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Commentary by James A. Crumbaugh III

RISMEDIA, Sept. 25, 2008-All the Realtors® in this country who know me, understand that I have a deep passion for the real estate industry. I believe it is our duty to create wealth for the consumer, through the ownership of real estate.

I also believe that it is my duty as CEO of a national company to help maintain the health of the real estate industry by providing an environment that creates profit for our brokers and puts more of the commission into the Realtor’s pocket.

The traditional business models of yesterday in the real estate industry are long gone. The original business model, where the broker and the Realtor shared the commission at 50%, disappeared about the same time as the 8-track tapes.

Since then, the industry keeps asking itself, “How is the real estate industry going to change?”

We still have new Realtors coming into the industry who need day-to-day hand holding and day-to-day training. The new Realtors are still going to need the training environment of a typical brick and mortar office.

The problem is this: how do the typical brick and mortar offices keep their doors open, when the average Realtor is now getting a 70% split? I empathize with these brokers; I’ve been there myself.

They provide the guidance and training and then after two years or so, the new Realtor leaves them to join a firm that gives him or her a higher commission split, or they go to a 100% company.

Some real estate companies now have to deal with the 100% companies. Many of the better Realtors who are with these types of companies have professional offices at home, yet they pay a large fee to stay at that particular company.

Then you have the 100% companies. Some of these companies have a small office where they have a couple hundred licenses hanging with the office and the Realtor comes in to use a computer or conference room.

Other 100% companies have no brick and mortars and the Realtors work entirely out of their home offices and use title companies and lawyer’s conference rooms to meet their clients.

So which business formula will dominate the real estate industry 10 years from now?

Will it be the typical brick and mortar office that trains the new Realtor and loses that Realtor to a 100% company? Will it be the 100% companies that have a couple hundred Realtors share a single office? Or will it be the 100% companies that allow the Realtors to work out of their home offices?

Economics will determine all of it. Brokers really don’t bring many buyers or sellers to the table in today’s world. It’s the Realtor’s individual effort that brings almost all the business to him or her.

It’s understandable that the Realtors no longer want to give away their commissions, since in most cases the commission was generated by the Realtor completely by their own efforts.

I’m even hearing from Bank CEO’S, who are questioning the need for a brick and mortar location in the future. Obviously I’m prejudice about the business formula I believe will be the future.

But economics will decide what business model survives.

James A. Crumbaugh III is CEO of Allison James Estates & Homes.

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