While some traditional real estate brokers today said they know zip about ZipRealty, the fledgling brokerage with an unconventional business model, others are watching with interest as the company plans its initial public stock offering.

Larry Knapp, president of Saratoga-Calif.-based Alain Pinel Realtors, said he wishes the company well.

“I think it’s great. They have a little different model. Just like every other business model in the world, things progress,” Knapp said. “I hope they’re successful in going public and achieving their goals. Ultimately it’s the relationship with clients that determines your success.”

Headquartered in Emeryville, Calif., ZipRealty has initially focused its operations on 12 major metropolitan areas across the country and has set its sights on expansion into other top-25 metropolitan markets. ZipRealty is a full-service broker that offers discounts and rebates to home buyers and sellers through its business efficiencies. ZipRealty agents are full-time employees, while agents at most other brokerages are independent contractors. Also, ZipRealty uses the Internet as its primary generator for leads.

Knapp said that ZipRealty and other relatively new business models serve to keep traditional brokers “on our toes.” ZipRealty’s approach, unlike that of some real estate newcomers, seems to loosely fit the traditional agent model, he said. “To me it’s more of a lead-generation system than a completely new business.” He also said that in his experience, ZipRealty agents seem to cover a wider geographic area than agents who work for traditional brokerages.

ZipRealty had about 547 agents as of March 31, 2004, with operations in the Atlanta, Baltimore-Washington, D.C., Boston, Chicago, Dallas, Los Angeles, Orange County (Calif.), Phoenix-Scottsdale, Sacramento, San Diego, San Francisco Bay Area and Seattle metropolitan areas.

Shannon Adams, a Realtor for Evergreen Realty in Mission Viejo, Calif., said she heard of ZipRealty through her work in southern Orange County.

“I do think traditional brokerages are going to have a lot of competition in the next couple of years, which is really impacting our commission structure. There are going to be more and more variations in the structure. She said that home buyers and sellers seem “a little bit nervous about anything that’s not traditional, but money talks.” If consumers think that they can make a buck or save a buck, they may look into non-traditional methods, she said.

Danner Bierhaus, a Realtor for Fireside Homes-Broadview in Seattle, Wash., said ZipRealty and other nonstandard real estate business models represent a paradigm shift for the industry.

“I think we’re in a new era right now. To be competitive you’ve got to look at new approaches right now. The buyers, the sellers are much more educated. They’re asking a lot of the right questions. You’ve got to be on your toes.” Bierhaus’ office just opened two months ago, as an offshoot of a larger brokerage. Rate reductions and extra services are becoming the norm in competitive markets he said.

ZipRealty even announced in its IPO filing that it would continue to lower the bar on commissions.

“Over the past several years there has been a slow but steady decline in average commissions charged in the real estate brokerage industry, in part due to companies such as ours exerting downward pressure on prices with our lower commission structure.

“We anticipate that commissions will likely continue to decline, and have designed our business model around an attractive cost structure and operational efficiencies, which we believe should allow us to continue to offer our services at prices less than those charged by the majority of our competitors,” the company stated.


Send tips or a letter to the editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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