RE/MAX DRAWS VETERAN AGENTS 100% commissions, for experienced only


Last November, Ronald Seibert spent a whole weekend searching his files at the Columbia office of Coldwell Banker. His quest? To estimate whether it would pay to switch to an unusual real estate company called RE/MAX International.

Although Mr. Seibert was one of the top 10 agents at his Coldwell Banker office in 1992, he reckoned he could have earned $12,000 more had he sold the same property through RE/MAX. So he changed to RE/MAX in December.

"I just reached the point in my career where I thought it was time for a change," said Mr. Seibert, an agent for 10 years.

Across Maryland -- but particularly in Howard and Prince George's counties as well as Southern Maryland -- more and more seasoned real estate agents are doing what Mr. Seibert has done. They're moving from so-called "general brokerage" firms, such as Coldwell Banker, to RE/MAX.

What RE/MAX does is simple: Agents keep 100 percent of their zTC commissions but pay a flat monthly fee -- regardless of whether they have sales or not -- that covers overhead plus profit for the local broker-owner. Other companies pay agents' overhead, but take a cut of the sales commission.

RE/MAX agents, all of them real estate veterans, also enjoy the benefit of RE/MAX's name and advertising, as well as the savings from pooling overhead expenses with other agents.

"We're a rapidly changing industry," says Dave Liniger, founder and chairman of Denver-based RE/MAX. RE/MAX has grown from 11,500 agents five years ago to 24,000 agents today. And all of the company's growth has come by recruiting experienced agents from other firms.

No beginners

"We don't take beginners," Mr. Liniger emphasizes.

In Maryland, there are 750 RE/MAX agents, up from 498 five years ago.

But at least one real estate executive in the Baltimore-Washington area, Chairman Wesley Foster of Long & Foster, is convinced that the RE/MAX chain will soon stop growing, primarily because general brokerages, such as his own, are imitating RE/MAX's plan.

"I don't see them continuing to have the strong growth they've had for the next 10 years," Mr. Foster says.

Not for everyone

The 100 percent commission plan, whether from RE/MAX or Long & Foster, is not for everyone. It's mostly for experienced agents, like Mr. Seibert, who are confident of a steady flow of sales. Mr. Seibert keeps all his commissions but pays RE/MAX $1,200 a month to cover expenses.

"If I were to go into a slump, this arrangement could be a problem. But so far I've done exceptionally well here this year. In fact, I think I'm going to end up having a banner year," predicts Mr. Seibert, 51, who a decade ago left his manager's job at a Baltimore air-conditioning company to sell homes full time.

At most brokerages, a majority of agents still pockets only about 50 percent to 60 percent of the commission. Regardless of the number of homes they sell, however, their basic expenses are covered by their firms.

Losing top talent

Mr. Foster, the head of Long & Foster, admits that many brokerages such as his have lost top talent to RE/MAX because of its commission program, but adds that some are now matching the RE/MAX package to retain their best performers --

even if doing so puts them in a financial bind. Successful agents, even if they don't bring in commissions for the real estate company, can draw business for other agents in the company.

"We never lost agents to any other company until RE/MAX came along, and then we lost a lot to RE/MAX. But we've done everything we could think of to stop it, and we have stopped it with our own 100 percent commission plan," he says. Eighteen months ago, he says, Long & Foster began offering its agents the chance to work on a commission program cloned from the RE/MAX model.

"We've sort of taken away the candy store from RE/MAX," Mr. Foster asserts.

In some parts of the Baltimore metropolitan area, including the north-central suburbs, RE/MAX is yet to become a serious competitor, says Lou Occhionero, sales manager for Coldwell Banker's Charles Street office in Baltimore County.

As a general rule, RE/MAX offices have been less successful in communities bordering on Baltimore than in those near Washington, says Mr. Occhionero, who until 1990 had worked for the White Marsh office of RE/MAX. In Baltimore County, he contends, the company had little name recognition with the public.

Still, Mr. Occhionero says RE/MAX agents continue to represent a formidable challenge for Maryland's real estate industry.

Good agents

"The RE/MAX agents are generally good agents, steady workers and hard workers. They're the backbone of which the industry is made," he says.

For their part, RE/MAX executives acknowledge that their commission program has many imitators and that the best producers within the general brokerage firms now can usually obtain as favorable -- or more favorable -- terms without having to leave their present firms.

"The 100 percent concept is not unique any more," says Mr. Liniger, who owns nearly all of RE/MAX International, a 20-year-old franchisor that now works with 1,576 RE/MAX offices in the United States, up from 885 offices five years ago.

All the offices are independently owned and operated and pay dues to the international company.

At RE/MAX headquarters, Senior Vice President Daryl Jesperson says it was inevitable that his firm would eventually lose the market advantage of the 100 percent commission concept it perfected.

"No competitive advantage lasts forever," he observes.

Still, Mr. Jesperson and other RE/MAX executives argue that the company can continue to gain market share by distinguishing itself from general brokerage firms in other ways.

One such difference, which RE/MAX stresses, is that all its agents are required to work full time, while most general brokerage firms allow part-time agents to work in their midst.

A number of market factors now favor full-time, experienced agents, in Mr. Liniger's view.

Not only is real estate law more complicated than it used to be, but consumers are becoming more demanding. Many are wary when an agent can't answer their questions, he says.

"The perception of consumers today is that they're getting hoodwinked by real estate agents," Mr. Liniger says.

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