Why The Classical Real Estate Model Is Still Holding Up Articles | Real Estate

By: Erion Shehaj

Now that the national housing market has hit a bit of slump, you don't hear about them as much in media's feature stories but I remember about six months ago when every other day CNN Money was covering some new concept real estate company that was slashing commission rates and how it all was going to mean the end of the classic model of real estate commission system.

I remember, because it was around that time that after three years in real estate, I had gotten my brokerage license and had setup my own real estate firm. The concept of reinventing the wheel sounded awfully attractive especially since we were trying to find our own little niche in the real estate world. And what better position to be in than to provide full service real estate for a mere fraction of the cost? Who wouldn't want that, right?

Actually not very many people. I understood later why. The cost of selling the home to the home owner is secondary to the actual sale of the home. In other words, the sellers cares more about whether their home will sell versus how much it will cost them to sell it. Discount real estate companies have had good success in hot markets where properties virtually sell themselves like California and Florida. But in the middle class America, real estate remains a trust based business and although counterintuitive, lower priced services are usually deemed to be less trustworthy.

For instance, when we first started the company as a discount real estate firm I had this "brilliant" idea about how I was going to offer to sell about 30 homes for absolutely free. The plan was to get enough exposure of the homes I was selling for free to make up for the effort. Would you believe it that people would simply not want to do it? They didn't want to sell their home for free. The low cost (or in this case, no cost) idea has a "too good to be true" appeal to it that makes it seem shady even when sincere to begin with.

I think the real estate classic system will hold up for quite some time if not ever.