Market Analysis Summary
This revolutionary plan is setting the stage for the future of real estate. No existing franchised or corporate owned traditional real estate company will be able to compete with the fees and subsequent profits established by our industry plan.
Even if the structure of real estate sales in the future is automated to the point of not needing real estate agents, our company will have a firm hold on the FSBO (For Sale By Owner) market. We are committed to change and embrace the idea that is inevitable. Our ability to foresee needs for change will prepare us for a profitable future in the industry.
3.1 Market Segmentation
Established Realtors: The majority of our market will consist of the Established Realtor and is viewed as the future of real estate. These agents have embraced technology and are constantly looking for new ways to increase their profit margin. Our service is ideal for them in that the majority of this part of the market has already sought out a 100% commission program and has established a home office as well as a Web presence. This technology-savvy group will be the fundamental part of the industry in the future and will see our company as simply “the wave of the future,” in real estate.
New Real Estate Agents: We project our New Agent segment to be a much smaller share than our Established Realtors segment. We assume that agents new to the real estate industry will need more hands-on training found in traditional real estate offices. Though, as technology progresses and our website matures, even inexperienced agents will find Amerihall beneficial.
Old Timers: Our research shows that the Old Timers will resist change and not be as willing to accept new technology as the Established Realtors. This part of the market is predicted to be our slowest growth area.
|Year 1||Year 2||Year 3||Year 4||Year 5|
|Old Time Realtors||3%||300||309||318||328||338||3.03%|
3.2 Target Market Segment Strategy
Originally our target will be the more experienced, computer-literate agent in the state of Illinois. We will expand the target as our system becomes more refined. The expansion to a national level should take no less than two years. Our research shows that in the beginning, our clients will be within the age of 30 to 45, with annual sales between $1.5 and $5 million. The clientele should be centered on the northwest suburbs, expanding to the western suburbs, followed by greater metropolitan Chicago, and finally fanning out to rural Illinois. At this point we will re-evaluate the growth market to determine the best plan of action.
3.2.1 Market Needs
We believe that, with our direction centered on e-commerce, our business can focus on expanding Web services with a boundless growth potential. Our market may be directed to providing specialized real estate software to all real estate agents, including our competitors.
Phase 2 of our plan will focus on clients looking to sell real estate on their own. The term used for this type of client is FSBO (For Sale By Owner, pronounced fisbo). This part of the market is growing at an alarming rate. Research from many independent sources show this growth factor will result in a decline of top-producing real estate agents by as much as 50%.
We believe our service, through Web technology, and the largest market share of realtors will provide us with the needed tools to overcome the changing real estate sales trends. Our goal is to provide full-service real estate sales at a fraction of the cost associated with traditional real estate office.
Currently, the traditional real estate office provides the listing and sale of a client’s property at approximately 6% commission of the total sale. This figure is an industry norm that is usually set by the managing broker. This figure can go as low as 5% in metropolitan areas and as high as 10% for commercial or other unique properties. To put this in perspective, a home selling for $200,000 will cost an average of $12,000 in commissions alone, not to mention legal fees and other closing costs which can bring the figure to as high as $15,000 before capital gains tax. It is plain to see why clients are scrambling to find ways to sell their own properties. The current figures for licensed real estate agents in Illinois alone are 49,000 with a 98.2% share of all sales in real estate. The untold truth is that, of the sales of real estate, 82% of the listings are sold by another real estate agent outside the listing office. The buyer’s agent receives 2.5 to 3.0% of the total commission charged to the seller. This is the saving grace of the industry and the key to our future roles as a real estate sales company. Our proposal for Phase 2 is simply to establish a revenue base from the ever-growing FSBO market.
Our plan is to initiate a Web-based tool which allows the public to input a listing directly into the Multiple Listing Service (MLS). The client will be able to list a home and show the properties themselves. The advantage is that this will be accomplished by only paying 2.5% – 3.5%, compared to the industry standard of 6%. Through automation, the public will have the option of saving thousands of dollars and receive the same marketing strength of a client listing a property the conventional way. The client will still receive offers from other realtors who, upon closing, will still receive 2.5%-3.5% commission for bringing in the buyer.
If the client is in need of a full-service realtor at any time through the transaction, there is always the option of searching out a local Amerihall Realest® agent with whom they can negotiate a deal, depending on the services needed.
Our agents benefit by being guaranteed added income when services are rendered. In this regard, we hope that agents will accept our proposed strategy to pull in a new market and not consider it a threat to their livelihood.
Clients benefit by saving thousands of dollars when taking on the responsibility of showing their homes themselves, a task that is legal and preformed more and more by consumers on a regular basis in the industry.
Our share of the profit is 1% commission on the sale, and no overhead on our part. This will establish a future market in this ever-changing environment. This phase of the plan will not be initiated until the Web volume is appropriate.
3.2.2 Market Growth
Our initial plan will provide for 27,000 Amerihall brochures to be mailed to all of the active realtors within the Multiple Listing Services of Northern Illinois (MLSNI). The response should be expected to be no less then 1,800. The responding agents will receive a start-up package, which details our services and provides transfer forms and related independent contractors agreement, or the agent can join Amerihall at our website, www.Amerihall.com. This process is expected to bring in 1,000 new agents The bulk of our agents should then trickle in as their contracts expire with their existing offices. We project 1,500 agents within the first year.
3.3 Service Business Analysis
The following topics will list a number of attributes associated with our business structure. Our plan is simple: that we will have no competition due to the fact that no company will be able to compete under the existing structure of their corporations. The established national real estate companies (i.e. Re/Max, Century 21 and Coldwell Banker) cannot compete while under a franchise structure. Independently owned offices have too much overhead to be able to compete with our corporate structure.
3.3.1 Competitive Edge
We project that all agents working for Amerihall will increase their profit margin by 70%. We suggest that, by volume of agents alone, our advertising and sales will stand out well above the other real estate companies. Our agents will be able to offer their services for 25% of the normal rates and still realize a significant profit.
Our agents will have the ability of changing the industry standard by under bidding the competition to the point that traditional real estate companies will be unable to compete due to high operating cost.
3.3.2 Main Competitors
The two largest companies are Re/Max and Century 21. We expect much resistance from these two leaders in the industry. Our first obstacle may lie in a direct legal assault on our company in an effort to drain our assets, and give them strength through diffusion; the second effort will probably be centered on credibility. The focus will be on how a rogue real estate agent could possibly provide services as efficiently as traditional office agents. These situations can both be defended by a professional image and certainly by the technology our agents can bring to their disposal.
3.3.3 Competition and Buying Patterns
The uniqueness of our company, and our knowledge of the realtors’ needs, gives us an exceptional lead over any competitor. Our concern is over copycat companies and the ease of repeating our idea before we grab a firm national position. We are investing a great amount of energy using copyrights and patent laws to assure a firm position.