IPayOne Inc., a discount brokerage based in Carlsbad, Calif., is bringing real estate commissions to a new low: 1 percent.

Launched in March by a group of mortgage and real estate companies, iPayOne has made some major marketing moves in its home region, securing an exclusive real estate advertising contract with the San Diego Padres baseball team. The company’s primary business is in San Diego, Orange and Riverside counties, and there are plans to expand to Los Angeles within the next six months and eventually to go statewide, said Burke Smith, president and founder.

“The concept was simply to create a one-stop-shop real estate company,” Smith said. IPayOne offers escrow, mortgage, title and real estate services under one roof. It’s not mandatory for home buyers and home sellers to use the ancillary services, but they are available to customers, he said. “We are a mortgage bank. We have the ability to broker out or fund directly,” he said.

Owners of Loanisland, a Carlsbad-based mortgage brokerage firm formed in 1996, are also principals for iPayOne. Blue Water Financial, Palomar Realty and Blue Water Realty also formed the company. “They are all common owners,” Smith said.

Most iPayOne listings are structured with a 1 percent total commission, and the business model is designed so that the company can represent both the buyer and seller. Prospective buyers who work through iPayOne are pre-qualified at no charge. The buyers work through the company to present offers to iPayOne sellers, and when an offer is accepted the transaction carries a 1 percent total commission.

Smith said, “We just thought that a total commission package is what the customer was looking for, as opposed to a flat fee where you still need to pay the buyer’s agent. We create a scenario where we represent both buyer and seller for a 1 percent commission. The way we’re designed, we leverage the power of the Internet so well that the 1 percent commission is still profitable.” IPayOne agents receive a salary plus the commission.

IPayOne’s offering of mortgage, title, real estate and ancillary services, including appraisal, inspection, home warranty, and insurance services, among other services, also can help to offset the low commissions, Smith said. The company also has relationships with auto dealerships, moving and storage companies, and even restaurants to offer additional services to consumers.

While some discounters offer scaled-down real estate services for commission bargains, iPayOne handles advertising and marketing of homes on its Web site and via a multiple listing service, legal paperwork and appointments to view homes. IPayOne sellers are responsible for showing the home during open houses. Through an expanded package of services, which features a 2 percent commission, an iPayOne agent will conduct the open houses.

“We don’t really feel like we have any competitors,” Smith said, as the for-sale-by-owner discounters tend to offer less services and typically do not have a full range of ancillary services.

Smith said iPayOne will list homes of all values, from $250,000 homes to those over $1 million. So far the company has handled about 60 home listings.

The company’s unconventional approach to commissions, and representation of buyers and sellers, has not gone unnoticed by traditional real estate agents.

“They send us nasty letters and make nasty phone calls,” Smith said, and there have been reports of stolen real estate signs. “But we’re not here to replace a good 6 percent agent that markets themselves well. They will always have work.” It’s the agents who are riding the coattails of the hot housing market and have “gotten business by default” that iPayOne seeks to unseat, he said.

Even Trevor Hoffman, a relief pitcher for the Padres, has received some calls asking him why he would promote iPayOne, Smith said. But that also works both ways, he added, “We get phone calls when he blows a save” while pitching for the Padres. The company is taking its baseball affiliation to a new level this weekend, as Padres third baseman Sean Burroughs will sign autographs at an IPayOne-listed open house tomorrow in San Diego.

Pam Acosta, a San Diego-area Realtor, said she has seen a couple iPayOne listings in the local MLS and drove by an iPayOne-listed home that had numerous signs in its front yard. “I wouldn’t show their listings. They are only offering the buyer’s agent $1,” she said. Acosta said she doesn’t expect the business model to last, especially now that the booming local housing market is beginning to turn.

Suzanne Hulett, an agent with Keller Williams Realty in San Diego, also said she saw an MLS listing by iPayOne and was surprised to find no “owner/tenant information, instructions regarding how to show the property, or lockbox.” Then she saw the commission: $1. “That’s not 1 percent or $1,000 or even $100. It’s $1,” she said.


“If the seller understands that no other agents will show the property they are undoubtedly terribly naive and/or totally uneducated about the purpose of the so-called ‘agent’ putting their home in the MLS,” she said. The agent, she said, “is not representing (the) seller in a fiduciary manner and is helping ruin the reputation of those of us who work hard to assist the buyers and sellers who put their trust in us to do everything in their best interests. The only recourse is waiting for the market to continue its correction.”

Smith said he expects the iPayOne formula to work even in a down market. “Our model probably works more successfully in a down market than in a hot market. People want to maximize their profit,” he said, adding that they can make up for a leveling or drop in home prices by saving money on agent commissions.


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

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