Monday, April 2, 2007

Business model analysis

Perhaps I was unfortunately in a renegade's office then. To my understanding there is still a $150 transaction fee per event. So when I sold a $300K house. At average commissions of 3% (I assume there are better markets that does 4% or higher as the norm). I take 70% at $6300. Paying $150 transaction fee. I am taking home $6250. That would result in a 68.3%. It would make more sense to then sell higher priced homes. Selling a $200K apartment, I would take home after 70% split and -$150, $4050. That is 67.5%.

Still not bad assuming there are no other costs. Unfortunately, the broker's office does not cover agent's own advertising costs. And that is a heavy toll.

Further, as a business model, every transaction, Exit Realty Corp from Canada pays 10% to the recruiter. Where does Exit Realty Corp generate this money to pay the 10% when it does not make anything from a sale except the $150? If every Exit agent in an office is productive and meets industry standard of $40K-$50K income. Exit Realty Corporation in Canada would have to pay $4K-$5K per agent to their respective recruiter.

Right now where does Exit Corporation's only source of revenue? It is from annual membership fees, training courses, training dvd's, stationery that you have to buy through exit resource center. Are there any other means Exit generates revenue? I hope there are but I am not aware of them.

The more agent who are successful, the more 10% Exit Realty Corp has to pay out there does not come from a real estate transaction. Therefore, Exit cannot sustain all successful agents. To my understanding, it is imperative that many agents fail. That way their $300 annual membership fees plus other fees paid to Exit would be able to be able to balance out the 10% given to recruiters.

It is a business model that can only survive if there are much larger number of failures than successful agents. That's just how the math works out to my understanding. And that is why I think Exit Realty is a deceptive business model much like Amway, World Financial Group and other schemes that depends on large new recruits failure rates. Especially because they over emphasize the unrealistic income earning potentials. And during the entire recruitment process there is no clear explanation on each revenue streams.

I understand that each franchise owners are unique and can practice good ethics. However, the underlying revenue generating method is not clearly disclosed. The risks are downplayed while the rewards are overemphasized.

Am I complete in my analysis of where Exit Realty Corp generates its revenue? Are there other sources where they make money besides membership fees, training seminars, dvd's, and things targeted at the new recruit?

Thank you all for your feedback and once again I apologize if I come across as overly negative but this is my current understanding of their business model. good luck to all.

04/03/2007 by RomoGracie



http://activerain.com/blogsview/67028/WHY-EXIT


Unfortunately, Exit Realty seems to fit the marketing methodology of many MLM's, eg Amway, to the cue.

There are a lot of company rallies, a lot of training DVD's, there is even a positive affirmation CD. And you are told to avoid negative people and think positive. These are all red flags that MLM's and Amway type schemes uses.

Of course Exit Realty might be the exception. I hope it is, but in the recruitment video, Steve Morris emphasized that what Exit Realty doing is not illegal. I am not aware of any legitimate business's recruitment videos emphasize that they are not illegal.

Still those are speculative issues. Is there any peer reviewed source for that $49million paid out as residuals. If that was the case, since it's 10% of transactions commissions, that would mean that there was $490 million in commissions generated. At 3% average commissions rate for real estate commissions, that would mean a $16 billion worth of homes sold by Exit Agents. With the average price of homes around $200,000 - $300,000, that would mean 50,000 to 80,000 homes sold by Exit agents in 2000. Now Exit claims to have sold 500-1000 franchises, http://www.exitatlascruces.com/index.php?page_id=213 , this year. So let's say there were 500 franchises 7 years ago in 2000. That would mean each franchise sold 100-160 homes in just 2000.

I, personally, am not aware of any single franchise that has 100 real listings. Total listings that they have to show people, let alone actually sell (I have seen exit franchises that puts a lot of fake listings and/or steal other company's listings). 100-160 homes sold per franchise in 2000. that's 1 home sold every 2-3 days.

I am not sure then if I should trust that $49million paid out bonuses figure.

And where did Exit Realty Corp get $49million to pay out when they make only $150 per transaction fees? Where did they get $49million as they claim to be able to pay out to recruits? What kind of business is able to generate at least $49million when they lose 10% on every transaction?

The only solution I can think of is that most agents pay the annual membership fees, training videos, dvd's , rallies , and never sell a single home. So sustainability of Exit Realty strongly depends on high failure rate of new recruits. And a large large number of new recruits at that. And that is why the huge income potential(tho unrealistic) is emphasized, while the risk of losing $300-$1000 the first year and never surviving in the business is completely downplayed if not out right ignored.

I don't know, I hope I am wrong in my analysis but this is what I can deduce from what Exit Realty itself is saying.

I apologize if i come across as overly negative but this is the conclusion I come away with from the evidences that Exit Realty has presented. Good luck all.

04/03/2007 by RomoGracie

Saturday, March 31, 2007

Exit Realty is a Scam


I still can't believe how many people are getting scammed by these people from Canada. Steve Morris. If you have watched the pitch video and still joined them, I don't know what to say. Maybe there is a bridge in brooklyn i can sell you.

The formula is simple, you pay them $300 every year no matter what you do. that $300 is gone. Then you are encouraged to buy business cards, stationery, training DVD's, training camps, rallies, that's all going to end up to $1000 or more just your first year of doing real estate with these people. Have you made any money? probably not. It's a cult. Like Amyway or World financial group.

Listen, it's simple, any job where you are hired but you have to pay them first, is a scam. No legitimate business requires you to pay them anything. Even working at mcdonalds you don't have to pay upfront.

And the problem is , can you sue them? Good luck, they are in canada.
Why is your company the best?
Posted by: forumadmin (IP Logged)
Date: February 16, 2006 10:15PM

"Norm, why is that Keller Williams is the fastest growing real estate company in North America. And is 10 times the size of Remax in the same business year?"

Those are numbers I'VE never heard...

Here is what I got from their corporate sites:

RE/MAX:
Open Offices : 5,400+
Active Agents : 130,000 +-

Coldwell Banker:
Open Offices : 3,700
Active Agents : 120,000

Century21:
Open Offices : 6,600
Active Agents : 110,000

Keller Williams:
Open Offices : 547
Active Agents : 58,810

ERA: - (Oddly low ratio of agents/office)
Open Offices : 2,800
Active Agents : 36,000

Exit Realty:
Franchises Sold: 800 ** They didn't mention number of open offices
Active Agents : 21,400


Speed of growth means little. I've seen new franchises pop-up and then drop. In order for this to be a true comparison, we'd need to see how many of these were new offices, how many ditched one frachise for a new one, how long they've kept them and how big their market share is.

And the comments about top agents joining ______ from RE/MAX means little. Especially since they are one of the largest companies out there. The agents I know that make more than a million a year in commissions are with RE/MAX. And haven't left and have no plans to...

And my comments about Exit stand. Not only is it the silliest franchise name I've ever heard (and you should hear what some consumers have said - LOL - they aren't nearly as nice) but because all agents are only being pitched the "residuals" concept they are getting most agents who are recruiting and not making sales.

Their whole pitch is "think residuals". How is this NOT like a pyramid or MLM?? In order to make money, SOMEONE has to make a sale. And this means if you want residuals you need to find other agent who are capable of making sales for you.

Though it is a trend I am seeing more often. RealtyWorld now has one (though I hardly see any RealtyWorld offices around).
Category:
Multi Level Marketing
Submitted: 11/20/2004 3:29:10 PM
Modified: 11/20/2004 3:29:00 PM

Exit Realty ripoff There is a new real estate company now that has a MLM flavor to it. Hinesville Georgia

Company
Exit Realty
Address:
Oglethorpe Highway
Hinesville Georgia 31313
U.S.A.
Phone Number:
912-408-8100
Fax:


There is a new real estate company now that has a MLM flavor to it. Let me tell you - it tastes like bitter herb. I am a licensed agent and I tried to place my license with this firm and they did a bait n switch with me.

I have already notified the state of georgia consumer affairs AND I will be notifying the real estate commission, BUT I do want to warn consumers to beware and be aware. Don't use them - they prey on investors - be careful.

Oh and they won't give me a copy of my credit card receipt OR tell me where they sent the information.!!!


EXIT Realty Corp. International adopted the same method of recruiting done in the Insurance industry. The key to profits is sign up fees from new recruits. While traversing on the borderline of legality, CEO Steve Morris denies that Exit is a pyramid scheme. Morris states that because only one level of residuals are paid out, no laws have been broken in the US.

Exit Realty generates the bulk of its profits from new recruits' sign up fees. These fees can range from $200 to $400. http://www.joinrealexit.com/FeesyouShouldExpect. Once a recruit is signed on, he may run into additional fees in things ranging from stationary to seminar costs.

According to various trade journals such as Realty Times, the first year failure rate is over 86%, and for those brokers or agents who have survived, over 70% have an income less than $30,000 (see Real estate broker). With these figures, the annual membership fee of $295 plus training course fees of $320 or more becomes the main source of revenue for Exit Realty Corp.

Exit proclaims that an agent can make more than 100% but that is done with erroneous basic elementary school mathematics. The formula proclaims that by making 10% off each of your recruits, you will earn more than 100% because each recruit generates 10% of their income for you. 10% from 11 recruits, according to the formula, would translate to a profit of 110% for the recruiter. If one follows the same argument, going to a store to purchase 10 boxes of cereal and paying 7% tax on each box, would incur a total of 70% tax. This, of course, defies any branch of mathematics.

EXIT was founded by CEO Steve Morris in 1996. It has grown in only 10 years to over 1,100 offices and more than 32,000 real estate professionals in North America. That makes it the fastest growing real estate franchise ever.

The growth of EXIT REALTY and EXIT REALTY PROPERTIES is substantially credited to the effectiveness and quality of its training programs. The mandate of the EXIT Realty system is to give their agents every opportunity to get the most and best out of themselves and others. Excellent teaching, training and coaching is a prerequisite for ALL of their agents and this means that they can better serve their clients.

EXIT Realty has a one of a kind sponsoring program that allows real estate agents to produce new sources of residual income. EXIT is adding 200+ agents/week in North America. It has paid out over $100 million in sponsoring bonuses since 2000. It won the Champions of Industry Award, a Pat Summerall production, http://www.bizjournals.com/dallas/stories/2004/11/15/daily58.html, for 2004 as seen on CNN Headline News.

This information is a summary of information from EXIT Realty marketing sources. See www.exitrealty.com for more information.

Fee Schedules

1. EXIT Annual Dues. $295.00

2. Regular training program fees. First program is FAStTRAC at a cost of $320.00.

3. Errors and Omission: E&O $18.00. Each transaction incurs a $18 Error and Omission fee.

4. Realtor Fees. These fees are incurred by all agents and are paid directly to your local Board of REALTORS. Please inquire with the Broker in Charge.

5. Transaction fee of $150.00 for all transactions.

6. No desk fees just like all other realty companies.

7. You are responsible for all your business needs such as stationary, cellular phone, and related business requirements.

External Links

See also

Chad mcbain Chad mcbain is offline
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Default Re: Exit Realty

Yeah, did a couple of those rallies wich are similar to an Amway gathering, but looking back now it did have a little cult like feeling. At a RE/MAX gathering half the people are there to here a speaker or trainer the rest wanted a day off and to check out a trade show, at Exit Steve is the speaker, trainer, and trade show. I will never forget the look on one of the V.P.'s faces as she watched him speak, you would think she was at a David Copperfield show with the awe struck look she had wich would be fine except she had heard the damn canned speech a thousand times already.....hell I have heard it several times and I only went to 2 or 3 events. Just seemed weired.
Chad mcbain Chad mcbain is offline
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Default Re: Exit Realty

Well lets see, I grossed $44,000 my first year, Exit took 33% wich is about $13,500 plus we paid for all advertising in the paper about $3000, and the guy who was their marketing spokesperson screwed me for another $1500 plus tax so lets see........my no fee safety net first year in real estate cost me about $18,000. Not bad for a rookie agent, Christ I pay that at RE/MAX for a private window office, the best branding in the business( argueably) my face and listings in the paper every week paid by the broker, full time admin from 9am to 9pm 7 days a week.....AND MOST YEARS I GROSS SIX FIGURES. So when a newbie says they are worried about paying fees I just smile and say yes so was I....so was I.