Erin Campbell

Many people are taking Foxtons’ demise as a sign that the discount brokerage model is doomed to failure. Some are suggesting that "discounters" just can’t survive in this kind of market. That couldn’t be further from the truth. Assist-2-Sell, a full-service discount real estate company with 600+ offices, has seen all kinds of markets in its 20 year history. We believe it was Foxtons’ overall business model—not it’s pricing structure—that caused them to go under.

What killed Foxtons had nothing to do with discount real estate. They abandoned that model when they started charging three and four percent. They tried to take a business model that worked in Great Britain--where they don't utilize the MLS--and make it work in the United States. It just wasn’t a fit. They had hundreds of paid employees and customer service centers; a model that didn’t allow them to make adjustments to their overhead in down markets.

Foxtons also took advantage of the market at the expense of the agent community. They offered low compensation to cooperating brokers, which would sink anyone. You have to work with your competitors, rather than alienate them and take away their motivation for cooperating with you. - Thu Nov 1 2007, 17:01