Wise Enters Market, Assures Full Commission for Agents

With home values creeping higher and the number of transactions, listings and new construction all increasing, the competition in the Northwest Arkansas real estate market is on the upswing.

It’s no surprise, then, that a 23-year-old businessman sees an opportunity to make a splash in the market.

Grant Wise, a Rogers native and the owner of a local construction business, has launched his own real estate company, Wise Custom Realty.

Wise said he wants a diversified portfolio of properties for the new company, but is counting on a nontraditional compensation structure to separate his firm from the rest, and be an attractive alternative for potential agents.

Wise’s company offers agents 100 percent of the commission for every transaction, a practice generally perceived as unorthodox by most brokers.

Commission splits can vary wildly, but a general practice is a 50/50 split at most franchises, then negotiable depending on experience.

Payment structures at most large franchises require enough of a bite out of a transaction to support the business model, not to mention high-end office space, overhead charges, marketing and advertising.

The 100 percent concept has become a popular way of doing business among residential brokerage firms in other areas of the country including California, New York and Florida.

But Wise’s firm, which opened in March, is likely the only one in Arkansas operating on a 100 percent commission model.

Several Northwest Arkansas brokers contacted by the Business Journal say they don’t know of another 100 percent commission office in the area.

A spokesman for the Arkansas Realtors Association said the organization does not track which offices use a 100 percent commission structure.

“It’s never been done in this area,” explained Steve Pangle, a title company veteran of two decades and senior vice president at First National Title Co. in Bentonville.

Wise believes it will be a winning business model of the modern real estate firm. So much so that he has a plan in place to open 10 locations in the next 18 months and 550 locations in the next five years.

“We know exactly where we are going and exactly how we are going to get there,” Wise explained. “We’ve planned this to the nth degree, and our company is completely designed to support the agent.”

 

Arizona Roots

The nation’s first 100 percent commission office, Realty Executives, was opened in 1965 in Phoenix by Dale Rector. The concept was built on the simple premise that associates would receive 100 percent of their commission and would share equally in office expenses.

A full-time broker, whose salary was paid by the associates, would coordinate offices. The concept, revolutionary at the time, is now practiced by about 25 percent of Realtors throughout the country, according to the Realty Executives website.

Wise’s model banks on volume for profit. It requires agents to pay $250 per month to house their business with WCR.

A second revenue stream is a fee system based on the size of the transaction. Agents are required to pay WCR $200 to sign off on a transaction of $150,000, for example.

The maximum transaction fee is $500.

“If an agent sells a $4 million house, they will pay us $500 and then take home all the commission that goes with it,” Wise explained.

Pangle can see the interest to potential agents in that kind of math.

“If I’m selling $300,000 houses and I’m paying commission on that at 6 percent, that is pretty significant cash. If I only have to pay my broker a $250 flat fee and keep all that commission, then I can see the appeal.”

Wise said he has nearly 10 agents in the Bentonville office, with about two dozen commitments from other agents to come on board in the next six weeks.

Also on board is a wealth of experience for WCR to lean on through the formative years.

David Thornton spent 36 years with Cooper Communities Inc. and is WCR’s principal broker.

Kevin Harrison, a longtime area business leader and current Benton County JP, is the firm’s chief operating officer.

Doug Davis is leading WCR’s business development efforts. He has more than three decades of real estate experience in California, and Wise said David is known as an expert in the 100 percent commission business model.

“He has been part of these programs, and that is where he is valuable to us in the stage we’re in now,” Wise said.

Another key part of WCR’s business plan is its partnership with Regus, an office-space provider with more than 1,500 locations worldwide.

Regus’ only Arkansas location is in the sixth floor of the Bentonville Plaza, about 30,000 SF, and WCR is one of about 60 companies that rent space there from Regus as a virtual office space.

“We have partnered with Regus and plan to be in all 550 of their U.S.-based locations,” Wise said.

The brick-and-mortar location gives WCR agents several office benefits that include video and audio conferencing, display rooms and conference rooms.

WCR also offers advertising, marketing material, Web-based assistance and E&O insurance.

“No one thinks we can do this, but our expenses are minimal,” Wise said. “With the agents we have now, we’re at a break-even point and we can survive another two to three years without anything else.”

WCR will open locations later this year in Dallas (June), Chicago (September) and Kansas City (November). Another in Memphis is scheduled in January.

Ed Clifford, executive director of The Jones Center in Springdale, said the partnership with Regus presents WCR with an interesting opportunity.

“There is an economy of scale there for an organization that can put together offices out of Regus offices,” said Clifford, former head of the Bentonville/Bella Vista Chamber of Commerce who worked with Harrison during the early development of the nine-story Bentonville Plaza, built in 2004. “It’s very different than any other real estate brokerage I’ve ever seen.”

 

Taking Notice

Clifford wouldn’t predict success or failure for WCR in the long term, but said the business plan is well thought out.

“I don’t think it’s something that anybody ought to pooh-pooh,” he said. “I realize we have agents doing $20 million [in sales] a year in Northwest Arkansas, but any time there’s a new model on the street, people ought to take note of it.”

Nick Limbird, a Realtor with RE/MAX Real Estate Results in Bentonville, is one who has. Limbird, a member of The Limbird Team that had a total volume of $29.69 million in 2012, said the idea of 100 percent commission will make most any agent take notice.

“Operating your business as a Realtor has its fair share of expenses the general public typically has no idea about,” he said. “So the idea of making 100 percent [commission] is intriguing.”

Limbird added that his main concern would be the level of support available from a 100 percent firm, noting that larger firms spend “millions upon millions” of dollars in advertising and branding for their companies.

Ultimately, he said, it would require a proven track record with long-term stability before he felt comfortable with the concept.

“New firms or spin-offs pop up periodically, but most don’t stand the test of time,” he said. “I feel better standing behind a proven commodity that has survived the highs and lows in this crazy business.”

Mike Robinson, principal broker at the Bentonville branch of Crye-Leike Realtors, said the success of the structure would also depend on the services and tools offered by the broker.

“I work for a company with a good commission split and fantastic online and marketing tools for agents,” he said. “Those are worth something to me, and if I had to pay for that on the open market, they would cost me much more money than my company charges.”

Pangle said First National Title is supportive of WCR’s entry into the market, and said the best approach for the new firm to counter the doubters is simple — time.

“The hardest thing for Realtors to do is change,” he said. “They just don’t like it. I understand what [WCR] is trying to do. Just know that it’s going to take a year or two to prove to all the people out there what they’re trying to do is in earnest.”