanged in a traditional real estate transaction.
“One of the most important decisions that a consumer will make several times throughout their lifetime is the purchase of real estate,” Ozonian explains. “The unique characteristic about home buying is that it has an emotional component along with investment risk that has high personal impact. As markets soften up a little bit, the equity calculation of what you have left when the transaction is completed becomes very important. A lot of customers are going to say, ‘I’m not going to risk 6 percent of my equity without a fair return on investment for the cost of the service I’m receiving.’”
Ozonian’s decision to join Help-U-Sell has boosted the company’s stock in the eyes of industry insiders. “Here’s a guy who stood behind full-scale commissions all his life,” says Brad Inman, founder and publisher of Inman News, a syndicated real estate news service. “It says less about Help-U-Sell and more about the mainstream industry maybe having to rethink its models.”
Ozonian, who has his office in Orange County, says the opportunity to lead the future strategy development for the company became “increasingly appealing” as he came to see a “definitive place” in the real estate business for the fee-for-service model.
“In a restaurant, you get to choose off the menu,” he explains. “When you get the bill, it’s for what you decided you wanted. You don’t get a bill for the whole menu and there’s a clear relationship between the cost of goods served and the price paid. Real estate has always been the opposite, where you pay a fee based on the assumption you need everything the broker has to offer and there is rarely an accounting for the cost of producing the service and profit added on.
“The Internet created the tipping point for the way people live their lives,” he adds. “We believe the Help-U-Sell model is perfectly positioned for the tipping point forming in residential real estate.”
Giving Consumers what they Want—More Profit
“They’re an interesting company with substantial business but could be much more widespread,” says Inman regarding Help-U-Sell. “Most people in the industry have their head in the sand about future and change. I think Help-U-Sell always got it. Their vision is clearly about giving the consumers an alternative. This is America. Why shouldn’t there be choice?”
That is just what Art McArty, a 43-year-old Internet marketer who lives in Sanford, Florida, wanted. Already computer-savvy, McArty did his research online before interviewing three fee-for-service firms and choosing Help-U-Sell.
“Help-U-Sell definitely had done their research, knew what the houses were selling for within a three- or four-block area, knew per square foot what I should be asking,” McArty says. “If somebody called and was pretty interested in going to the next step, I’d give them their business card.”
McArty paid Help-U-Sell a fee of $2,950 to sell his house in nearby Orlando last year. The home he’d purchased five years before for $135,000 sold for $250,000. Under a standard arrangement, $15,000 of the sale price would have gone to an agent. Thus, McArty got to keep $12,050 more of the proceeds.
Based on the standard 6% commission, Help-U-Sell estimates that over the last 12 months it saved sellers over $400 million, compared to what they would otherwise have paid real estate agents receiving the traditional 6% commission. Those savings ensure a more stable real estate economy as comsumers have more equity to invest or protect their real estate assets.
Ripe for Today’s Market
Steve Murray, editor of the Denver-based REAL Trends monthly, is impressed with Help-U-Sell’s growth since 2000. “We think by 2010 these kinds of companies could have as much as 10-12 percent of the market,” he says.
Roger Steiner, a Help-U-Sell regional franchise owner in Southern California, says the company’s system “generates business no matter what the market conditions. In 1990, we went through a switch from a strong sellers’ to a strong buyers’ market. It deflated the market and prices dropped 30 percent in California. We got a lot of referrals from traditional agents who couldn’t get the commissions they wanted.”
Roger and Bernadette Steiner own the regional franchise in Southern California’s Inland Empire region. Today, the Steiners have 115 offices in a four-county area.
Their 1986 entry into the market dominated by traditional commission sales was not universally welcomed. “We had eggs thrown at our office the first night we were open,” Roger Steiner says.
“We just kept on doing business,” he says. “Realtors in general are afraid of change, but we had 100 listings within the first three or four months.”
“In a slowing market, the broker community will look for a savior, a tool that will help them,” says Help-U-Sell board member Bradley J. Crandall. “We are, I believe, the best option out there, because we offer what’s best for the consumer.”
Help-U-Sell representatives promise to do just about everything for the flat fee—payable at settlement.
But one flat fee does not fit all. “Help-U-Sell fees vary dependent upon the services, areas, marketing required, and the agreement between the agency and seller,” according to the company’s Southern Oregon Web site. If a seller can’t always show his or her house, Help-U-Sell will, for a slight fee. If the seller wants the property to also appear on the MLS, that’s available, too, for a separate fee.
Help-U-Sell helps the seller determine his or her property’s fair market value through an extensive market analysis to ensure that the property is priced to sell. The firm also provides yard, open house and directional signs for the owner to post. Once an offer is made, Help-U-Sell negotiates the contract, prepares legal papers and follows through to settlement.
Technology, in the form of the Internet, has added another factor to the buyer-seller equation. “History buffs will tell you it’s 10 years removed from the event before we understand its effects,” says Bryan Drakulich, a Sparks, Nevada-based Help-U-Sell regional franchise owner. “A little over 10 years ago, the first home was put on the Internet. It has empowered the consumer, and that’s what we’re all about. It was like handing hammer and nails to a carpenter.”
Drakulich, who is now regional director for all of Nevada and Orange County, California, is a Help-U-Sell success story who’s lived through real estate ups and downs. A native of Sparks, Drakulich started in real estate at 17.
The Sparks-Reno area was at the time experiencing a boom in new three-bedroom homes selling for $89,500, the FHA-loan maximum. The homes appreciated little in the ensuing three years, leading to frustration among sellers with little equity yet facing 6% real estate commissions, Drakulich says.
Then, a family friend pitched the Help-U-Sell concept, saying, “This is the future of real estate.” Drakulich and his father flew to California to meet with Help-U-Sell founder Don Taylor. “He said, ‘Help-U-Sell is not a real estate company; it’s a marketing company,’” Drakulich recalls. “I knew right then and there that I was in the right place. At the end of the day, it’s all about servicing and assisting the consumer.
“Becoming a Help-U-Sell fran-chisee was the best business decision I made in my life,” says Drakulich. “I was 21 years old. I never looked back and never regretted it.” Drukulich’s Nevada operation now includes 25 offices; his California region, 13 more.
A Different Brokerage, Not a Discount Brokerage
Help-U-Sell is not a discount brokerage, where an agent reduces his or her commission to obtain business. Instead, sellers who sign on with Help-U-Sell pay a flat fee, which ranges in price depending on the cost of doing business in a given area. In 2005, Help-U-Sell saved consumers a combined total of over $400 million in commission fees.
“It seemed to be much easier to deal with them and understand their practices than with the typical Realtor,” says Tara Rucci, who lives in a suburb of Columbus, Ohio, and has both bought and sold through Help-U-Sell.
Help-U-Sell saves money by having the seller show his own house. “By carving that out separately, we’re able to control our costs and put more money into marketing than our competitors,” says Crandall. “The most inefficient area of real estate is showing the property, because it’s not controllable. If they are willing to show the home, we still follow up.”
Most commission-sales brokers advertise initially, then sporadically if at all. But Help-U-Sell guarantees to advertise a property weekly. If a property sale is co-brokered, the seller still saves money by paying the flat fee plus the standard co-broker fee.
For about 30% of its listings, the company also offers a service known as “Talking House.” Prospective buyers who want to see a property but aren’t yet ready to deal park in front of the house, tune their car radios to a set frequency and hear the essential facts on the property. “We put a sign in front that says tune your car to 1610 AM. It broadcasts 24-7 from a transmitter we put in the house,” explains Paul McAlpine, general manager of the Nevada regional office.
“The great thing is, you go on the Internet, find four or five homes, but before you engage with a real estate professional, you drive by. Talking House gives you the ability to get an insight into the house,” says Ozonian.
Organizationally, Crandall says, Help-U-Sell is “an employee-centered business model, not agent-driven per se. That doesn’t mean we don’t have offices with agents. We rely on agents to target business opportunities and develop market strategies. We have a marketing system where the franchise owner puts it all in place. But you’re not in a situation where you have unnecessary bodies around. You hire agents based on needs. You don’t have this big overhead, with lots of desks. You train people as you need them.”
The cost of obtaining a franchise ranges from $19,500 to $29,500. In addition, there is an ongoing royalty fee amounting to 7.5% of gross revenues. Franchise agreements are re-newable every five years. Help-U-Sell Un-iversity offers monthly sessions for franchisees to improve their marketing and business skills.
Real Estate for All Seasons
Help-U-Sell is an idea for all seasons and markets, according to Drakulich, who obtained his first franchise in 1983. “Help-U-Sell does well in good markets and does great in a soft and declining market when sellers need more help.” While rates remain low, he notes, many more owners with interest-only, adjustable-rate loans could face soaring monthly payments without rapidly rising equity, forcing them to sell. “What are they going to do?” Drakulich asks. “People need help, and we are the solution.”
Invoking what might be the company’s mantra, Steiner adds, “The consumers drive our business. As long as we meet their needs, we’ll continue to grow.”
According to Murray, however, Help-U-Sell and other flat-fee franchises could face “formidable competition” if traditional real estate brokerages decide to offer the same services as a sort of subsidiary business.
There could also be problems, Murray says, “if Help-U-Sell doesn’t stick to its game plan, and starts losing its focus by trying to be more things to more people.” If flat fee firms veer too far from their successful model, Murray says, “Before you know it, they’re undifferentiated. If they stick to their knitting, they can have a good and very profitable chunk of the market.”
“We believe that there has always been an increasing desire from consumers to become more empowered and have more choice,” says Ozonian. “Creating value means improving on what already exists and the good news for Help-U-Sell is that what consumers want is a significant improvement in the relationship between the services being provided and the price paid for those services that the consumer has concluded are consistent with their goals.” |
