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The Future is Networks
By arlene | April 5, 2008
As globalisation becomes the buzz word of the 90’s, and technology continues to bring an increasing amount of information to our doorstep, so the importance of co-operation, participation in and linking into the multi-media superhighway increases.
One of the avenues through which real estate has found comfort in the ever-changing environment, is with the creation of different forms of networks. Networking as a concept is, of course, not new, and has informally been in existence between real estate firms for many years. The host of informal arrangements has, over time, matured into formal third party corporate structures supplying a variety of needs, focusing mainly on the enhancement of the flow of property information.
Loosely defined, networks in real estate are the organisations that co-ordinate some kind of formal arrangement between a number of participating estate agency firms, uniting or linking them together, frequently under a universally identifiable name or device, whilst offering a selection of services and benefits.
As such there are numerous variations and hybrids of each other. Broadly speaking, however, they can be divided into the following five main categories :
2. Intercity referral networks
3. Multiple listing systems
4. Advertising affiliations
5. Mortgage information networks
None of the above is exclusively more superior than the other and each has its own particular advantages and disadvantages. Even though the advantages generally outweigh the disadvantages, participation in any network should be evaluated by each estate agency firm, because they may be suited to some and not others.
We refer specifically to commercial networks, excluding associations or institutions (non-profit making organisations) such as The Institute of Estate Agents of South Africa, which although also a form of network, differs from the above. Non-commercial networks, due to their very nature, focus on issues such as ethics, tariff determination, education, legislation, standard forms, dispute resolution and so on, rather than networking in particular.
Suggested guidelines to evaluation of these networks are highlighted.
I. Franchising groups
Franchising was started in the real estate industry in South Africa in the late 70’s, and although it met with some failure in the initial stages, played a major role in building Aida Real Estate to the only truly national firm by the mid 80’s. During the early 90’s franchising became the single fastest growing trend in the real estate industry in South Africa and today eight of the country’s top 10 firms have a franchise network.
Advantages for the participating firm (franchisee)
- An operating system with a proven track record including all the items required to run the business successfully.
- Continuous research and product improvement.
- A known acceptable national image, as well as national advertising campaign.
- Help in day-to-day problem solving is usually provided.
Potentially larger income and lower overheads.
* The agency is easier to sell, should it be necessary to do so. Disadvantages for the participating firm (franchisee)
- The strict, although limited, control the franchisor has over the franchisee.
* The restriction of trade areas.
- Potentially conflicting interests of franchisor and franchisee.
The sometimes high cost of purchase of rights or conversion to franchised name.
2. Intercity referral networks
An informal group of estate agency firms, usually not operating under a common banner, but allowing participating agencies to share client information with other estate agency firms mostly located in another town or city.
Intercity referral networks have, however, developed beyond their historic structure, and today supply a variety of additional services very similar to that of franchise groups. However joining or leaving an intercity referral network is usually much easier than with a franchise.
The first examples of referral networks in South African real estate date back only a few years. Although initially greeted with considerable enthusiasm, the groups disintegrated in the early 1990’s. Today the best example of an intercity network is HomeNet and whilst closer to a referral network, has adopted various franchise- like structures, such as the incorporation of the HomeNet logo into participating firms‘ own name.
Advantages for the participating firm
- Contact with associated real estate firms in other regions where the participant does not operate.
- Potential additional income through the sending or receiving of referrals.
- Some form of national identity and a national advertising campaign.
Quick and easy involvement with or breakaway from the network.
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