Well, here's a news story that didn't surprise me! 
Foxtons, the discount brokerage servicing New Jersey, New York and Connecticut, is just about shutting its doors. It is sending home 350 out of 380 employees, and is contemplating filing for bankruptcy. I say "employees" because as a personal opinion (and I can have these here because it's "my" blog!) I don't consider these discount agents as true "Realtors" who represent their client's best needs. Foxtons business model include such services as sellers showing their own homes and buyers attending inspections by themselves, among other nightmares that we all try hard to avoid. Well folks, this is what you get when you take a "gamble" for that 2%-3% listing fee! These "employees" did not work on commission, but rather on salary - so have had no real commitment to getting these listings sold.
While in the process of this major business overhaul and reduction in staff, they still have over 4,000 active listings to sell! What will become of these sellers who are hoping to get their homes sold? Of the 30 employees left, how many of them are sales agents who can take care of these sellers' needs? I guess this is a true example of getting what you pay for and taking such a gamble.
I had an opportunity to speak with a true-blue Foxtons "sales person" when my parents were considering selling an investment property in New York City last year. She kept bragging to me about how she has over 130 listings throughout New York -- and I kept asking her how can she possibly look after each of these listings' best interests? She never had an answer for me and just couldn't grasp what I was asking her! No, I didn't recommend this person to my parents, but they somehow found her on their own and were intrigued by the cheap listing fee -- I told them to run! Luckily they listened to me and didn't take the "gamble" by listing their property with her.
I guess this gal with the "over 130" listings will be looking for a job now, which is unfortunate for her. I heard that these employees were let go via email with no notice. I also wonder if most of these sales agents will look for more traditional brokers to take them in, and if so, do they really have the negotiating skills to do well as a traditional, professional Realtor? I'd love to hear from any Foxtons sales agents if there are any on AR, just to see their viewpoint on all of this.
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For Sellers and Buyers of homes in the Lancaster County Real Estate market -- speak with a professional, full-service Realtor who will do what it takes to negotiate on your behalf and who will always keep your best interests in mind.
Homes for Sale in Lancaster PA -- Lancaster County Real Estate
Although this company has failed there will be changes in this industry. Look at services such as financial brokerages and travel that have both been effected by the Internet empowered consumer. It will be a matter of time until one or two particular model hits and many will use that model.
Sorry to be the bearer of bad news ... but history tells us otherwise
Jeannie,
I can't imagine trying to service 130 sellers at the same time. I'm a firm believer in "you get what you pay for" and this is just another example proving that to be true. Can you imagine how a company that fires it's employees via email treats it's customers? I think it'd be interesting to hear from a client of the company to see how their transaction went. Thanks for sharing.
Allen - thank you for your input. Although I embrace all business models and ingenuity where business is concerned, I don't think any business can succeed when a certain level of experience, professionalism and service is expected and not delivered. Yes, the internet has empowered the consumer, but it's also empowered us as Realtors -- at least those who have learned how to use it to their benefit and embrace it, and learn how to offer it as a service. But to cut the fees, and then cut the services as well -- something is going to give. Even Priceline - the "name your price" innovator of internet travel agencies years ago had to adjust their business model and changed the way the offer their services. A business has to learn how to grow and adjust with the market and the economy, and keep the level of services expected of it, or it will go bust.
I admit, I use internet travel agencies and appreciate the discounts I can find -- but I haven't stopped using brick and mortar travel agencies entirely because there are times I expect a certain level of assistance and services, that I feel only they can deliver. I know I'm paying for it in the long run, but it's worth it at times and I know to appreciate the value I am purchasing.
Andrew - I believe the way the company worked was that the listing agents did only that -- sign the listing agreements. The seller was then transferred to another department who did the marketing, then another who did contracts, etc., all the way down the line to settlement. So, the client never would have a chance to build a relationship with one person who serviced their needs. I think that is very important in our business, to build a relationship with our clients and personally know what their needs and expectations are. We are a service industry, and I don't think you can service the clients needs when you don't have the opportunity to build a relationship. So, this woman who I spoke with who had 130 listings really only had 130 "listing contracts signed" - she wasn't representing them and probably didn't even know the addresses or names of the sellers once they inked their signature.
I think it would be interesting to hear from a client as well -- past and present.
To the ex-employee -- Thank you so much for taking the time to comment. We're located in the U.S. as well, by the way.
I'm curious to know how many other employees have been laid off earlier in the year, such as you were. Also, I'm curious to know what department you worked in, and have you found another job in the real estate industry? Do you think others have been able to find jobs in the real estate industry as well?
And did the sales agents really drive around in company-owned mini-coopers? Now that's a perk I would have liked!
Thank you again for taking the time to share.
Forrest -- You said it all when you stated "The reality is that any real estate business model must work under all market conditions." I tend to agree with that, not just with real estate but it could be said with any industry. If it doesn't work, they need to learn how to adjust to the market conditions. I guess they saw it coming once they increased their listing fee from 2% to 3% and even 4%, but it must have been too little, too late.
I wonder, as they increased the listing fees, did they also increase their level of services? I somehow doubt it. I think they did too little, too late, and now have left all these people in the dust -- employees and clients. What's to happen with buyers and sellers who are in the middle of a transaction? These are consumers life savings they're dealing with and could have such a large trickle effect with transactions going awry.
I would think that this could open the doors for some big conglomerate to come in and swoop up the referrals from them, get the transactions done, and save the day.
Jeff - The photo was pretty perfect for this, wasn't it? No photoshop, I lucked out and found it on a website that I use that offers free stock photos for use on blogs, websites, etc.
The agents that I have worked with all drove the Foxton's Mini Coopers with the Foxtons logo and 3% really big on the door.
The visual correlation of the small car and the small percentage was clever marketing.
I have found that there are price shoppers in every market and every business. They comprise a huge percentage of the population - we all do it to an extent (after all, you don't ever pull into the most expensive gas station, do you?)
The fact that Foxtons signed so many listings is evidence that price shopping is a powerful tool. Their demise is likely related less to client dissatisfaction than it is with flaws in the business model which was either unable to survive on the percentage they contracted for (did not properly determine the cost of doing business), or was not able to sell the homes to generate the necessary volume of sales to support the fee structure (unsold homes generate no income and cannot pay the bills).
Realtors (and home inspectors!!) are wise to market the value of what they offer, especailly in comparison to low-ballers or discount brokers. However, it would be unwise to assume that this model will not re-emerge with a better business plan and model. For my part, I have created an inspection level offered to price shoppers - it comes without the frills, but is better than what most offer (my PREMIUM inspections are loaded with benefits and extras) at an aggressive price.
Understandably, Realtors cannot alter their structure, but listing the benefits of your services and educating potnetial clients to the VALUE of your services (after all the goal is to SELL the house, not list it right?) can combat a discounting strategy.
Jeannie,
Thank you for the information. I have heard of them, however never knew anyone who dealt with them and I have friends and associates in all those states.
I know how I have dealt with our local discount entities.....and I know that the Client wants cheap....and it is up to us to sell service and value.
I would suspect that many of those folks who are among the 4000+ are probably having the same thoughts that many unsuccessful FSBO listers have: I guess hiring a good Realtor is worth it!
While I don't have a dog in this hunt (I inspect the homes no matter how they are listed) I would think that most consumers are not aware of this turn of events , and may not connect the dots for themselves. If I was a Realtor in the coverage area (and even if I was not within that area) I would think it might be a good idea to submit an OP/ED or article to evry local paper I could making many of the points that you do, and drawing a larger connection to FSBO, etc and the real value of a good Realtor.
Just a thought.....
For those who are not familiar with the Foxtons Mini Cooper:
The one on the left is the newer one, and the "3%" is somewhere on there prominently to reinforce the "small" rate. Good marketing idea, but appranatly not enough to support the company by itself!
This is from their site to their clients:
October 2, 2007
We regret to inform you that, due to the recent down turn in the residential real estate market, Foxtons has decided to conduct an orderly liquidation of its business. To accomplish this goal, Foxtons is filing a voluntary chapter 11 bankruptcy proceeding with the United States Bankruptcy Court for the District of New Jersey. You will be receiving information concerning the bankruptcy case over the next few days.
Your property continues to be advertised on Foxtons' website and/or your area's Multiple Listing Service, as it was prior to Foxtons' bankruptcy filing. Moreover, the Foxtons signage at your property, if any, can continue to be displayed pending further notice.
As part or the liquidation of its assets, Foxtons is asking the bankruptcy court to authorize the assumption and assignment of your listing agreement with Foxtons to another broker. The identity of the proposed successor broker has not yet been determined. If the bankruptcy court grants this request, and if a successor broker makes a sufficient bid for Foxtons' listing agreements, then the listing agreement for the sale of your home would be assigned to another real estate broker. With the exception of the identity of the listing broker, all of the terms of your listing agreement with Foxtons would remain the same. We hope to have this assignment process completed within fifteen days. You will receive further information from the bankruptcy court concerning this proposal.
We regret any inconvenience to you caused by this situation and hope to transition your listing agreement to another broker as quickly and smoothly as possible.
Thank you.
Very truly yours,
Mark Horvat
Vice President of Sales
Joseph - thanks for that updated information!
As part or the liquidation of its assets, Foxtons is asking the bankruptcy court to authorize the assumption and assignment of your listing agreement with Foxtons to another broker. The identity of the proposed successor broker has not yet been determined. If the bankruptcy court grants this request, and if a successor broker makes a sufficient bid for Foxtons' listing agreements, then the listing agreement for the sale of your home would be assigned to another real estate broker. With the exception of the identity of the listing broker, all of the terms of your listing agreement with Foxtons would remain the same. We hope to have this assignment process completed within fifteen days. You will receive further information from the bankruptcy court concerning this proposal.
This was exactly what I figured would happen. It will be interesting to see who takes over those listings!
Forgot to add -- I LOVE mini coopers! I will own one of those cuties, one of these days, and it must be red (although I won't be picky!) They just aren't very practical in driving clients around, unfortunately.
Hmmm.... which brings me to a possible future marketing strategy of my own.... maybe instead of a mini cooper I can get one of those new Smart Cars! They are awesome, we rented one in Greece last year. Great for parking in small spots! I can have it wrapped with a car wrap: "Sell Smart -- Sell with Jeannie". I would just need to figure out how to fit a sign in the non-existant trunk!
Jeannie - apparantly there will be whole fleet of pre-owned minis coming on the market soon!!
Can't say I have seen a Smart Car, but I will do a google search.....
To stay viable in this ever changing market we must be able to prove our value to our clients. We must know our contracts forward and backward. We must be able to prove we are good negotiators. We must have the knowledge to stay on top of an Internet driven market. My 2 cents. :)
I was part one of the last mass layoffs... Although the VAST majority of the employees at Foxtons had the best intentions for their clients, it was physically impossible due to the work load. Most of the Outside agents(Listing Agents and SOME buyer Agents) worked 75-90 hours a week, at 6 and a 1/2 days a week... still struggling to stay afloat. It is no easy task to manage 70-140 listings at one time... especially when there were 6-7 people messing their hands in the pot(and ultimately leading to very poor client service). You had one person taking the photos, another processing the floor plan in ZIMBABWAY, another employee using YOUR agents PRIVATE user name and password to enter the listing into the MLS service, ANOTHER agent responsible for the AD being entered into the proper newspaper, and yup... YET ANOTHER agent responsible for installing your lawn sign and directionals. The list goes on and on.... including other agents that were responsible for negotiating your transaction(without your listing agent being involved, and usually only made aware via a simple email. I could go on for pages and pages... but the reality is FOXTONS went bankrupt BECAUSE they lost focus on the proper treatment of their sellers and buyers AND just as equal their dedicated staff of employees. Employees that were there 2 + years worked hard, believed in the company, and did their best within the limits set forth by their company. Also the focus of recruitment of new employees shifted from business, proffessional sales consultants and similar, to fresh out of high school and physically attractive agents that would bring in the listings, but in the end unable to serve the client properly. The turnover rate for the last 18 months was out of control... especially on the buyer agent side. In the end most employees were overworked and underpaid, while most sellers and buyers were overpromised with no intentions of the company ever following through. I won't even touch on the ethics, as most of the FOXTONS agents AND brokers were forced to make VERY VERY UNETHICAL decisions or risk losing their job, if they werent considered a team player, etc.
I wish the best to all sellers and former and most current employees... I have a tremendous amount of respect for most of the managment and former employees as they had heart and soul... and the best intentions in mind for the client. It was a few rotten and GREEDY corporate worms that spoiled a great idea and a promise.
ALL CURRENT SELLERS should voice their opinion about listings being sold to other brokers... as you should be given an unconditional release, and not be forced to sell with a broker not of your choosing. Call the following Attorneys office and also voice your opinion to the bankrupcy judge.
Foxtons attorney Michael E. Holt at Forman, Holt, Eliades & Ravin in Rochelle Park at (201) 845-1000.
Bids are due Oct. 22. An auction would be held at Holt's office on Oct. 25. And a hearing in U.S. Bankruptcy Court to confirm the results would be Oct. 26.
Another Former -- Thank you so much for taking the time to voice your experience. I appreciate it so much! I can certainly understand how overwhelming taking care of those many clients must have been for you.
And, I agree that the current sellers should be able to decide for themselves to take an unconditional release for their listing contracts. Thank you for providing that contact information.
Are you still selling real estate? I wish the best for you.
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I would love to hear from any current sellers about their experience regarding this mass layoff and bankruptcy filing.
Jennifer - thank you for taking the time to comment about your personal situation. I am not an attorney, nor am I a licensed Realtor in your state (as I doubt you are in PA), but my recommendation to you would be to speak with an experienced real estate attorney as soon as possible! Make sure you have all records of trying to reach someone -- dates/times of phone calls, emails, etc. I would try to have the attorney hold the deal together so that you can move forward, but also try to claim a "breach of contract" or "abandonment" by your listing broker. Look at your agreement closely, and it should (hopefully) state that they would look out for your fiduciary interests. Not returning phone calls, especially with regards to an offer which is what you have agreed to pay them to do, is something that I would consider "abandonment". Since it is a bankruptcy, though, I am not sure where that would leave you. Definitely -- speak with an attorney!
Good luck, and please feel free to come back and keep us posted.
Wow, some news I read on the Asbury Press about their local bankruptcy filing claims that they have $40.9 million dollars in debt. There is some debate as to whether they would legally be allowed to sell their listing agreements.
According to the article linked above:
Foxtons wants to sell the listings, along with customer databases and any equipment, furniture and vehicles that are not leased. It believes those assets can generate $2.6 million to pay off creditors, according to court documents.
Real estate experts, however, said a listing for a broker automatically becomes terminated under New Jersey real estate law when the broker files for bankruptcy.
"Once they file for bankruptcy, (the listing contract) is done," said Michael Silkowitz, a real estate instructor at the Academy for Real Estate Careers in Lacey.
But Jim Gardner, a spokesman for the New Jersey Real Estate Commission, said a bankruptcy judge would need to rule on Foxtons' request. Michael Holt, Foxtons' bankruptcy attorney, said there are questions about whether a clause that voids a contract in a bankruptcy case is enforceable.
What I also found interesting in the article is who some of the early investors of the company are:
To raise capital, the company issued private stock offerings from 2000 to 2004. Early investors included executives and a subsidiary of Hovnanian Enterprises Inc., a Red Bank-based home builder; Toll Brothers Inc., a Horsham, Pa.-based home builder; and Kimball Hill Inc., a Houston-based home builder, according to court documents.
And, they owe $3.1 million for the leased automobiles. How many of these cars were actually out there? Crazy stuff.
I sold two properties through Foxtons in 2002. The service was outstanding. Conducting an open house without a "skilled negotiator" to hold my hand wasn't much of a problem ;-> Of course, it was a seller's market back in '02 (I received 21 offers on the homes in one week). I'm selling another house in PA this summer and haven't decide what I'm going to do this time, but it sure won't be Foxton's!
RobW - I didn't even realize that they were around in '02 in the US. What state was that in? I'm glad you received excellent service from them, and am wondering if your experience with them was before they became too big for their own good. It's a shame when a business starts to spiral out of control and the owners can't seem to stop it. Thanks for stopping by and sharing your experience.