Donald S. Teel

Nothing new here and we will likely see more of this as the profit margins continue to disappear for many franchises and more importantly, for many Broker-Owners. From an pseudo marketing standpoint, the old line operations continue to discuss "The Brand" while the consumer is moving further and further from anything resembling real estate brand loyalty. The big are getting bigger, not because it is the best business model but because there isn't enough market capital, transaction or otherwise, to sustain their operations. If eggs are rotten, what good is it to scramble them? These types of mergers, although good for protracting the lifespan of internal players, typically delay the inevitable. The post-merger long term gain after 3-5 years will be negligible when measured on the basis of per person productivity and retained profit per transaction. In addition, there will be fall out and spin-offs that further derail and erode early financial assumptions. When will traditional brokerage realize they are never going to recover from the 75/25 model (75% to agents and 25% company dollar)? Our numbers indicate that it now costs a Broker-Owner 34% to unlock the doors and if inflation comes in 2010, this cost will be pushed up by 2-6%...an unsustainable operating formula for any company. The "New Real Estate Economy" calls for a model that is tactical, surgical and large but dispersed. The demand is for sound business models that are deliberately decentralized with many independent and often seemingly unrelated components operating without centralized brand control while wholly premised upon agile operations and lean cost per transaction models. Centralization in overcrowded markets under the old and dying Brokers, Boards, Books and Buildings (4Bs) formula is simply death to profit. These mergers look good on paper and sound good in news releases that mask the ROI and profit defficiencies. Why does this industry continue to perpetuate the "money myth" pretending that huddling together is by itself going to magically adjust the imbalance that exists between cost of sale and NOI? What we should do is follow this merger from its starting point and at 6 month intervals through year three of the marriage. We should watch it in an incubator, examining its net capital gain (gross commission income), market share gain and more importantly, growth in the percentage of truly sustained and retained annual profit over time will tell the only tale that needs telling. For now, we will pop the corks on the champaign bottles and strut the deal down the runway. Respectfully submitted, Donald Teel - Founder e-Partner www.ePartnerUSA.com REALonomics www.REALonomics.net 928.777.8100

This is the sort of consumer-centric value proposition often absent in traditional models. The packaging of property information with transparent access by the consumer is something NAR and its myriad local Associations should be pursuing and Broker-Owners demanding. Our profitless brokerage models could find new revenue models through both property and local information bundling. Nice job to the folks at Redfin. Donald Teel - Founder e-Partner www.ePartnerUSA.com REALonomics www.REALonomics.net 928.777.8100

Once again, the true nature of the relationship between Franchisor and Franchisee is exposed for what it is...a battle over the worn out notion of local market control via the mistaken concept of "brand" value. When are Broker-Owners going to wake up, take back the markets and force franchisors to pay them to allow their brand presence in a geographic market? For decades, franchisors have perpetuated the myth that their brands have value to broker-owners, yet without required empirical quantification or, recourse for non-performance of their brand. The GMAC debacle is proof that franchisors actually believe their own party line and will dump long-standing Broker-Owners from whom they have lifted the profits for far too long. Broker-Owners have given away their market control, property information and their profits in pursuit of a pipe dream. Worse yet, the need for a franchise brand is being rapidly eroded by the power of Internet in the hands of the consumer. We simply do not understand The Evolution of the Real Estate Industry nor do we seem to have the resolve to reinvent our out-moded models that are incapable of producing the necessary economic results for Broker-Owners. Another sad part of this story is that Metro Brokers is apparently looking at repeating the nightmare with another franchise. Say it ain't so! The real estate industry needs to strip down to the bare necessities, redefine its business model and ask the hard questions about how we produce income, ROI and sustained profitability for those at the greatest risk, Broker-Owners. Franchisors are powerless without Broker-Owners and the old line franchise arrangements are no longer applicable in the The New Real Estate Economy. Can a franchise work? Yes, but only if they are structured and defined within the economic and operating realities being faced by Broker-Owners today. Respectfully to all, Donald Teel - Founder e-Partner www.ePartnerUSA.com REALonomics www.realonomics.net 877-380-1000