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The residential real estate slump has taken another casualty: Foxtons, a West Long Branch, N.J.-based real estate company that was recently orphaned by its British parent. The company said it was shutting its doors, laying off 350 of its 380 employees and considering filing for bankruptcy.The shutdown was attributed to lackluster residential sales. However, the suburban New Jersey realty firm was recently left behind by its former parent, British real estate firm Foxtons Ltd., when buyout firm BC Partners acquired the British portion of the business for £400 million ($790 million) in May, perhaps compounding its problems.
Created in 1999 as YourHomeDirect.com, Foxtons tried to differentiate itself from other real estate companies by bucking the industry standard of charging a 6% commission; instead, the company compensated its brokers with a salary and charged customers a 2% commission. The business model never worked, so shortly after Foxtons Ltd. acquired YHD, the company changed its compensation model, ultimately charging customers 4%. It still struggled. Foxtons' closing comes as the future of real estate remains bleak. Fannie Mae chief executive officer Daniel Mudd said the housing slump will last beyond 2008, dragging down home prices and increasing credit losses at the largest providers of financing for U.S. mortgages. Home purchases declined 8.3% to an annual rate of 795,000, the lowest level in more than seven years, from a revised 867,000 rate in July, the Commerce Department said. The median price also dropped 7.5% from August 2006, the most since 1970. Full coverage will come later in The Daily Deal and on TheDeal.com. —Gerald Magpily See story from the Asbury Park Press CategoriesComments
From: Anonymous,
The fact of the matter is that this model should have been more focused in NY... NJ was far too costly...the average home price and the number of homes sold couldn't begin to compare to the type of volume and revenue pulled in at the NY office. There were 4 NJ offices and only one (Lyndhurst) brought in any decent money...
Posted on:
September 29, 2007 10:24 AM
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This was definitely coming for a while. Cannot spend the way the North American Foxtons arm did charge such moderate fees and not expect your business model to tank. The model would work with some modification to their spending on marketing and employee support. I was a former Foxtons Agent myself so I am sorry to hear of my former co-workers misfortune.