Columbus, Ohio • Sep 07, 2014 • 77° Partly Cloudy
 Hot Links:
Agent tries to alter longtime real-estate fee system
Sunday September 7, 2014 5:19 AM
Comments: 0
0
0
16
The Internet has revolutionized how we buy and sell homes, but it hasn’t touched one major part of the
process: how real-estate agents are paid.
HOME AND GARDEN
 Garden plots in
For the most part, agents still receive a percentage of the sales price — in central Ohio, usually 6 percent —
typically split between the buyer’s agent and the seller’s agent.
retirement communities
allow residents to nurture
themselves as well
Sean French thinks it’s time to revolutionize that as well.
 Agent tries to alter
French, a 40-year-old Navy veteran, has launched Vernon Road, which seeks to do to the real-estate industry
what CarMax did to the used-car industry.
longtime real-estate fee
system
 Exotic blooms are good
reason to get hopped up
about toad lily
 Prairie thrives where
Wrights once flew
“We are changing the way real estate is done,” said French, who lives in Bexley with his wife and four
children.
Instead of charging clients a percentage of the sales price, Vernon Road charges by the hour. French argues
that so much of the homebuying process has shifted to the Internet that agents should merely provide a
professional service, akin to lawyers, who also charge by the hour.
MORE HOME & GARDEN
ON THE HOUSE
 Dublin bringing sexy
back
BIZ LIST SEARCH
Use our search to find local
businesses in the
Columbus area.
BROWSE BUSINESSES IN
COLUMBUS:
Vernon Road agrees to give a 3 percent commission to the agent on the other side of the deal but otherwise
charges buyers or sellers $85 an hour. For sellers, French estimates that the typical tab would be $2,125, or
25 hours; for buyers, it would be closer to 15 hours.
French argues that it takes just as much work to sell a $100,000 home as it does a $500,000 home, yet the
first sale generates a $6,000 commission while the second generates a $30,000 commission (assuming a 6
percent rate).
Under his formula, the owner of the $100,000 home would pay Vernon Road $5,125 ($3,000 for the 3
percent to the other agent plus $2,125 for the $85-an-hour charge).
The higher the price, the bigger the difference. Through Vernon Road, the seller of the $500,000 home
would pay a $17,125 real-estate commission ($15,000 for the 3 percent plus the $2,125).
When he represents buyers, French passes along the 3 percent commission he receives to them, as a rebate.
Today
Last 3 Days
Last 7 Days
French knows he faces obstacles in getting Vernon Road off the ground.
He is still interviewing staff for his office and so far has landed one client, Shaun Powers, who hired French to
sell his Galloway home.
“It’s a different process,” said Powers, a 28-year-old investigator for the state of Ohio. “ Essentially, you’re
paying for it upfront. I like that. You know what you’re buying instead of saying, ‘Oh, down the road, I’ll pay
X amount of dollars.’ This way, you can see what you’re buying.”
Powers hopes he will save a few thousand dollars selling his home with Vernon Road and thinks French’s
idea has a future.
“It’s got some legs if people really think about how they’re investing the money,” he said.
Still, French acknowledged, “We’re taking on a lot of entrenched beliefs.”
One of the biggest is persuading clients to pay in advance for services they have traditionally borne at the
end. Vernon Road’s home-selling clients pay $1,275 upfront, covering the first 15 hours of work, which
includes professional photos and consultation with a home stager. Homebuying clients pay $850 in advance,
covering 10 hours of labor.
If the client can’t close a deal, the money is gone. In a traditional fee arrangement, if the deal doesn’t happen,
the client pays nothing.
Another argument against the Vernon Road model is that it seems to offer little incentive for the agent to sell
the home. French counters that the agent doesn’t control the length of the listing.
“My urgency to sell a home has no effect on the market,” he said. “It won’t make the photos more vibrant
online.”
This is the sort of talk that sends shivers down the spines of traditional real-estate agents, who work overtime
to convince clients that they can sell a house faster and for more money than rivals.
French argues that agents don’t matter as much as they once did. The appearance of the house on
Realtor.com or Zillow.com or Trulia.com is far more important than what the agent does, which is why
professional staging and photographing services are part of his package.
Vernon Road, like flat-fee agencies, seeks to shred the paper-thin assumption that there’s a link between the
value of the house and the value of the real-estate services.
Other industries, such as financial planning, have wrestled with similar questions. Some financial advisers
are paid by the hour or by a flat fee; others base their pay on the value of the client’s assets.
The financial services industry has shifted its business model to reflect client preferences, but, surprisingly,
the real-estate pay structure has remained largely intact despite the Internet’s rise.
“I was surprised the Internet didn’t reduce fees,” said Itzhak Ben-David, a professor of finance at Ohio State
University and director of the school’s Center for Real Estate.
“Before the Internet, you would think there was more value in agents. Now, anyone can look at Zillow or
Trulia.”
Likewise, Ben-David noted, increased competition among real-estate agents hasn’t made much difference in
fees.
Jim Weiker writes on home and garden topics. Reach him at 614-461-5513 or by email.
jweiker@dispatch.com
Favorite
Print Story
COMMENTS
Login or register to post a comment.
1