Douglas Heddings, a top real estate broker and founder of the popular blog True Gotham, has left Manhattan’s Charles Rutenberg Realty to start his own firm, with an unusual business model based on higher-than-average commission splits and profit sharing.
The new company is known as the Heddings Property Group — the same name as Heddings’ team at Rutenberg.
The firm, which now has 12 agents, will continue to be based out of the 515 West End Avenue office that Heddings opened when he and a team of four agents joined Rutenberg in June 2009.
But Heddings said he plans to open a five-agent office in the Union Square area Aug. 1, and a Hamptons branch in the fall. In the next three months, he plans to hire between six and 12 additional people.
The new sales and rental firm has a unique business model, which is a cross between a traditional brokerage, where agents split their commissions with the firm, and Rutenberg’s model, where agents keep 100 percent of their commissions, but pay fixed monthly and transaction fees.
“On the spectrum between Rutenberg and a traditional brokerage, we’re certainly closer to Rutenberg,” Heddings said. “At the large firms, a new agent starts there and I think they make 50 percent [of the commission]. That’s just ludicrous to pay a house 50 percent of your commission.”
At the Heddings Property Group, agents don’t pay transaction or monthly fees, but they also don’t keep 100 percent of their commissions. The agent who originates a deal gets “a much higher split than the average,” Heddings said. In addition, a certain amount of the proceeds from each deal is set aside for profit sharing, which he implemented at Rutenberg.
“In an effort to build a true team environment, everyone is compensated for every transaction that comes in our door,” Heddings explained.
That means that even if an agent doesn’t do a deal for a month, they’ll still get a paycheck. Since everyone has an incentive to see a property sold, they are motivated to help each other, he said.
“Everybody’s getting paid for every deal that comes in,” he said. “It’s not the competitive, cutthroat type of atmosphere that many people are accustomed to in this business.”
Heddings recently instituted a “virtual office website,” or VOW, which allows clients to browse real estate listings from other firms as well as his firm. But Heddings decided to remove the analytics feature on the VOW, which allowed agents to track their clients’ every move as they searched for listings through the online service, to help protect clients’ privacy.
He said he his decision to leave Rutenberg was prompted more by his longtime desire to start his own company than from dissatisfaction with the firm.
Heddings said his time at Rutenberg “was a very positive experience, in that it gives you the feeling of being a true independent contractor with the autonomy to run your business the way you want to.”
Heddings said he had always wanted to start his own firm but was nervous about going out on his own, and Rutenberg helped him make the transition.
“I went to Rutenberg first and kind of eased my way into the boutique brokerage environment,” he said.
After a year, he decided he was ready to start his own business.
“I just always wanted to truly work for myself,” he said. “It just made sense for me to spread my wings and do my thing.”
Kathy Braddock, one of the co-founders of Rutenberg in New York City, said she thinks it’s “fabulous” that Heddings is starting own firm.
“He’s always been a wonderful entrepreneur,” she said.
Braddock said Rutenberg is not structured to house “a firm within a firm,” and said that “with his size and growth, it’s not right for him.”
Rutenberg has recently become one of the city’s fastest growing companies, roughly doubling in size between 2009 and 2010. The presence of a high-profile agent like Heddings — who blogged about the benefits of the Rutenberg model — helped boost the credibility of the four-year-old firm, agents said.
“Doug was a big fish that they caught,” said Antonio del Rosario, a partner at brokerage A.C. Lawrence & Company.
Braddock said she doesn’t feel that Heddings’ departure will reflect poorly on the brand, since Heddings “left for the right reasons.”
Agent Robert Bernstein, who worked for the Corcoran Group before joining Rutenberg, said Heddings was one reason he joined the firm.
“Before I joined Rutenberg, I had a long talk with [Heddings] about why I should join this firm,” Bernstein said. “He had nothing but positive words about Rutenberg. For me, that’s all I had to hear.”
That doesn’t change because Heddings has left, Bernstein said.
“He gave them credibility that still stands as far, as I am concerned, whether he is there or not,” Bernstein said. “I wish him the best.”
As for long-term goals, Heddings said he may eventually look to open a division of the company in Maryland, where he is originally from. But for now, he said, “I’m taking it one step at a time.”