Property Grunt

Monday, April 09, 2007

Spinola's Way and is that Jonathan Miller in your pocket or you just happy to see me?

One of the things I enjoy about real estate is examining the actions that occur in the industry, whether it is a trend or the actions of a player.

About a year ago, Steve Spinola of REBNY wrote a scathing letter condemning Tom Acitelli's article about the internet’s growing influence in the real estate brokerage industry.

It is funny how things change in a year. Now Spinola is trying to get the members of REBNY to jump on the online bandwagon. Of course, some people just want to ride on their own.

Listing Service Dream in Disarray

Below are some points of interest

After weeks of maneuvering by the board to meet the objections of smaller firms, the two largest brokerage companies in Manhattan, Prudential Douglas Elliman and the Corcoran Group, announced last week that, partly because of the costs involved, they were planning to boycott the new Web site (name and address yet to be determined).
“We are not participating,” said Pamela Liebman, the president and chief executive of Corcoran. “We wish the Real Estate Board good luck.”

Ms. Liebman said that Corcoran’s sister companies — Citi Habitats and the Corcoran Sunshine Marketing Group — will also decline to participate.
Dorothy Herman, the president and chief executive of Prudential Douglas Elliman, said in an interview, “At this point we are not joining, either.”

Listings are gold to brokers. The more listings they have, the more money they make. So why wouldn’t they participate in a system that allows more access to their competitor's listings? Because those listings do not belong to them. And in order for them to get access to those listings, they need to show their exclusives. As far as they are concerned they are the stars of the show, why share the limelight? They can make more money with their own exclusives and limiting co-brokes.

Now you would think that since they already share their listings on R.O.L.E.X, that they wouldn’t care. But you have to understand, the system that Steve Spinola is pushing is one that is accessible to the PUBLIC! This is why Corcoran and Elliman want no part of this. Anything that deals with displaying their listings to the public, is something they want in their control not in the hands of a third party.

Steven Spinola, the president the Real Estate Board of New York, which represents the real estate industry, from major building owners to brokers, said he still hoped that when the final product was ready, the major brokers and smaller competitors would decide to sign on. “It will have the most accurate and comprehensive listings,” he said, “and it will catch on quickly.”

But it is clear that the defection of the two companies, if not reversed, will be a major blow to the site’s claim to comprehensiveness. Together, Corcoran, Prudential and Citi Habitats represent 63 percent of Manhattan listings and of Manhattan brokers among the 10 largest companies, according to figures in an industry survey by The Real Deal, a trade magazine, last May.
The Corcoran Sunshine Group, which markets new buildings, is now representing 30 buildings with about $5 billion worth of apartments and about 100 brokers, according to Ms. Liebman.

Under the proposal, companies are being asked to pay an initial fee based on size, $12,500 for a large company and an additional $100 a year for each agent represented on the site. Corcoran and Elliman, with the most brokers, would pay the largest bill, but they are not sure they will get their money’s worth. Mr. Spinola said he was budgeting about $1 million to market the site.
“I spent a lot of money on my Internet site,” Ms. Herman said. “I have not seen a comprehensive business plan showing how they are going to market it and how they are going to build traffic.”

They already have their own brand recognition and spend a fortune on their own advertising and marketing. For all we know, the parties that have opted out of the listing service are probably having their own research and development team working on an alternative. Eventually the majority of real estate transactions will take place online and these brokerages probably think their time and resources are best spent upon developing their own tools.

Hall F. Willkie, the president of Brown Harris Stevens, said his company and its sister company, Halstead Property, would be participating. He said that the new site would drive traffic to brokers’ Web sites as well.
Frederick W. Peters, the president of Warburg Realty, who is working on Rebny’s Web efforts, said that he believed most smaller firms would also sign up.
But Klara Madlin, who runs a boutique brokerage with 15 agents, said that she would wait. “I’m on the fence on whether it will be any value to me,” she said.

So why would Hall F. Willkie, one of the great scions of Brown Harris Stevens, think of joining forces with REBNY? First of all with the big guns bugging out, REBNY is outmanned and outgunned so he may have cut a deal with Spinola to the advantage of Brown Harris Stevens. But I think the real reason why he has joined forces with REBNY, is that Mr. Willkie, like everyone else, is uncertain about how this listing service will impact his company. And rather then spend the resources of Brown Harris Stevens on their own site, he will simply work with REBNY and observe to see how this goes. If the worst happens and the site is a flop, he will be able to pull out but not without learning what mistakes REBNY made with their site.

To quote the Godfather

"Keep your friends close, but your enemies closer" - - Michael Coreleone

If you want to know how a master appraiser works, read this article on Jonathan Miller.

You know Jonathan Miller is a badass, because he is also in the trenches with the best of them.