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Man who changed U.S. real estate visits franchisees in central New York

CNY Business Journal (1994-95), May 15, 1995 by Grossman, Naomi

SYRACUSE--It sees inevitable that David Liniger, a man who started buying houses as a high-school student and received his real-estate license at the age of 21, would eventually change the face of the real-estate industry in North America.

By providing real-estate agents with all, or nearly all, of a sale's commission, Liniger's real-estate franchise company, RE/MAX International, Inc., forced the entire industry to restructure the way it does business. Today Liniger's Colorado-based company has grown to include more than 2,400 offices employing 40,000 agents.

Liniger visited Syracuse earlier this year as part of a 60-city North American tour. His goal for the trip was to touch base with local franchises and promote the use of his company's latest technological offerings.

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In 1973 when Liniger, along with his wife, Gail, founded RE/MAX--an acronym for real-estate maximums--the commission of real-estate agents was typically about 50 percent of a sale. "The harder you worked, the more commissions you had to give away," says Liniger. "Also you had no freedom to advertise or negotiate with sellers." The few real-estate companies that provided their agents with 100-percent commissions offered no support services or significant name recognition. Liniger worked in both environments and found them lacking.

By having agents share monthly office overhead and management fees, RE/MAX allows its agents to keep 100 percent of commission earned. The idea slowly caught on. "I would sit down with each agent and a yellow pad, and show him how much he would benefit by being a RE/MAX agent," says Liniger.

Within five years, RE/MAX had 1,000 agents but it had also stirred a great deal of controversy.

"Local brokers were afraid we were going to steal their best agents," says Liniger, "and we received telephone death threats."

But nothing could stem the tide of changes Liniger had set in motion. To compete with RE/MAX, other real-estate companies were forced to offer their agents larger commissions. Today, most real-estate agents take home a larger part of their commissions, in exchange for which they are responsible for more overhead costs.

Yet, by effecting this change in the real-estate industry, it would seem that RE/MAX has lost its edge with its customers, the agents. Liniger insists that this is not the case. "When we started, all we had was the compensation method," he says. "The system has changed drastically since then, but now we have an expanded market share, more services, and a brand name."

RE/MAX is number one in 26 major U.S. markets and in nearly every major market in Canada. It is in the top five in nearly 75 percent of the major markets in North America. It has offices in the Caribbean, Mexico, and southern Africa and is planning an expansion into Europe. Still, part of the focus of Liniger's recent 60-city tour in the U.S. and Canada was on the latest technological services the company is now offering its agents-services that could allow RE/MAX to gain a new competitive edge. "We've embraced technology to make our agents more productive," says Liniger. "We've taken a leadership role in developing tools that can be used in this industry."

The company has its own e-mail system on which home sale listings are accessible to customers and realtors. Liniger believes that the Internet is a perfect place for these listings. "Customers can access listings that are up-to-date within the last hour," he says. "Electronic media won't put newspaper ads or the home guides out of business yet, but it is another direction to access a younger, better-educated segment of the market. It can become an alternative method of pre-shopping for them."

RE/MAX recently launched its own satellite television network, RSN, which broadcasts six hours a day, five days a week. The network is used to broadcast motivational materials, to train sales associates and their assistants, and to demonstrate how to use the company's latest technology. Currently 1,000 out of 2,500 RE/MAX offices have their own satellite dishes to receive the signal.

New software has also been developed for RE/MAX agents that can do everything from publishing brochures to helping a customer find a mortgage.

While many people in the real-estate industry say that technology is useless for an agent who needs customers, Liniger insists that for a RE/MAX agent technology is invaluable. "It is true that marginal producers don't need technology, but because of the payment structure at RE/MAX, we do not have many lower producers," says Liniger. "Even the computer and the fax are invaluable to the top producers who need to manage their customers."

And, apparently, in today's real-estate market agents need all the help they can get. Ten years ago, 4.5 million properties were bought and sold every year. That number is now down to 3.5 million. "The real-estate industry is no longer a growth industry. Baby boomers have aged, and their active years of buying have passed," says Liniger. "The generation X is still eight to 10 years away from buying homes so the market of residential properties has shrunk." Liniger also points out that family formations are down by a third over the last decade, from 1.8 million new families a year to 1.2 million.

Man who changed U.S. real estate visits franchisees in central New York

CNY Business Journal (1994-95), May 15, 1995 by Grossman, Naomi

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