By Ken DeLeon | Founder
When Amazon’s purchase of Whole Foods Market recently made headlines, I was reminded of my desire for a combination of the quality of Whole Foods with the pricing of Trader Joe’s. That wish may be granted due to the aforementioned acquisition. However, this desire for the best products at affordable pricing is not limited to groceries. DeLeon Realty has instituted an analogous value proposition to create the best of both worlds for our clients.
I have always loved the quality of Whole Foods products, particularly their produce. But, even though I invest in the health of my family directly through buying quality produce, I have shopped at Whole Foods more infrequently than desired due to its reputation for high prices through its negative “Whole Paycheck” association. In contrast, I almost never check a price while shopping at TJ’s because I implicitly trust that it will always be fair. I always wished that the two could meet.
This dream is now on the verge of reality with Amazon buying Whole Foods and consequently bringing their innovative business model and cost-cutting mindset to Whole Foods. According to BusinessInsider.com, the CEO of Whole Foods has announced that his company will now “become as customer-centric as Amazon” as “they put the customer first in everything they do.” This acquisition will be a huge boon to foodies everywhere who want Whole Foods selection and quality, but with a focus on the consumer and fair pricing.
Similarly, I believe that the real estate industry also needs to reevaluate its model and focus, first and foremost, on the client. For too long the traditional model has not changed, prioritizing agents’ compensation over clients’ satisfaction. With our Silicon Valley origins and innovative mindset, DeLeon Realty’s latest revolution completely redefines this antiquated real estate system, building a client-centric model that provides the most optimal results while often having the most reasonably priced services.
DeLeon Realty has always focused on providing clients with the greatest results and, up until now, that has been heavily prioritized over costs. For example, we undoubtedly provide the most services and marketing to our clients. Therefore, we have been able to obtain the highest sales prices for our clients while selling their homes for the most money possible above list price in the fewest number of days relative to other top Silicon Valley brokerages.
However, the cost to obtain our exceptional marketing has been slightly higher for clients because DeLeon Realty has needed to charge 5.5 percent commission, whereas most traditional agents charge five percent. Commissions vary and should be negotiated based on the level of service and marketing provided. In spite of this higher commission rate, DeLeon Realty still saw sales grow nearly 60 percent last year, and we were recently named the #1 Team in California and announced as a close second in the entire nation (out of over 1.25 million agents and teams). Smart clients saw and they made the winning bet that the extra half of a percent is worth it since the value proposition exceeded that.
Like home staging (which our firm provides as part of our extensive package), our superior marketing has a multiplier effect. Counting internal hours spent by our team of experts plus all of our marketing costs, we typically spend over $25,000 in preparing and marketing a home in just the first 10 days it is on the market. This is about 10 times more than a typical agent and four times more than the very best agent will generally spend in marketing. However, following our client-centric model, we are willing to spend this extra amount on marketing because it will net our clients an extra $60,000 to $100,000 in return.
Even with our higher commission rate, last year we were still a market leader with over $400 million sold in listings alone. While successful, we still did not feel we had entirely changed the model from an agent-centric model to a client-centric model. To fully change the game and to fully advocate for our clients, we have devised our most revolutionary innovation yet: the commission is greatly reduced if a DeLeon Realty agent represents the buyer of one of our listings as we waive all of the buyer-side commission. While each side gets its own agent to advocate on behalf of its clients, both sides benefit through the buyer-side commission being waived. Thus, the commission charged to the seller is only three percent, so sellers can work with the best brokerage in Silicon Valley for nearly half of the price, while buyers’ offers are more competitive when working with a DeLeon agent.
Through our innovative and more efficient business model, we can now provide clients with Whole Foods-style best-in-class service, while potentially charging the analogous Trader Joe’s prices. DeLeon Realty invests in our clients’ success, thereby ensuring our long-term success. We believe it is better to net less profit per transaction while providing exceptional client service. In the end, the secret to success is the same as the secret to life: By doing good, you will do well. Great ethics result in great economics.