Introducing the ListingHedge(TM)
Today is the public beta launch of RealtyBaron.com’s latest and greatest, a risk management product for real estate agents called ListingHedge™. As the name implies, a ListingHedge™ allows an agent to hedge a listing. Put simply, a ListingHedge™ is used to reduce the financial risk agents accept when spending time and money upfront in exchange for a commission after a home sells. Traditionally, agents do not recover expenditures from an unsold listing. With a ListingHedge™ in place, however, an agent is still paid for work that does not result in a sales commission. The illustration below compares the traditional risk model to this new hedged risk model:
During the beta period, a ListingHedge™ is purchased and settled with BaronBucks™. Any broker or agent with a RealtyBaron.com account is automatically credited with $5,000 BaronBucks™ that can be used to purchase a ListingHedge™ for each listing the broker or agent is marketing.
After the beta period ends and the service officially launches, a ListingHedge™ will be purchased and settled with real money. BaronBucks™ accumulated by agents during the beta period will be converted to equity shares in (pre-IPO?) RealtyBaron, Inc.
To get started, follow these steps:
- Log in or sign up at http://www.realtybaron.com/agent
- Complete your AgentRank™
- Upload your current listings
- Hedge your current listings
Question, comments, or concerns? Add a reply below and I’ll respond.
Copyright 2008 Baron Briefs
Tags: hedging, insurance, realestate, realtor, risk
September 3rd, 2008 at 11:23 am
Marc –
I recommend having your lawyer review the plan to disperse equity to Beta participants. I’ve been involved in a few projects that considered similar solutions for rewarding crowd-sourced involvement. It’s always turned out to be dangerous ground and it may not be legally possible depending on how many people participate and how the company is structured. My understanding is that there’s a limit to the number of people that can hold common stock of a private company.
September 3rd, 2008 at 11:37 am
Thanks, David. Very sound advice. Rest assured, I wouldn’t proceed to the next step without one or more attorneys reviewing it.
Currently, no common stock is being distributed and will not be distributed until RealtyBaron, Inc becomes a public company. Until then, we are tracking BaronBucks using an internal accounting system.
September 16th, 2008 at 6:55 am
[...] Realtybaron.com launches a “hedging” service for real estate agents. You can still get paid for work that does not result in a sales [...]
December 4th, 2008 at 1:39 pm
So I pay $5000 after the beta period ends and get $1200 back when the lisitng expires? Hedge this!
December 4th, 2008 at 1:51 pm
@JR
Huh? You don’t pay $5,000. We give you 5,000 BaronBucks to use during the beta period.
Please re-read the post.
December 4th, 2008 at 2:23 pm
please explain why this is a benefit? I have a total of $1,800 in expenses, including your fee, on a listing that doesn’t sell. After the initial beta period, you will be giving me back $1,200 in real money. I’m on a 50-50% spilt with my broker and my state’s regulations say that only they can get paid for work I do and they in turn pay me. My net is then $600, which is income, which I still pay taxes on. I still have a loss of $1,200. Why wouldn’t I just write that off as a business expense in the first place?
I would also venture to guess that most traditional brokerages would not allow individual agents to participate in this type of thing without their permission since in most states the agent cannot negotiate what comes out of the brokers commission without their permission.
Good luck to you.
December 4th, 2008 at 2:48 pm
@Steven
The hedge pays out after the “listing period” expires … not the “initial beta period”. And it would pay out $3,000 … not $1,200.
Regarding your state’s regulations, the hedge is not paying out for work. Rather, it’s paying out in the event the listing does not sell. Selling the home remains a much more profitable outcome, but the hedge reduces the financial “sting” of an expired or withdrawn listing.
March 11th, 2009 at 7:16 am
What is to keep agents from taking listing that they know will not sell and hedging them?
For example, I list a $350,000 house for $500,000. Are you ging to pay me $6750 for this transaction once it expires? If so, how long will I need to wait?
March 11th, 2009 at 9:29 am
@Roger
Each ListingHedge(TM) is underwritten. Therefore, it’s unlikely it would be approved at $500k. However, something between $350k-$400k is likely.
Re: “how long will I need to wait”, you’d be paid 30-45 days after listing expires.
January 23rd, 2010 at 1:09 am
still trying to understand