Thanks to a $12 million advertising campaign, potential home buyers and sellers in New York have been exposed to Foxtons, the two percent discount brokerage, through ads on radio, in newspapers, on subway cars, billboards, trucks and even on bus shelters.
But the West Long Branch, NJ-based company does find a particular drawback in getting the message out in Manhattan.
“We can t put up yard signs in New York,” said Glenn Cohen, the founder of Foxtons North America, which operates in the Tri-State area. “That s a pain in the butt for us.”
Perhaps that s for the best. In London, where Foxtons was founded before expanding to the U.S. in 2000, the company is known for its aggressive tactics. One yard sign wound up in the front yard of Alastair Campbell, the press secretary to Tony Blair. Campbell s home wasn t even for sale.
Closer to home, many in Manhattan residential real estate have taken exception to the company s business plan and ads which offer to sell homes at one-third the standard commission of six percent. Many call it a “bait and switch,” saying the company is not delivering on what it is promising. Others have praised the company. In its June 2003 issue, Money magazine referred to Cohen as the Charles Schwab of real estate, stating, “The real estate commission may be going the way of the $200 stock trade.”
Advertising aside, how big is the company s presence in New York? What is bite and what is mere advertising bark?
The number of employees is fairly modest. Cohen said the company has around 15 agents who operate in Manhattan, up from 10 when the company started in New York in January 2002. While the company has space at 30th Street and 7th Avenue, according to Cohen, agents “mostly don t operate out of the office.”
Another Foxtons employee said a visitor to the location wouldn t find any agents there, presumably because they drive in from New Jersey. Overall, Cohen said Foxtons has 400 employees in the Tri-State area, including 280 agents, though some publications have reported the number of agents as lower. Around five to 10 percent of the company s business is done in Manhattan, Cohen said.
Foxtons large advertising campaign does not appear to correspond with any astronomical expansion, either, though the company has undergone solid growth, according to Cohen s figures. He said the company grew 20 percent last year, and that he hopes the company will continue that pace in the future.
In advertising, the company has benefited from a relationship with Viacom, the global media company with an outdoor advertising division. Andrew Heiberger, president of Citi Habitats, who says Foxtons is “anti-broker” and can t survive with its current business model, said the company gave Viacom a piece of the ownership in exchange for free advertising. “That s why they got the name out so quickly,” he said. “Now its back to reality.” Cohen acknowledged Foxtons does have a relationship with Viacom, though he said Viacom doesn t have an ownership stake. “It s just a nice partnership,” he said. “They have a lot of vehicles. We also buy advertising in bulk.” Cohen said his company s approach to advertising utilizing outdoor and other venues as well as newspapers gives it a leg up over the competition. “Traditional real estate companies don t understand advertising,” he said.
But it s the services touted in the advertising that are drawing the ire of much of the Manhattan residential real estate community. Neil Binder, principal of residential firm Bellmarc, said that Foxtons is “creating a false impression” in implying sellers will get a full range of services for two percent commission. “It s a come on,” Binder said.
“At the end of the day it s not going to be two percent,” agrees Heiberger. Even if the company operates under the two percent model, Heiberger maintains the services would be inadequate. He said the company shortchanges sellers in not conducting weekly open houses, in not marketing properties to the broker community or mounting professional marketing campaigns, in not being able to draw enough traffic to its Web site, and in “not having the patience required to work for three or four or five months to get a top price.” Says Heiberger: “It s very na ve and unprofessional of them to think all a broker does is list and show. Forget the two versus six percent issue. You could lose out on, say, 14 or 15 percent of the value of your home in selling it incorrectly.”
Cohen said the company doesn t lack services at all. The only thing sellers must do differently under the two percent commission plan is to show their own homes, he said. Agents can do this for an additional commission, but Cohen said around 80 percent of the deals the company does, in fact, end up being two percent commission. Cohen said the company screens and pre-qualifies all potential buyers before they arrange appointments to see a home. The company also uses floor plans and virtual tours to further whittle down the number of showings a seller might have to conduct. “If it s a $500,000 apartment, and five people come and see it before someone buys, you ve just saved yourself $20,000 in commissions, or $4,000 a showing. I d say that s a pretty good deal,” he said.
In terms of marketing, the company “brings a million unique visitiors to foxtons.com a month,” Cohen said. A look at the site revealed 139 listings for Manhattan. Foxtons also does not allow clients to list with other real estate agents, unlike traditional brokerages, which permit multiple listings, though it guarantees newspaper advertising for listings, like most firms. Cohen also touts Foxtons toll-free hotline, which is open seven days a week. “Traditional agents tend to not answer the phone,” he said. “But you can call us up and any speak to any agent, and they will be able to access all your information on our database.”
Cohen is nonplussed by the criticism he receives from other companies. “The brokerage community hates us because we charge much less and operate much differently,” he said. “Consumers love us for the same reasons.”
In the battle over commissions, Cohen said rival companies “have encouraged people to complain” about Foxtons.
Peter Constantakes, Assistant Secretary of Public Affairs for the Department of State, said there have been 25 complaints lodged against the company, “mostly dealing with the fact that people were thinking they were getting full services for two percent,” he said. Constantakes said the number of complaints wasn t necessarily very large, and that they had been satisfactorily closed. “With the number of clients they are dealing with, it is not unexpected,” he said. “There hasn t been any widespread thing.”
“But it s something we ll continue to monitor on an on-going basis,” he said.