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OFFICIAL MAGAZINE OF THE NATIONAL ASSOCIATION OF REALTORS®



This article was published on: 01/01/2003

FOR BROKERS: Tech Spending

Service with a smile—and a fee
Internet leads (and followers)
Say goodbye to ink?
Online Exclusive

Get your money’s worth

BY MATTHEW MCDERMOTT

If there’s one mantra on brokers’ minds today, it’s that technology has to start paying for itself. Spending on technology differs widely among brokers. But David Cocks, managing partner of Compensation Master, a compensation consulting company in Charlotte, N.C., estimates most brokers spend between $420 to $660 per associate per year, depending on market and brokerage size.

That spending is typically something that brokers shoulder by themselves. Two-thirds of brokerages don’t share their technology costs with their sales associates, NAR data shows.

Naturally, brokers want to know what they’re getting for their investment—and they’re getting better at figuring that out. More than a decade into the revolution that swept technology into the real estate industry, many brokers are finding efficiencies and managing costs in a way that ensures a better return on their tech spending.

Service with a smile—and a fee
In 2001, when Mark T. Eibner, CRS®, GRI, launched Realty Oasis, a 100 percent commission company, outside Denver, he had little interest in taking a business-as-usual approach. He built his company with technology at the foundation.

Through a Web-based transaction management system called the Oasis Platform, his associates interact with their customers, coordinate transactions, and access the company’s affiliated services—mortgage lending, title insurance, home inspections, and homeowners insurance—without having to be physically present in the office.

All of his professional support staff, including the heads of his Web, office services, and marketing operations, are accessible via the transaction platform. That enables associates to work out of their home office; so far, 80 percent of his 50 associates have chosen that route. The online system allows Eibner to build his business without having to grow his office space to match. In fact, he’s looking at years of growth before his office space, which can accommodate 250 sales associates, fills up.

Eibner’s office space is substantial—6,400 square feet in suburban Denver in the Oasis Building. Much of that space accommodates his ancillary operations and in-house services, including a marketing department, and provides meeting space for his associates and their customers.

To recover his technology costs, Eibner charges associates a monthly Web platform access fee of $295 and a per-transaction fee of $295. For associates who tap his in-house marketing department for brochures, virtual tours, closing gifts, and other services, he charges a per-transaction fee of $375. Up to 90 percent of his associates use the marketing services.

Internet leads (and followers)
Tonda Burr and Katy Boles can’t estimate the amount of business they’ve lost because of it. The culprit? Web site leads that aren’t tied to a listing or addressed to a specific sales associate.

Getting sales associates to follow up on these leads, called general Web site leads, is a major task and has led Burr and Boles—chief operating officer and CEO, respectively, of Graham & Boles Properties in Winston-Salem, N.C.—to institute a two-channel policy designed to help them recover these lost revenue opportunities.

When these general leads come in, they’re channeled to the relocation department. Relocation staff work with consumers until they’re committed to the homebuying process. Then the leads are passed along to sales associates who pay the company a referral fee.

The policy doesn’t apply to Internet leads that are tied to a particular listing or directed to a particular sales associate. These leads go directly to the sales associate.

Burr says the sales associates accept the Internet referral fee as money well spent, given the amount of processing the broker does before the lead gets to the person. “In our experience, general leads from our Web site need anywhere from two to nine months of hand-holding before these consumers are ready to look seriously at properties,” says Burr. “We make a significant investment in developing these leads and our associates understand that. I really feel that acceptance of Internet referrals is a communications issue.”

Saul Klein, CRB, president of Internet Crusade, a real estate sales and technology consulting company, sees Internet leads as an untapped source of profit for both brokers and sales associates. “It’s no accident that there are companies such as HomeGain, HouseValues.com, and now LendingTree that have business models focusing on lead generation,” says Klein.

Nor does Klein think associates will hold it against brokers who try to make a profit off improved Internet lead management. When done right, he says, Internet leads enable sales associates to spend less time and money on prospecting. In the future, generating high-quality Internet leads may be seen as a major draw for soliciting top sales associates to join brokerages.

“Sales associates have been paying referral fees to other practitioners sight unseen for years,” Klein says. “Why wouldn’t they want to cut their prospecting time and dollars for warm leads from their broker?”

Burr’s success in managing Internet leads owes much to her openness with the company’s sales associates, she believes. Burr says, generally, salespeople are unaware of the high cost of operating a brokerage. But sales associates at Graham & Boles know that the company spends more than 1 percent of gross revenues on technology and about half a million dollars on advertising each year.

“The competition is trying to recruit your associates,” Burr says. “That’s why you must remind sales associates what you do for them—how you free them up to focus on selling. Brokers have a strong value proposition for sales associates; they’re just not doing a good job of communicating it.”

Say goodbye to ink?
As more buyers migrate to the Internet, brokers may finally start to realize reduced print advertising costs, one of the early promises the Internet held out. Brokers are unlikely to jettison newspaper advertising entirely, but many brokers have spoken publicly about decreasing newspaper ad budgets.

At Graham & Boles, the approach has been to refocus print advertising from selling listings to selling the broker’s Web site, then letting the Web site sell the listings.

Burr believes the two-pronged approach gives the company more advertising bang for its buck and puts the company in a position to start trimming its $500,000 print advertising budget.

Spending less on print ads is something Prudential Fox & Roach has already begun doing, according to Chip Roach, CEO and vice chairman of Prudential Fox & Roach, REALTORS®, with 45 offices in Delaware, New Jersey, and Pennsylvania.

The company still advertises in major metro papers, but it stopped advertising in 40 local newspapers and funneled that money, in an almost dollar-for-dollar shift, into providing virtual tours on every company listing. It’s too early to quantify the benefits of this approach, but the company is happy with the feedback it’s getting from its sales associates.

“Consumers are telling our salespeople they love the virtual tours,” says Roach, “and our sales associates are telling me the tours shorten the home search process.”

As many brokers are finding, Web-based technology is a great tool for increasing the efficiency and productivity of your sales associates and boosting your ability to generate company leads. The cost of staying up to date can be steep, but savvy brokers are discovering ways to bring bottom-line balance to their tech investment.

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