Discount Real Estate companies going OUT OF BUSINESS

One of my friends sent this article to me about how discount real estate companies are going out of business. It is interesting. You see it made sense that if you lowered your commission you can make it up in volume. But this business requires the best to be successful and with out large reward, agents won't go through the "hell" we go through to get the job done. This is one of the reasons there is such a huge turn over with Realtors. 86% of new Realtors do not renew their license. Most are just part time. In this market some houses are selling with an average Realtor, but the good agents are still the most successful. Why should an experienced agent charge less, when brand new agents are getting paid 6% or higher?

Foxtons done in by housing slump
Posted by the Asbury Park Press on 09/27/07
BY MICHAEL L. DIAMONDBUSINESS WRITER Post Comment

Foxtons, a West Long Branch-based real estate company that made a splash with its discounted commissions, said Wednesday night it is closing because of a downturn in the housing market.
The company said it is contemplating bankruptcy for an orderly shutdown, and it will continue only with a skeleton crew; it is laying off 350 of its 380 employees.
"The plain fact is that we have been battling against a real estate market that recently has turned into a sharp decline, and the company no longer has the liquidity to operate as a going concern," said John D. Blomquist, Foxtons' senior vice president and general counsel...

The business model, however, was unproven. Real estate agents were unmotivated to show their buyers Foxtons homes, knowing the commission wouldn't be as much. And observers said what Foxtons lost in commissions, it would have to make up in volume.

full article can be reached with this link:
http://www.app.com/apps/pbcs.dll/article?AID=/20070927/NEWS/709270425/1070/NEWS02