Jimmy Dague, whose Century 21 Aadvantage Gold franchise in Las Vegas led the company worldwide in sales from 2002 through 2006, has filed Chapter 11 bankruptcy.
“I think there will be more; I can’t imagine how the smaller brokers are paying their bills,” Dague said. “Maybe they can fund their overhead from their own personal savings. But I honestly don’t believe there are five companies in town right now that are very profitable. There’s just not enough sales going on.”
Perhaps not. But viewing the situation from a distance, it seems smaller brokerages are well positioned to ride out the market – particularly the 100 percent shops where there’s next to no overhead (including training expense, in most cases.) Dague alludes to the lack of adjustment in his own business plan as sales slowed in 2006:
The 54-year-old said that even when his business was Century 21’s top seller in 2006, he still lost money. Dague said that’s because his sales fell 60 percent from 2005 to 2006, but he kept the same number of staff – and the same overhead – in his nine offices.
The article points out there were 1,300 sales last month in Las Vegas spread among the city’s 1,400 brokerage offices. So clearly, there are fundamental issues at play there that may not exist elsewhere – at least not yet.
But on a more macro level, the problem seems to be as much about infrastructure built during the boom than about the market itself. Many industries go through the same type of issues – I rode it out at Schwab, other industries are cutting back as we speak to adjust to changed demand.
Oddly enough, this article got me thinking one again of Redfin – a company hailed as the catalyst for the real estate revolution. Redfin has substantial overhead, as evidenced by the IV drop of venture capital that has kept the company afloat. There are technological costs, to be sure, but Redfin also pays its agents on salary. And that can become costly for a company trying to survive on a single basis point on most sales.
Sadly for the consumer, the current changes make the 100 percent models where agents pay desk fees and the companies have little overhead per agent the most efficient. And it is sad, as many of these agents receive little to no training beyond the state’s licensing.
One other side note. The article said companies are being forced to advertise more to try and generate more business. Higher advertising costs don’t always translate into higher sales volume. Maybe for the Russell Shaws of the world. But many of us are attacking the market share in a cost-effective manner through the web.
I’ll likely never be the top selling agent in Century 21. But I’m still plugging along, creating business through seven websites and my personal referral network. Would I like more? Absolutely. But as long as I have enough to survive the bottoming of the market, that’s all I can ask as it puts me ahead of many others.
[tags]Century 21, real estate marketing, Las Vegas Real Estate, Phoenix real estate[/tags]