What’s A Discount Listing Worth? How About $78.57? (Ex-Foxton’s Listings Sold Off En-masse During Bankruptcy Proceedings…Good Move For The Buyer?)

October 31, 2007

As I previously reported, Foxton’s the now-defunct east coast discount shop, is, well, defunct.  They recently fired most of their staff and declared bankruptcy.  What to do with the thousands of listings they had, however?

foxtons.jpgRIS Media reports that a tranche of some 1400 of them have been taken over by another broker, Fillmore, for about $110,000, which puts a value of $78.57 per discount listing.  With most agents spending hundreds or thousands of dollars in acquisition costs per listing, this sounds like an absolute bargain.

However…these being discount listings, the math might be different.  For a full service listing netting, say, 2.5% on the listing side, I’d be willing to pay significantly more than $78.57.  I believe Foxton’s, however, only charged a few thousand dollars per listing, out of which they had to cover employee costs (their agents were largely salaried, not commissioned), office costs, and the nifty little cars each agent got.  This model only works well in volume, when the market is spinning along comfortably.  With the market slowdown, however, things didn’t go so well.  As Foxton’s VP of Sales Mark Horvat delicately puts it:

We regret to inform you that, due to the recent down turn in the residential real estate market, Foxtons has decided to conduct an orderly liquidation of its business.

If Foxton’s couldn’t make it happen with their fees, how will Fillmore manage it?  Only two ways to do so profitable that I can see:

  1. Charge more.  This is a non-starter, however.  The listing agreement that Foxton’s clients signed specified a certain listing fee, and Fillmore would be contractually bound.  Mark Horvat again:With the exception of the identity of the listing broker, all of the terms of your listing agreement with Foxtons would remain the same.
  2. Lower costs.  Fillmore doesn’t seem to be going down this road either.  It appears they’ll be launching new satellite offices, hiring some 40 top-performing Foxton’s agents, buying their agents laptops, renting them cars, and putting them through their “Fillmore University” training program.

The math just doesn’t make sense to me.  If Foxton’s couldn’t swing it financially, how is this not financial suicide for Fillmore to take over the listings at the same fee, with the same cost structure?  What am I missing?

Foxton’s did not, apparently, have any Boston coverage.  If it did, I find myself wondering if Redfin might have tried to purchase any of those listings.

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3 Responses to “What’s A Discount Listing Worth? How About $78.57? (Ex-Foxton’s Listings Sold Off En-masse During Bankruptcy Proceedings…Good Move For The Buyer?)”

  1. John Harper on October 31st, 2007 4:44 pm

    Kevin - never under estimate the power of prayer

  2. John Reinhardt on November 2nd, 2007 5:57 am

    I was doing my daily checking in with RIS Media and found the link to your blog. Very interesting topic. I would love the opportunity to share with you the math for my purchase of the existing Foxtons listings. We are only paying as you quote $78.57 per listing. That is a lot less than we would have to pay for a simple listing referral lead from most services. We already have received a flood of phone calls from the new Fillmore listings with signs and from other mls brokers. We’re putting together about 5 deals in two days.
    You do the math….not so bad huh!
    Another note: The agents are now getting those sellers that need to sell faster to understand the value of better incenting the agents by raising the commission to more traditional rates. This is also working out fine.
    I’ll be happy to keep you posted.
    Thanks for your concern.
    John P. Reinhardt
    President, CEO
    Fillmore Real Estate

  3. Bill Gassett on November 30th, 2007 3:02 pm

    Well I guess it is working out ok for now. The discount model is going to suffer as the downturn worsens. The clients they represent are going to look toward more traditional methods when they become disappointed their home has not sold.

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