Real Estate Broker's Insider
July 1, 2005
Low-fee broker finds discounts spur business
07/01/2005
It's not unusual for a consumer to feel dissatisfied with the level of service he receives from an agent.
It is unusual, though, for a consumer to leave a transaction so unhappy that he starts his own company to challenge the traditional model.
But that's exactly what Glenn and Kyla Wallace of Durham, NC, did after selling two homes in 2001.
"I jokingly told me wife that if our dog, Tess, had access to the Multiple Listing Service, she could have sold our properties," Glenn Wallace says.
Disgruntled, the Wallaces started their own discount company, which they named My Dog Tess. Sellers pay My Dog Tess $500 for a listing in the MLS and not much else, or 1 percent for representation by an agent. Sellers typically agree to pay buyer's agents an additional 2.5 to 3 percent.
"I really started the company because I thought the pricing model was flawed, and I thought there were a lot of people out there who agree with me," Wallace says. "It's way too expensive to sell a home."
Wallace is a certified public accountant who had no real estate experience before starting his company.
Wallace points to the same arguments invoked by many critics of the traditional model. The rise of the internet means agents no longer control the listings book, and therefore no longer merit their pay, Wallace says.
Full-service firms argue that they pay for themselves by generating higher sales prices, an argument Wallace dismisses.
"The bottom line is they're terrified," Wallace says. If they're right, I'll go out of business."
So far, Wallace says, he sees little danger of that.
"I have more work than agents right now," Wallace says.
My Dog Tess has eight agents in North Carolina's Research Triangle area, including a former ZipRealty agent who moved to North Carolina from Baltimore, and former employees of Nortel and Time Warner Cable.
Wallace says discount firms aren't a new concept for consumers in the Research Triangle. Help-U-Sell and Assist2Sell have offices there.
But Wallace says his company's unusual name and aggressive advertising have boosted its buzz. My Dog Tess runs ads on Cable TV and local radio stations, and it also uses "car wrap" advertising.
The company's yard signs read, "My Dog Tess: A New Breed of Realtor."
Wallace acknowledges that margins are slim with 1 percent commissions. So My Dog Tess skimps on one costly bit of advertising: Wallace doesn't buy ads in the local newspaper, opting instead for cheaper ads on Realtor.com.
"Fewer and fewer people are going to the paper to look for real estate," he says.
Moreover, My Dog Tess has minimal office space. Agents work from their homes.
Wallace offers agents either a split or a small salary plus bonus.
The typical agent does 15 to 20 deals a year, he says, in part because consumers are drawn to the company by its low-cost fees. When a consumer contacts My Dog Tess, he's already sold on the company, Wallace says. That means agents don't have to spend a lot of time drumming up business.
"My agents don't spend time farming or sending out postcards," he says. "They can do that, but they don't need to."
