Millions of people used to say; “I would never buy clothes online”. Sounds funny doesn’t it. I still hear; “no one will ever buy a house without stepping foot in it”. Same concept, not as funny. Truth is, lots of traditional consumers buy homes every day without ever visiting them; they’re called condominium buyers.
The way people “shop” for condos, particularly the hi-rise type, is “building” first. Is the location a fit, does it have good in/out access, walkability to shops and services, offer a pool, a gym, a dog park, a front desk and the list goes on. Condos are also built predictably. They offer a half dozen floor plans stacked in logical patterns up the floors of the building. There isn’t a lot of mystery going on.
Once the consumer has chosen their building(s), it becomes a waiting game. “I am looking for 2 bedroom, 1,300 square feet or better, in buildings A or B, preferably facing east, 10th story or higher”. This is not an unusual agent request from a condo buyer.
Notice something different about this sale cycle? The building is up front and center. The buyer appraises the building long before considering any potential purchase. This means whoever runs the building actually has a great deal to do with every sale. Crappy HOAs are a drain on asking prices. Conversely, a well-run HOA adds significant value.
Given this, any new sales model focused on condominiums should include benefit to not only the selling homeowner, but to the building and community at large. Giving back to the community makes it stronger. Strong communities appreciate faster than others.
Take the average 200 unit hi-rise. It may have 7 or 8 units available for sale at any given time. On a piece of paper, draw what that sales model “looks” like by connecting all the players in each deal. As you do, note who gets what in terms of compensation. What you will see before you is a portrait of inefficiency and waste. Making matters worse is what you don’t see.
The element that was so critical at the beginning of every sale is somehow long forgotten when the money gets handed out. The Building gets nothing. The cost of Building management, landscaping, maintenance and improvement is the burden of the Community at large. Homeowners pay for these services via their monthly HOA dues. The seemingly ever increasing, HOA dues.
In any given year, tens of thousands of dollars in sales commissions are paid to agents and Brokers who only marginally were involved in any sale, yet the Building is ignored. Stop doing that! Homeowners are facing continually rising cost. Maintaining dated franchise sales models at the expense of the homeowner is not smart.
In developing a new Condominium sales model, we have 2 goals: bring the overall price of selling a condominium WAY down, and create a revenue stream for the Community that will help offset HOA dues.
The traditional 6% commission is toast!
Consider the 3% selling side of a transaction. Start with letting 1% stay in the homeowner’s pocket. Give 1% back to the Community and compensate the listing agent with the last 1%. Listings at 1%? Reverse sticker shock, I am sure. But, if you think about it, it isn’t nearly as bad as it sounds.
One of the reasons the 6% figure has lingered for as long as it has is in part due to the agent’s cost of acquisition. It takes a lot of money and effort to develop a sales funnel. But, what if the cost of filling the funnel were zero? What if your sales funnel was filled customers literally steps from each other? Oh, and don’t forget, what if buyers were waiting for your sales funnel to become available? Could it be made any easier? Given this, well organized agents will not view the 1% commission as a negative.
Homeowners will like saving money. HOAs will be thrilled with a new revenue source. The Community at large will see a very positive change in their monthly dues and assessment capability. So, how is any of this bad?
NAR and the franchise defenders will tell you, it hurts competition, forces choice and attacks our freedom! As always, when you don’t own the narrative, you drape yourself in the flag. Who said freedom has to be stupid? Yes, sellers might not like their Listing agent. And yes, Sellers are being forced to give back to the Community? Yeah, well—get over it!
Long-term quality of life, for every Community with shared facilities, is often based largely on that Community’s ability to maintain those shared facilities. How long will it be until the cost of maintaining a large public structure exceeds an HOA’s ability to raise it from its homeowners? Common sense tells us the creation of a revenue stream for the Community will help off-set or significantly lower homeowner monthly dues. So, why not do that?
The justification is clear. Remember how important the Building was at the onset of the sales cycle? It was the Building that brought on the buyers. In theory, sellers are realizing greater profits from their sales because the Building, or those who run it, are doing their jobs so well. Ever hear of a tip-out?
Over the last 3 years, Wynd Realty has been working on business models meant to create a “Community Realty”. The idea is to develop a method for a Community to take charge of their own real estate destiny. Fostering efficiency, driven by a sense of greater good for all is the core of what a Community Realty could be.
The hi-rise Condominium represents the market segment offering the best chances for anyone to actually change our current real estate behavior.