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ReLogic aims to save its clients thousands

By John Rebchook, Rocky Mountain News (Contact)

Published July 17, 2008 at 9:05 p.m.

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Dan Verdi and his wife, Abby McQueeney Penamonte, were going to use the "traditional route" when they began the search for their first home.

But they stumbled upon a house being listed by ReLogic, a Denver Tech Center-based company. Its brokers work on salary instead of commissions, and listings are done for a flat fee, typically $995.

The company provides traditional services, such as posting homes on Metrolist and home staging.

"It sounded interesting, so we logged into the Web site," said Verdi, an account executive at McClain Finlon.

"The biggest appeal to us is that you get back a part of that 2.8 percent broker commission, so we thought why not?"

They've narrowed their search to a $299,000 loft in LoDo and a $274,000 home in the Highland area.

"Depending on the price at closing, we think we will save around $6,000 to $7,000," Verdi said. The typical client probably will save about $10,000, according to company officials.

ReLogic broker Adam Cox has shown Verdi and McQueeney Penamonte about 35 homes, although Verdi found the two finalists on the Internet.

A driving force behind ReLogic is that with 87 percent of people nationwide starting their search for a home on the Internet, real estate agents don't do as much as they did in the past, and so, the thinking goes, they shouldn't be paid as much.

Instead of commissions, brokers at ReLogic earn salaries, with bonuses of $40,000 to $60,000 per year. They also get benefits, including profit-sharing in ReLogic.

In addition, ReLogic brokers get reimbursed $500 a month for expenses, and the company has two Ford Escape hybrids available for brokers.

Vic Mitchell kicked off the company in January, with about $3 million of financing, including money from iSherapa, a Greenwood Village venture capital firm.

Paul Allen, the co-founder of Microsoft, owns a similar company called Redfin.

"Redfin is very high-tech, low- touch," said Ken O'Donnell, managing broker for ReLogic. "We do all of the hand-holding you would find with a traditional firm."

He compares the change to what happened to travel agents, who found their role diminished when people began booking trips on the Internet.

Mitchell, a Republican state representative for House District 45, said his own experience selling a home was the "tipping point" that led him to ReLogic.

Former companies Mitchell led include Ricochet Networks, Advantage Wireless, Motion Telecom, Advantage Cellular and Advantage Advisory.

Mitchell said he built a home in Castle Pines Village and last interviewed three agents about selling his existing home.

"They all told me the same thing," Mitchell said. "You can negotiate with us on our listing fee, but you have to pay the top co-op commission to sell your home. I thought, 'There's an economic model that is broken.' "

Gary Bauer, an independent broker, said that the salaried broker concept has been tried and has always failed. In 1990, the owner of Coldwell Banker Professionals tried it in Denver.

"They lasted less than a year without paying broker commissions," Bauer said. "While their idea is interesting, I think they're going to have a hard time still being around two years from now."

rebchookj@RockyMountainNews.comor 303-954-5207

How they stack up

Comparing ReLogic with a traditional broker for buying a $250,000 home.

* 2.8 percent buyer co-op fee paid by seller, or $7,000, for ReLogic and traditional broker.

* At closing, ReLogic charges a $5,000 processing fee but returns $2,000 to the buyer.

Or, the buyer can pay a $1,000 retainer upfront. ReLogic will credit them with $4,500, giving them $3,500 at the closing.

* Savings: $2,000

Selling a $250,000 home

* Traditional listing agent commission of 3 percent is $7,500. It is zero for ReLogic seller. The buyer-broker commission is $7,000 for a total cost of $14,500 to the seller.

* ReLogic charges a $995 enrollment fee and a $2,500 processing fee. Combined with the $7,000 broker commission, the total is $10,495 to the seller.

* Savings: $4,005

Comments

  • July 18, 2008

    7:29 a.m.

    Suggest removal

    acm writes:

    What's a Rocky Mountain News real estate article without a quote from Gary Bauer?

  • July 18, 2008

    8:47 a.m.

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    ofcourse writes:

    Let's see if your attorney will rebate his/her fee if your case is lost. Experience is the tipping point in all professions. 95% of agents do not know the stats in the neighborhoods they work, and most can only quote figures from the last publication of RMN. A good real estate attorney in town shared one his many pearls of wisdom, that most of the time it's the knowledgable and experienced agents that keep your clients out of my office. Sometimes it short term gain, but long term pain. These firms always talk about what there saving you, but rarely what your giving up.

  • July 18, 2008

    9:54 a.m.

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    duncandog writes:

    ofcourse is obviously a Realtor. "Let's see if your attorney will rebate his/her fee if your case is lost" Boy that sounds like a quote directly from a Tom Hopkins Seminar!!! That is such an old analogy.

  • July 18, 2008

    9:58 a.m.

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    duncandog writes:

    Really good article. ReLogic is bringing to the forefront the fact that real estate industry in general needs to change. Real estate agents commissions are way higher than they need to be. Maybe 5-10 years ago they were more in line, but because of the internet and the average persons access to the information, in todays market they are way too high.

    My mother was agent. Now I love and respect my mothers abilities dearly, but she got into selling Real Estate because all of her kids were older and in school, and she wanted to get back into the workforce. No college degree, not a lot of work experience (she was a secretary for 10 years before she started her family), but all of her friends said she had a good personality, and she should try selling real estate. So 6 months and about $1200 later she was qualified to sell a house to someone.

    She struggled at first, as do most, and after a year or so she started doing ok. Over the years she made an above average income in the industry. But the work she had to do back then compared to what a typical agent does, is well, no comparison.

    She used to have to look through weekly phone book size MLS listings to find properties. She had to drive to the court house to look up documents or research properties. She had to drive neighborhoods looking for houses that were for sale, go inside just to see what the kitchen looked like. She earned her money.

    But with almost all that information online now, pictures and video tours of the home, neighborhood and school reports at your finger tips, it is hard to justify those kind of commissions anymore. And she will be the first one to tell you that.

    She is retired and living in Florida and when I went to buy my last property she suggested that I look into rebating firms, like ReLogic. I did. Had a wonderful experience, and got a huge rebate back.

    I couldn't be happier!!!

  • July 18, 2008

    10:37 a.m.

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    curious88 writes:

    ReLogic...hmm...trying to capitalize on the 40 plus year Company and knowledge of a little better know company. Let's get real. The job of a Realtor is to maximize their clients needs and wants. The price of a home can vary with whom lists it, markets it and sells it by more than 5-10%. Does ReLogic doubt the consumer intelligent level to think a $3000 - $7000 "Savings" can Compensate for what a full service Realtor can do? It's basic math here so where is the logic?

  • July 18, 2008

    12:13 p.m.

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    swimmey writes:

    But ReLogic is full service! The Realtor does everything you need to buy or sell a home, you just don't pay out the nose for it. If you read John Rebchook's blog about this story it says that the young couple saw 35 homes and feel they are getting good advice about neighborhoods and location, but it's done very efficiently by managing the Realtor's time and doing their own research on the web which most people do now anyway.

    Those days of the "phone book sized MLS" are gone. People do their own research and the price they pay to an agent should reflect that.

  • July 18, 2008

    2:10 p.m.

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    mknoebel writes:

    We are in the process of selling our house and buying a new one. ReLogic was recommended to us by our mortgage guy - we had never heard of them but thought we would give them a try. I can tell you that we are not only satisfied, but very pleased with everything about ReLogic.

    On the "selling side", they had a "stager" come out and give us tips on how to make our house look more presentable. They took pictures and made up color brochures for us. They gave us a yard sign. They put our house on the MLS. And they let us know what folks thought after they saw our house.

    On the "buy side", my wife and I would look through the listings, find houses that we wanted to see, and scheduled them online. With our agent, Ken, we could look at as many or as few as we wanted to. They take care of all the paperwork for us - and much of it is able to be done online which is very convenient for us.

    With ReLogic, we were able to get a contract on our house in 2 weeks with a quick closing. And we were able to find a great house to buy, and they were also able to get us a quick closing on that end! And we are going to save thousands of dollars in the process! They most definitely are a "full service"!

    We have nothing but great things to say about Ken and the entire ReLogic company, and would definitely recommend them!

  • July 18, 2008

    4:27 p.m.

    Suggest removal

    sanevoice writes:

    Is the real estate economic model broken?
    -Probably.
    Is this the right way to fix it?
    -Not even close.

    Here's why...

    1) It's a bad deal for the investors:
    As shown in the example, show 35 houses, negotiate contracts, manage inspections, closings, title companies, hand-hold clients, etc. etc. for a $3,500 fee? After paying DIRECT COSTS associated with the sale (including the licensed agent who could probably make more being a manager at McDonalds), that leaves maybe $1,200 per transaction to cover all non-direct operating expenses?

    Relogic would have to transact thousands and thousands of homes a year just to break even, many more to paying off $3M in investment, and likely never provide a positive return to the investors unless they became pretty much the ONLY people providing realty services in any given market.

    2) It's a bad deal for home buyers:
    Even if you accept that the *average* traditional Realtor is overpaid, having a semi-skilled can't-make-it-in-a-competitive-market Realtor negotiate the single largest purchase most people will ever make in their lifetime is just plain dumb. Until the true "tipping point" occurs and you can actually get top negotiators to work for $30/hour, you are netting perceived savings instead of real savings.

    3) It's a bad deal for home sellers:
    Same story. How are you going to determine the maximum net with a reasonable on-market time for your home? The $25/hour RELOGIC agent? A web site programmed by individuals who have probably never been to your state, let alone your neighborhood or home? You may "save thousands on commissions", but likely spend thousands for additional on-market time or even worse an undervalued home that sells quickly because it was priced incorrectly, losing the seller many times their commission savings in lost purchase price?

    So, does it make sense for some buyers and sellers? Absolutely.
    Buyers and sellers of low and lower-mid market commodity homes. Homes where there are 20 just like it in any given market, so calculating optimum purchase and sale prices are trivial and formulaic. First time buyers and first time seller.

    I just wouldn't want to be the one funding it... or the poorly compensated Realtor working there.

  • July 18, 2008

    4:56 p.m.

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    eapete1 writes:

    The ReLogic model is not intended to help the people that need it the most: seller's of low priced properties, seller's that need to do a short sale, buyer's that are marginally qualified to purchase and need to find the very best, low priced home that will pass the FHA requirements. ReLogic is trying to skim the real estate cream: high income buyers that are buying at a price point where they can expect the homes they see on the internet to be in move-in condition and sellers with properties at $250,000 or above that actually have equity in them. It is the people that need realtors the most that will get no benefit from ReLogic. And that means that the full priced realtors will either help them out and get under paid for their efforts or the people will have no help with their real estate needs.

  • July 18, 2008

    11:45 p.m.

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    therealtruth writes:

    Boy, sanevoice and eapete just don't get it. I have been a real estate consultant for 20 years. And in the last 4 I have consulted with a number of "rebating" brokerage firms. And let me tell you, the train is coming. It is very clear that the last 2 contributors are real estate agents running scared. And they should be.

    Firms like ReLogic, RedFin and Zip Realty are based on the concept that as more and more information is available to the public, much of the tedious duties that Realtors used to perform i.e. MLS searches, home previews, and market research, are no longer a burden. If you allow the public access to this information, they will not only do a lot of this work, but actually enjoy it.

    No real estate school in the country teaches agents how to do this, nor requires it to pass an exam. SO why do real estate agents claim that allowing customers to take ownership of this part of the transaction is "just plain dumb" Or that a company like ReLogic cant make a profit by making the process more efficient?

    This is the part of the process that buyer side rebating firms cut to a minimum, not the knowledge, the negotiating skill ( and certainly not the desire to see the customer get the best deal possible.

    Both ReLogic and RedFin pay salaries because it provides an huge negotiating advantage (statistically proven) to their clients. A traditional buyers agent NEEDS their client to buy a home for them to get paid a commission; a commission, I may add, that is paid buy the seller of the home (who is working for who), which is ultimately paid for by the buyer in the price of the home (most people don't know that the buyer is actually paying for all of the real estate commissions!). A salaried buyers agent is not motivated to "get a deal done" because of the fat commission check at the end of it. their goal is to get the lowest price and the best terms for their client, and that may mean walking away and showing another home, rather than accepting an unfavorable price. Commissioned agents often suggest pricing to their buyers that they think the seller will accept not necessarily the price the buyer should pay.

    So it doesn't surprise me that the Realtors have come out in droves because of an article about a company that is providing a much needed service. They may even call a special meeting to remind everyone of why they deserve to make the money they do. I don't know of any other industry in which its practitioners have to constantly remind the public of why there services are valuable and why they should continue get these high commissions, even as their jobs become easier. The Department of Justice wants to know why as well too! Check out this link

    http://www.usdoj.gov/atr/public/real_...

    The fact that agents are responding so aggressively proves that rebating firms are on the right track

  • July 20, 2008

    9:29 a.m.

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    LeadMan writes:

    Did you know that home prices have increased more than 400% over the last 25 years yet real estate commission rates have remained the same? Did you know that Realtors’ commissions are about 6x higher than mortgage brokers or wealth managers? Did you know that 1/5 homes of all homes sold today are sold without the use of an agent?

    The Real Estate Industry is one of the most broken and dysfunctional industries in America. Realtors will say just about anything to justify their outrageously high commission rates.
    If you use a traditional Realtor, it will cost you 6-7% to sell your home—or about $17,000 for a $250,000 property. As someone who has sold several homes without an agent, on average it takes less than 30 hours to handle the transaction.

    Homes sell when they’re shown well and properly priced. The value of the Realtor is limited. With the many research tools currently available, you can view homes online. Is a Realtor’s time really worth $500-$1000 an hour?

    The Realtors have successfully lobbied both the State and Federal Government to keep regulations high. The end result is that commissions have remained excessively high and innovation has been stifled. Consumers are being fleeced with what amounts to a 6-7% tax!

    I commend ReLogic for taking on the broken Real Estate Industry and providing consumers a cost effective alternative from the traditional Realtor experience.

  • July 23, 2008

    7:35 a.m.

    Suggest removal

    sanevoice writes:

    These last posts look like employees shilling for the company, worse yet, they believing their own SPIN!

    - Relogic isn't Redfin or Zip. Relogic's model is actually far closer to HelpUSell and the like. They are simply playing the NAME ASSOCIATION GAME.

    - Everybody gives customers internet access to MLS listings these days. The information is very limited, and outside the control of companies like relogic. No Sold info, no concession info, no trending, etc. Public records info is also very limited and often out of date or just plain incorrect! NO TIPPING POINT HERE!

    - The model is still: SEARCH/NEGOTIATE/CONTRACT/INSPECT/NEGOTIATE/MANAGE/CLOSE. Somehow Relogic thinks that the client helping the first step of that process fundamentally changes the current real estate model. IT DOESN'T

    - How does paying an employee a small salary motivate them to do a great job negotiating and providing service to buyers/sellers? Are Mcdonalds employees highly motivated for you to supersize/supersave your next meal? Of course not. BROKEN.

    - I'm all for fixing the real estate model. But the point is, relogics particular model is, as they say, ALL SIZZLE, NO STEAK!

    Too bad you can't short-sell private companies...