Companies to Watch: SOMA Living
Companies to Watch: SOMA Living
Why eye it: SOMA Living of San Francisco has blended a retail environment, salaried buyer’s representatives, and the Internet into a new real estate sales model. When starting SOMA Living last summer, parent Pacific Union thought it would be 18 months before it would see black ink. But the program turned a profit in its fourth month.
How it works: A storefront real estate office that has more in common with a library than a typical brokerage allows buyers to browse through current listings, recent sales, and the architectural and interior design idea center. They can get a loan and insurance.
Team effort: Unlicensed "resource coordinators" work the floor, offering free how-to-buy-a-home advice. Once buyers select a price range, neighborhood, and building type, the resource coordinator matches them with a salaried buyer’s representative. SOMA's four salaried reps, who receive a bonus for each transaction, have a workload of 25 to 50 buyers each.
The buyers' legwork makes it easier for SOMA's salespeople to help them find the right home. Bob Dadurka, SOMA vice president and managing broker, says once buyers locate the perfect home, he steps in to negotiate the contract. A transaction manager completes the process by following the sale--including compliance paperwork--through to closing.
Results: SOMA is getting 150û300 first-time visitors a month, and by the end of the year, about 75 buyers a month were signing exclusive agreements, says Dadurka. The average SOMA buyer is educated and affluent, spending about $500,000 in a market where the average sales price is $325,000, Dadurka says. Many come back three or four times before they’re ready to buy. About 60 percent of the buyers first found SOMA on the Internet. The salaried reps don’t farm, and the brokerage’s only advertisements are a single-page ad in a local real estate magazine and a small ad in the daily San Francisco Chronicle. Those leads are generating eight to 16 transactions per month. Buyer's reps can earn up to a low-six-figure income if they work hard.
Why now: Technology and the Internet are redefining the role of real estate salespeople as gatekeepers of information, says Dadurka. Value must come from service rather than information, he says.
What's next: SOMA Living is talking to venture capitalists and large brokers across the country about plans to open nearly 450 stores throughout the country. SOMA has already spent $3 million on software and other capital expenses and has plans to make another seven-figure investment soon, says Dadurka.
Advice to brokers: "Our economic model is entirely different from the traditional brokerage in that salespeople receive a bonus per transaction and the entire commission becomes company dollar," says Dadurka. "But the overhead is significantly higher because everyone is an employee. Your fixed costs are quite a bit greater."
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