In my aforementioned sales meeting, one of the agents said he’s struggling to compete against brokers and agents offering very, very small commission rates to prospective sellers. It was his feeling, and that of several others in the room, that in a slow real estate market such as ours such models provide even more competition than normal.
Of course, this seemed completely counter-intuitive to me. In slow market conditions, it costs far more to properly market and sell a home than in a fast-moving market. And if brokerages and agents are struggling to stay afloat based on a higher commission rate, how can a company operating on razor-thin margins expect to survive?
Proof came yesterday in the form of news on Foxton’s, a London-based discount real estate brokerage operating primarily in New Jersey, which will be laying off 350 of its remaining 380 employees and likely filing for bankruptcy.
Said John D. Blomquist, Foxton’s senior vice president and general counsel, …
“Foxtons is well run, very efficient, has a great team and has pioneered a new model in the real estate business – a model which has proven itself and, we believe, will have lasting influence on our sector.”
I hate to break it to you John but no, the model hasn’t proven itself and no, it will not have a lasting influence on your sector. If the answers had been affirmative, you would still be in business.
Blomquist said Foxtons has “been battling against a real estate market that recently has turned into a sharp decline, and the company no longer has the liquidity to operate as a going concern.”
We’re all battling a real estate market that turned into a sharp decline. But many of us are still here, still working, still selling real estate. Blomquist’s comments sound like all of the excuses that came out of Tuesday’s meeting. Or even the USFL once it was shut down by the NFL two decades ago ago. (Remember the New Jersey Generals, John?)
Apparently the big mistake Foxton’s made was not securing enough venture capital to stay afloat. Of course, even that money eventually runs out. Think some folks up in the Seattle area are taking note?