Recently, in the news, we have seen what appears to be a new phenomenon in real estate. VOW’s, or Virtual Office Websites.
This is nothing new, as VOW’s have been in operation for some time. While they are relatively new in the Ontario market, the recent publicity seems to make them seem new.
· A VOW is an internet based real estate office that offers brokerage services in different forms, but not through a physical office.
· The consumer contact is through the internet, based on the display of listing information pushed down through real estate boards.
· The displayed information is enhanced with a variety of extra information i.e. schools, demographics, etc.
· This extra information is designed to be ‘sticky’ so the visitor stays with broker whose VOW they are in.
· Most VOW brokerages have very few salespeople and refer consumers to Realtors in other organizations and take the referral fee.
· Each VOW offers a different level of service, with some offering listing services, some not, but all offer the buying service.
· The buying side is the lucrative side they are pursuing as it generally represents an undiscounted, set fee.
· If you look at a sampling of VOW operations in Toronto you will see that RealtySellers has an arrangement with the Property Guys to put listing on MLS, but are focused on a do it yourself listing approach. The RealtySeller VOW promises a 25% rebate if you buy through them and a reduced listing fee. They have 3 licensed Realtors in their company at this time.
TheRedpin.com claims to offer unique information and a 1% rebate if you use their contact to buy. They have 3 registrants.
Realosophy.com is based on a VOW format to capture purchasers and will list at 1.5% and recommend a 2.5% payout to the selling broker. They have 4 licensees.
· Overall the VOW model is one that presents listing and market information to the consumer in an internet format. It requires registration to view the information and then offers services in unbundled form, or on an information basis only
· While board rules are designed to ban a simple consumer information capture and referral, this is a practical oversight challenge.
· Notwithstanding the delivery of information, that is universally available, the value proposition is based on low cost of service.
From a competitive point of view:
· Firstly, there is nothing stopping any broker from creating a separate VOW for their brokerage.
· The DDF in Canada will give everyone the opportunity to display all listings and add consumer relevant information to make the site ‘sticky’
· National organizations may very well create sites that mirror VOWs and compete with the many locally focused VOWs now appearing in Toronto
· A strong competitive position will include a thorough review of VOW offerings, the comparative costs to yours, the dimension of the company behind the VOW and the capacity of their sales forces.
· The very fact that so many pop up overnight, have a limited investment in service delivery, and trade basically on commonly available information with the expectation of much consumer “do it yourself” creates a competitive position for a more service oriented organization to articulate. This is a perfect time for us to be improving our listing presentations and our value proposition. Its like I have been saying, you need to articulate and deliver on promises and really show customers your true value as a full service broker.
· Given the rebate programs and reduced listing programs (the aggregate of which still represent a 2.5 selling commission and perhaps a reduced listing) the issue really becomes one of value.
· Brokers must focus on getting the consumer to them; via the internet, referral, incremental service, reputation, salesperson activity, etc. If you have taken Frank Gerace’s training course, you know that he talks about “running interference”…trying to get between the customer and another broker/vow etc.
· Brokerages and the Realtor’s competitive offering must be clearly articulated and focused on the value proposition.
There is always a consumer segment that quickly responds to this type of offering and we will see more VOWs out there.
When you look at the two sides of our business it becomes easy to understand their model.
On the listing side; some don’t want to participate because it is more labour intensive, more difficult to originate and more difficult to service. This is offset by the offer of a reduced rate listing “do it yourself” offer to the consumer.
The buyer side is attractive to a VOWs operator. The cost of customer origination is confined to offering information aggregated by the boards on behalf of and as a result of their members’ efforts. The labour portion is supported through online, low cost service provision, the deal and payment cycle is relatively short and based on the generally widely supported selling commission which is not under real pressure.
VOW discussion in the US a few years ago was trumpeted as the new demise of conventional real estate brokerages and clearly that did not occur.
We are all in the business of adding value to universally available information, how we do it and articulate it is the key. You have to decide, ”Am I a full service broker?” If you are, then take stock of your real offer to your client, articulate that and charge appropriately for your service.