Brokerage alliances are among the top real estate trends touted by those heading major firms as a way to generate both buyer and seller leads, resulting in lucrative property sales. But what’s the real situation?
How they work:
Two different models for brokerage alliances exist, including…
- Auction house models
Sold in 2004 to real estate services brand Realogy Holdings, the company pays Sotheby’s 9.5% of net royalties received from franchisees, or a minimum of $2 million a year, as part of a 100-year licensing agreement. Today, Realogy owns 43 Sotheby’s offices, and more than 780 franchises, which sold $70 billion worth of real estate (earning Sotheby’s $7.2 million in fees) in 2014.
Christie’s International’s real estate brokerage network is wholly-owned by the auction house. Local brokerages, a network of 138 firms in exclusive areas such as New York City, the Hamptons, and Palm Beach, pay a fee to be the exclusive affiliate in their market, as well as additional fees for such things as listing-specific advertising. Brokerages sign 1-3 year contracts to use the Christie’s name and tap into its referral and marketing network. Combined sales within the network earns between $100-125 billion each year. Clients can advertise in Christie’s brochures and the lobby at Rockefeller Center, and earn a standard 35% commission by referring clients to another Christie’s affiliate in the network.
- Strategic alliances
Unlike auction house alliances, strategic alliances seek to better court foreign buyers, particularly in the luxury market, on the upsurge in the U.S. market in recent years. In order to draw global attention to domestic listings, allied firms often share marketing costs, jointly promote properties, and swap leads.
Is it worth it?
Learn more about this business model and the latest in real estate trends in the next installment of, “Brokerage Alliances – What’s in it for You,” only at Properties Online.