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More services, shift from legal agency to facilitator's role loom for brokers


A major transition is taking place within the real estate brokerage industry.

Recently, market factors have squeezed profits and forced some brokerage firms to close their doors. Others are consolidating their resources and adding services to build revenues and survive the tough times.

One of the extra services being implemented by many of the more progressive firms is a computerized mortgage origination system.

This allows the broker to generate additional fees by providing information on financing options available and processing a client's loan application through his own office computer.

It creates revenue for the brokerage firm and saves the buyer the time and effort of contacting a number of individual lenders on his own.

In some cases, a mortgage loan service in a broker's office also can reduce the cost of loan originations, according to a report from the National Association of Realtors. That cost now averages about $2,600 per loan. Some of the origination fees can be reduced by computerized processing from the broker's office, the report noted.

However, such an in-house service should be strictly optional for the firm's sales associates, according to Jon Douglas, who heads one of the nation's largest multi-office firms, one that carries his name.

"We have such a service, but we urge our sales associates to check with other sources of mortgage financing to find the very best financing package for their client," Mr. Douglas said.

"We're primarily in business to serve the client's needs. And if that's accomplished successfully, the profits will continue to come in."

Other services being added within brokerage operations are relocation assistance programs, escrow services and real estate counseling services.

In all cases where the brokerage client pays an additional fee for these extra services, the broker is required to disclose the financial details to the client in writing.

Another method of increasing capabilities and revenues is for major real estate firms and organizations to join together in providing and promoting services.

A recent example is the newly formed business alliance between Better Homes and Gardens Real Estate Service and Grubb & Ellis, two leading real estate organizations.

Called the Area Development Alliance, it is designed to provide additional services for each of these groups as well as a network of smaller affiliated brokerage firms.

Better Homes and Gardens is a national real estate brokerage franchise group. Grubb & Ellis is a major brokerage and consulting firm.

The alliance will provide national and regional marketing support for smaller firms that become affiliated, according to Ray Sculfort, vice president of marketing services for Better Homes and Gardens Real Estate Service.

It will also provide companies with training and recruitment programs, a national referral network affiliation, business management assistance, financial management and consultation, relocation assistance and advertising support -- things that will enhance the firms' service operations and profitability, Mr. Sculfort said.

The affiliated broker firms will pay a continuing fee for their participation in the network. The fee amount is calculated on a sliding scale tied to the amount of brokerage revenue generated by the firm.

"Tomorrow's brokerage firm owners must draw on history for their answers," said Bobbi Courselle, vice president of a multi-office brokerage firm.

"An environment of creativity must take over from the 'way we've always done it.' The answer lies more in creative services, technology and good management than in commission-slashing and competing for agents," Ms. Courselle said.

Another major change in the real estate brokerage industry is about to be proposed by the National Association of Realtors. The NAR Presidential Advisory Group on Agency is now about to release a special report that will recommend several major and controversial changes in the brokerage field.

Among the changes: abandoning of the agency role of the broker. They would no longer be the legal agency for a property seller or buyer or both. Instead, the broker would become a facilitator between buyer and seller.

In becoming a facilitator, the broker basically presses for a smooth and successful transaction rather than serving the interests of one party to the transaction.

It eliminates consumer confusion about whom the broker represents, minimizes liability problems for the broker and may remove the threat of litigation in some cases.

* Question: I'm interested in the "Five Star Award" program that identifies particularly high-quality time-share resort developments. How are these resorts selected?

Answer: The Five Star program, started 10 years ago by Interval International (a vacation exchange network), uses some demanding criteria to determine the award recipients.

To obtain this designation, the resort is evaluated according to Interval's Quality Rating System. This covers the vacation area, the resort's location, its amenities and facilities, accommodations and guest services.

Questions may be used in future columns; personal responses should not be expected. Send inquiries to James M. Woodard, Copley News Service, P.O. Box 190, San Diego, CA 92112-0190.

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