A real estate industry war has broken out in Florida over low-commission brokerage.

Home Discovere, a brokerage model with 2 percent and 4 percent total commission plans, has quickly become a top player in the Tampa-area market. Home Discovere started as a mortgage operation in September 2000, and rapidly grew to include a title company, a real estate brokerage company and a home services division.

A real estate industry war has broken out in Florida over low-commission brokerage.

Home Discovere, a brokerage model with 2 percent and 4 percent total commission plans, has quickly become a top player in the Tampa-area market. Home Discovere started as a mortgage operation in September 2000, and rapidly grew to include a title company, a real estate brokerage company and a home services division. The real estate brokerage company began operations in 2002.

Along the way, Home Discovere has managed to enrage some traditional real estate agents and brokers. A Home Discovere television advertisement drew an ethics complaint earlier this year from a board member of a local Realtors association who claimed the ad cast an unfavorable light on traditional Realtors. And some real estate agents at competing companies have complained that buyers who work with an outside agent are sometimes left to pay the agent’s commission out of their own pockets.

Traditional brokerages are so upset about the growth of alternative real estate brokerage models in the Florida marketplace that Coldwell Banker placed an ad earlier this month in a St. Petersburg newspaper that decries discount, limited-service brokerages. The ad states, “With ‘limited service’ brokers, price isn’t all that’s reduced. Limited service brokers charge less because they offer less.”

Stephen E. Johnston II, CEO and president of Home Discovere, said his company has been under fire from competitors, but that’s to be expected. “Any time you take market share away from people who have been doing business for a long time, it’s not an easy thing. It’s similar to what RE/MAX faced when they started. We’re getting a lot of that toward our company.” He said he continues to field angry phone calls about the company’s unconventional business model. “I get them everyday. I’m used to it.”

Under Home Discovere’s 2 percent plan, home sellers receive an MLS and Realtor.com listing, and buyers are encouraged to work directly with Home Discovere rather than through their own agent. Under the 4 percent commission plan, the buyer’s agent receives a 2 percent commission. Home Discovere also has a plan in which home sellers can limit the total commission to 3.5 percent if they agree to conduct their own open houses.

“I don’t refer to our concept as a discount model. We don’t offer limited service – for 2 percent I’m offering the same as a 7 percent company. I look at it as a low-commission model. This is what (real estate services) should cost. The word ‘discount’ has a negative connotation,” Johnston said.

The formula appears to be working. “We’re already profitable. We very quickly are the number one real estate office in Tampa in listings and sold units,” he said.

And Home Discovere also is one of the top companies in terms of number of units sold, he added. So far this year Home Discovere has sold more than 1,000 homes, Johnston said, and before the hurricanes wrecked Florida the company had about 500 homes actively listed for sale.

“The average it stays on the market in this area is about 110 days – we’re about half of that,” he said.

The company does business in seven counties in the Tampa Bay area, with plans for major expansion. “I believe this model is good for any major real estate market,” Johnston said.

All of Home Discovere’s various businesses are centralized at a single office building in Tampa. Its home services division offers appraisals, home inspections, home warranties, termite inspections, surveys and repair services. Buyers who work with Home Discovere receive a free home warranty, and buyers who work with Home Discovere Lending Corp. receive a 1 percent rebate on the home purchase, up to $5,000.

“We like when the buyers come directly to us,” said Johnston, whose family has worked in the real estate industry all his life. He acknowledged that in some cases, buyers not working directly with Home Discovere might agree to pay the commission of their agent.

Home Discovere now has about 100 employees, and all employees receive a salary. The company’s real estate agents do not receive a commission.

Johnston has family members who work in the real estate industry, and he said they have been supportive of his effort. “I’m not doing business in the area where they are. They think it’s great because we’re successful.”

And now that the company is established, Johnston said he believes that competitors will become more accepting of his business model. “They know that we’re not going anywhere. We’re not the enemy. We have a new model and we do want to work with these agents,” he said.

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

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