New York City is getting a new VOW-based brokerage company, in what may soon become a flood of companies taking advantage of the new technology.
Boston-based CondoDomain, a Web-based discount real estate brokerage, is now a member of the Real Estate Board of New York and offers a VOW, or virtual office Web site. That means that customers who log onto CondoDomain’s New York site can browse through all of the listings in REBNY’s database.
CondoDomain founder and CEO Anthony Longo told The Real Deal that the appearance of VOWs in New York City has opened the floodgates for new companies like his to penetrate the lucrative New York City market.
“The VOW will lay the groundwork for companies like ours to come in and compete,” said Longo, who has had his eye on the New York market for years.
The company, which specializes in new developments and discounts its commissions by 20 to 75 percent from the usual 6 percent fee, has offices in Boston, Chicago, Washington DC, Northern Virginia and Baltimore (with all listings on one Web site), but Longo said he never felt New York was an option without a true multiple listings service.
When REBNY announced last November that it would offer a VOW, Longo said, he immediately began plans to set up an office here — starting by moving to New York to oversee the plans.
“Once I confirmed it was real, I moved to New York the next weekend,” he said.
The company has hired two local agents and has office space in Soho, he said.
CondoDomain, which began operating as a brokerage in 2008, primarily works with buyers. It offers two fee options, the first being a full-service model in which brokers guide a buyer through the apartment search in the traditional way. The difference comes when the sale is completed: when the CondoDomain broker receives the usual 3 percent fee from the seller, he or she passes 20 percent of it on to the buyer in the form of a refund check. So on a $1 million apartment, a customer would receive a check for $6,000.
The other option the brokerage offers is a flat fee service, in which the client finds the apartment on his own on CondoDomain and other sites, then hires a CondoDomain broker to handle the negotiations and closing, all for a fee of $10,000. For a $1 million listing, for example, the customer would receive a check for $20,000 from the broker.
The business model works, Longo said, because the company’s infrastructure is all online, so its overhead is much lower than a traditional brokerage. The company has office space, but not the expensive storefront space many brokerages rely on to attract walk-in traffic.
“We’ve created efficient technology,” he said. “One-hundred percent of our clients come from online. We don’t need any retail offices.”
In addition to the cities where CondoDomain has offices, it also operates in about 14 cities around the country, relying on listing information from multiple listing services and partnerships with local brokerages.
This isn’t the first time the discount brokerage model has been tried in New York City. Most notably, Foxtons North America filed for bankruptcy in 2007 after making a splashy entrance into the New York metro area. The brokerage started by offering a 2 percent commission, then raised it to 3 percent and finally 4 percent, before going out of business amid criticism that the low fees didn’t provide enough incentives to co-brokers, and that the firm didn’t provide a high level of service.
But CondoDomain has several advantages Foxtons didn’t, Longo said. First, the VOW means that more information is available than ever before.
“The accessibility to data wasn’t there when Foxtons tried to do it,” he said.
Second, the down economy means opportunity for new business models. And finally, CondoDomain is primarily a buyers’ brokerage. Because brokers don’t have to spend time marketing or prospecting for leads, Longo said, they can focus on customer service.
CondoDomain isn’t the only company looking to take a crack at the discount model. Former Core agents Steve Ganz and Jonathan Isaacs recently launched new discount brokerage company, Aligned Real Estate.
Manhattan got its first VOW, known as the CBS 2 Real Estate Market, last summer. And Seattle-based online brokerage Redfin is also expected to set up shop in New York City via a VOW feed from REBNY, though Redfin CEO Glenn Kelman would neither confirm nor deny the rumor.
“We’re already in Long Island and Westchester County, but beyond that
we can’t say much about what we plan to do next in Manhattan and Brooklyn,” he wrote in an e-mail to The Real Deal.
The New York City’s VOW isn’t perfect — it offers far less information than MLS’s in other cities, Longo said.
“It’s still very constricted,” he said, adding that the twice-annual $3,750 audit fee REBNY charges for VOWs are “extremely expensive” compared to other cities.
Still, it’s enough for companies like CondoDomain to come in and take a crack at the market in a way they couldn’t before, he said, adding that he believes more companies will eventually adapt the discount model.
“I really think the industry is shifting to this,” he said. Along with Redfin, he said, “the two of us in New York City will start to slowly change the landscape.”