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Sawbuck’s Marriage With The DMN?

Wow, Josh, so this is the big story I heard bits and pieces of all last week. Very interesting. Here’s what I know about Sawbuck Realty: it’s an “alternative brokerage” without brick and mortar, launched in the D.C. area, and likes to partner with top-producing, hand-picked real estate agents in a given community. They are expanding rapidly.

Sawbuck’s business model serves consumers at the beginning of a transaction by offering an online, map-based search system for local listings — I mean all local listings, everything in the MLS — hence this new affiliation with The Dallas Morning News is, I suppose, going to take the MLS to the DMN website. Then Sawbuck refers the buyers to an agent in the company’s referral network, in our case, a Dallas agent. They take a referral fee of about 30% from every closed transaction. I guess, in this case, the DMN will take the fee. Looks like they are sending the agent a white hot lead: the company claims that 50% of leads become closings. And get this for drawing in consumers: Sawbuck is said to offer buyers a no-fee mortgage and settlement package, as well as all the property information online at the beginning of a search.  Sawbuck’s co-founder, Guy Woolcott, has said his company does a lot of work to qualify the buyers prior to sending that referral. Last year, here’s what he told Inman News:

“We’re actually contributing something to the deal,” Wolcott said. “We’re not just flipping (agents) a lead; we’re giving them a real buyer.”

The company offers live chat on its site so that consumers can ask questions without being connected to an agent and then choose to be connected when they are ready.

The agents that Sawbuck refers buyers to are hand-picked, and the company prefers to partner with experienced, top-producing agents who often are a part of a team, he said.”

My sources tell me they first heard about this Thursday when their giddy DMN ad reps paid them a visit, and they were shown a spiral notebook they had to return and keep very mum about the contents. The company launches Dallas August 1.

My head is swimming. This could be a brilliant partner$hip move on the part of the DMN – what is Belo’s stock symbol again? (Dialing broker now.)  They know that 95% of all real estate searches begin on line and online is where real estate is headed. Traditional brokerage models are antiquated — the cost of doing business never goes anywhere but up.

But gosh, how would you like to be a broker who has paid bazillions to advertise in the DMN all these years and now come to find them a competitor colleague?

I’ll bet there are going to be some meetings this week. Also, real estate laws vary from state to state. In Texas, brokers own the listings. I cannot see brokers paying the DMN 30% of their split. Many of the tip-top producers are pulling in close to 90% of that 3 per cent commission. And Sawbuck deals with first-time home buyers (the most high maintenance, to be honest) who are buying average-priced homes, say $150,000. The typical commision split is 6% — 3% to buyer’s agent, 3% to seller’s agent. Of that 3%, the newer agents are lucky to take home 1.5% — $4500 on a $150,000 home sale. Are you telling me that the DMN will get $1350 of that agent’s commission split?

On his company’s blog,  Sawbuck co-founder Guy Woolcott said that “79 out of every 100 adults in the USA is a real estate agent.”  Yet we know that a small percentage of those agents are making the really big bucks. (Most are making nothing at all.) He thinks one reason is the agents are paying more to outside sources for leads, presumably advertising. But at a recent social networking realtor seminar, agents were urged to dump direct-mail and newspaper advertising for the virtually free social networking. I also glean from my reading that Woolcott wants to attract the kind of high-producing agents who muscle the 90% split. Problem is, those agents are not selling to first-time, entry-level homebuyers.

Sharing MLS information usually goes over about as well as shaking someone’s hand and telling them oops, I have a staph infection. There are murmurs of uniting every state MLS into one giant entity. And as far as saving buyers money on title policies, title fees in Texas are set by Texas Department of Insurance. The free mortgage sounds neat — um, I’d like a definition of free — but I was with twenty North Dallas agents Friday for two hours and I heard horror story after horror story about the new pickiness of underwriters – requests for second appraisals at the last minute —  it’s all driving buyers crazy and killing many a deal.

But I’m intrigued. I’ve been waiting for this to happen in Dallas now for two years. There’s Redfin, Trulia, Zillow, ActiveRain, HomeGain (which I think is owned by a newspaper consortium that includes either Belo or A.H. Belo). The mission is to make listings and sales transactions as transparent as possible on line. Brokers here choose to share their information with the MLS — what if they decided not to share anymore? Where would Sawbuck get it’s listings? I’m sure the local brokers want to play nice, but will their agents like one more entity’s paws on their commissions? Fasten your seatbelts, folks, this is going to be a very interesting ride.

Update: Sawbuck would have testified at the Justice Dept vs. NAR/MLS lawsuit had it gone to trial.