Open Listings (YC W15) Is Helping Homebuyers Hack Real Estate(techcrunch.com)
techcrunch.com
Open Listings (YC W15) Is Helping Homebuyers Hack Real Estate
http://techcrunch.com/2015/02/26/openlistings/#c542VX:BaQ
38 comments
You're totally right that the commission does come from the seller's proceeds, but since openlistings acts as a buyer's agent, they, traditionally, get half the commission once the deal closes. 500k sale price (yes, they exist outside the coasts!), 5% commission = 25,000. 25,000 split between the seller and buying agent = 12,500 per agent. Openlistings (I think) keeps 5,000 of the 12,500 and kicks the other 7,500 back to the buyer... and if you had to include that additional 7,500 as part of a 30-year mortgage they're saving you much more than 7,500 over the life of a traditionally-financed purchase. That said, you're also right that people need education on these things! The agents win (and consumers lose) if the transaction seems complex. Somehow need to make people realize the process is pretty straightforward.
You're right that it takes some education. Perhaps we should phrase it as money back rather than a lower fee.
The messed up thing about the percentage commission is that it provides financial incentive for the broker representing you to convince you to offer a higher price, both so that you close and so that the commission is higher.
The messed up thing about the percentage commission is that it provides financial incentive for the broker representing you to convince you to offer a higher price, both so that you close and so that the commission is higher.
There is a decent amount of information that the agent-to-agent communication around offer presentation delivers. Are the sellers more keen on price or on terms ? If its a fixer, is the buyer aware of that and is that reflected in their offer (because the sellers probably wouldn't want to waste time on a buyer who was going to be shocked to find out that its a fixer after getting in contract). Usually the buyer's agent helps to gather this information in order to present the best possible offer, and then gets a sense of how that offer sits with the seller upon presentation ("oh this is way too low" or "the sellers need a shorter contingency period"). How will you handle gathering and passing along this information to prospective buyers in order to allow them to make the best offer possible ?
Great point - We deliver each offer personally and gather the exact information that you are talking about before finalizing each offer.
One of our main goals is to reduce the opacity in the process for our buyers. You've provided examples where the buyer benefits, but we also see private agent-to-agent communication used to drive up offer prices.
One of our main goals is to reduce the opacity in the process for our buyers. You've provided examples where the buyer benefits, but we also see private agent-to-agent communication used to drive up offer prices.
Very interesting. Yes I agree these private communications can drive up prices.
I have observed real estate agents acting as a cartel. As an example, if you use a real estate agent from outside the area, when they go to negotiate a sale with the selling agent the selling agent won't give him the time of day. Once you get an agent who is in the same circle with the local agents, all of the sudden you get responded to.
I am worried that this service, which I want to see succeed, will be nullified by the incumbent agents.
Thoughts?
I am worried that this service, which I want to see succeed, will be nullified by the incumbent agents.
Thoughts?
From what we've seen, money talks. That is, in every case we've seen, the highest offer got accepted. Seller agents are legally required to present every offer to the seller. It's kind of a prisoners dilemma thing -- as an industry it makes sense to block out agents who are disrupting the normal commission structure but as an individual agent who is actually getting paid a cut of the sale price, you just want your client to take the highest price.
It sounds like the main benefit offered by your product is the ability to forego the agent fees.
Have you considered attempting to make an API available for clients with a more established user-base (think Zillow or Trulia) to hook into, essentially giving you your fee and allowing their customers to buy directly through their clients?
The creation of your own client relies heavily on you getting a user-base large enough that people are going to be willing to trust it, and when they're spending a large portion of their wealth on a home, that's unlikely to happen (at least immediately). If your service has the face of an established client on it, the customer doesn't even have to know that you exist, and won't even get the opportunity to not trust you :)
Is this something you've considered? Is it a service that would even interest something like Zillow or Trulia?
Have you considered attempting to make an API available for clients with a more established user-base (think Zillow or Trulia) to hook into, essentially giving you your fee and allowing their customers to buy directly through their clients?
The creation of your own client relies heavily on you getting a user-base large enough that people are going to be willing to trust it, and when they're spending a large portion of their wealth on a home, that's unlikely to happen (at least immediately). If your service has the face of an established client on it, the customer doesn't even have to know that you exist, and won't even get the opportunity to not trust you :)
Is this something you've considered? Is it a service that would even interest something like Zillow or Trulia?
Yes! If you want an API to put in an offer via HTTP request (curl a house!) please let me know at [email protected]. This is definitely on our list, but not super high yet but if you want it, we'll move it higher.
It seems the value of this is highly dependent on the local market. A 2% commission on a $300k home is comparably priced at $6000 (and commission rates are negotiable), but a local agent will provide a lot of service difficult for a web app to compete with.
I can see the value in a market where seven figure homes are the norm, though. Most buyers don't want to negotiate a good flat rate with an agent. On the other hand, I bought without an agent and didn't feel too out of sorts during the process.
As a suggestion for the site: talk up the value the service provides over and above sending the offer letter. To me, that's where the value would lie.
I can see the value in a market where seven figure homes are the norm, though. Most buyers don't want to negotiate a good flat rate with an agent. On the other hand, I bought without an agent and didn't feel too out of sorts during the process.
As a suggestion for the site: talk up the value the service provides over and above sending the offer letter. To me, that's where the value would lie.
Point taken, thank you!
We recognize that our pricing makes less sense outside of California but we're hoping to operationalize it here and make it really efficient before scaling to other markets where the fee will be lower.
One misconception is that people think when they directly negotiate with a seller's agent that they aren't paying the full commission. In fact, when the house is priced, 5-6% commission is set aside for the agents. If you go in without a buyer agent, the seller agent takes the full commission (this is called dual agency and it's financially ideal for them).
We recognize that our pricing makes less sense outside of California but we're hoping to operationalize it here and make it really efficient before scaling to other markets where the fee will be lower.
One misconception is that people think when they directly negotiate with a seller's agent that they aren't paying the full commission. In fact, when the house is priced, 5-6% commission is set aside for the agents. If you go in without a buyer agent, the seller agent takes the full commission (this is called dual agency and it's financially ideal for them).
Is 100% dual agency the norm? The industry definitely seems pretty opaque in regards to these issues. In my circumstance, the seller agent's contract stipulated that the agent earned 50% the buyer agent's commission for buyers lacking an agent. That worked well for me, as the seller had lower commissions and her agent's interests were also aligned with me. But I admit that going into the transaction, I had assumed there would be no commission for my half of the transaction.
The norm in California is for both the buyer and seller to be represented by their own agents. About 10% of transactions in California are dual agency.
We take the full buyer's commission and refund it back to the buyer at close minus our fee.
We take the full buyer's commission and refund it back to the buyer at close minus our fee.
in nyc, i know that dual agency is the norm. you see sellers' brokers mildly sabotaging offers from buyers' brokers sometimes for this reason. agencies like Corcoran have built very tidy businesses by being sellers' brokers and buyers' brokers at the same time, and act that way whether there is any actual buyer's broker relationship at all.
Buying an apartment in New York is actually one of the things that spurred us to start the company. My wife and I wanted to buy an apartment in New York, but by the time we had made our decision, the seller's agent we had been working with was replaced with a new agent by the buyer. The new seller's agent did not want to share the commission and made it very difficult for us to complete the transaction (even though this is illegal). More transparency and fewer big personalities is what we want to bring to the market with our service.
Will you be a licensed brokerage in these "other markets"?
So about 8 years ago I bought a home using BuySide Realty. Similar idea: they represented you in the purchase transaction, then rebated 75% of the negotiated purchase commission back to you.
It worked really great. I saved almost 2% on my home. BuySide apparently became some company called Iggy's House (worst name for a company, EVER), then they disappeared.
So a) how do you differ from BuySide and b) how will you not disappear like they did?
It worked really great. I saved almost 2% on my home. BuySide apparently became some company called Iggy's House (worst name for a company, EVER), then they disappeared.
So a) how do you differ from BuySide and b) how will you not disappear like they did?
I'm not super familiar with BuySide but it sounds like they were a traditional brokerage that worked on a discount.
Our service costs less because we do less manually and more with technology. A typical agent spends 80% of their time looking for leads and trying to find properties for their clients. Most of the effort in submitting an offer is filling out a bunch of forms (computers are good at this). We let clients find homes by themselves and are working to automate as much of the offer submission and close process as possible. In this way, we have the margins of a scalable technology company, rather than a traditional human-powered real estate brokerage.
In terms of not disappearing, I can't guarantee anything but we're working our hardest to build a sustainable business!
Our service costs less because we do less manually and more with technology. A typical agent spends 80% of their time looking for leads and trying to find properties for their clients. Most of the effort in submitting an offer is filling out a bunch of forms (computers are good at this). We let clients find homes by themselves and are working to automate as much of the offer submission and close process as possible. In this way, we have the margins of a scalable technology company, rather than a traditional human-powered real estate brokerage.
In terms of not disappearing, I can't guarantee anything but we're working our hardest to build a sustainable business!
BuySide was pretty much the same thing. Here's the MLS, visit all the open houses you want on your own and drop our name as the buying agent, and come to us when you are ready to drop an offer letter.
So when you prepare and transmit an offer on behalf of your client and the selling agent responds with a counteroffer, who receives that? Who gets it back in the hands of the buyer?
Who advises the client on preparing the counter-counteroffer? Or are your offers more of a "buyer proposes $X take it or leave it" exploding deal?
So when you prepare and transmit an offer on behalf of your client and the selling agent responds with a counteroffer, who receives that? Who gets it back in the hands of the buyer?
Who advises the client on preparing the counter-counteroffer? Or are your offers more of a "buyer proposes $X take it or leave it" exploding deal?
From the time you want to put in an offer to the time you close, we assign a licensed agent to help you through the process. That includes calling the seller to find out more about the listings, pricing expertise on your offer, dealing with counteroffers, and making sure all paperwork is in order.
Currently, to the selling agent we look just like a normal brokerage. In the future we hope to put more of the negotiation process online so that process becomes even more transparent.
Currently, to the selling agent we look just like a normal brokerage. In the future we hope to put more of the negotiation process online so that process becomes even more transparent.
How are you different from redfin? Are you aiming for an acquisition by redfin or zillow?
RedFin is a great step towards making buying less expensive but they haven't innovated on the experience of buying at all. They give you a traditional agent experience for half the price. We let you submit an offer online and we're rifle focused on improving the offer/buy process. On a typical California home you'll save a lot more going with us. We charge a flat-fee rather than a percentage because it's just as much work to put an offer in and close on a $5M home as a $500k home.
And no, we are not aiming to get acquired any time soon! We're building a sustainable business with a very concrete revenue source. Hopefully it'll be the other way around ;).
And no, we are not aiming to get acquired any time soon! We're building a sustainable business with a very concrete revenue source. Hopefully it'll be the other way around ;).
How do you support the buyer other than handling the offer and contract? Do you provide escrow, referrals for home inspectors, surveyors, or title services? Do you shop those out?
First time buyers need a ton of assistance navigating all of that and making sure they don't get screwed by the sell side of the deal (e.g. seller recommending their own inspector, for one).
First time buyers need a ton of assistance navigating all of that and making sure they don't get screwed by the sell side of the deal (e.g. seller recommending their own inspector, for one).
Yes, we provide full service from offer to close. Right now that's largely done manually by in-house real estate agents. We're currently building out software to handle more of the process online (starting with the negotiation) but we'll always have expert agents on deck to help or provide the type of advice first time buyers need. What we won't do is drive you around in a Mercedes to hold your hand at an open house.
What DB are you pulling from? Is this self curated?
I tried add locations for `Santa Cruz`, `Santa Barbara` and `Mendicino County` and got "No listings in this area yet."
I tried add locations for `Santa Cruz`, `Santa Barbara` and `Mendicino County` and got "No listings in this area yet."
As a participating California brokerage, we're pulling directly from regional MLS servers. We don't have those areas yet but we're rolling out full CA coverage in the next month or so.
Currently we have 100% MLS coverage in SF and the greater LA area.
Next on our list is Silicon Valley, East Bay (Oakland), and San Diego. I'm super excited for Mendocino too!
Currently we have 100% MLS coverage in SF and the greater LA area.
Next on our list is Silicon Valley, East Bay (Oakland), and San Diego. I'm super excited for Mendocino too!
Congrats on the launch! What's the tech stack?
Founders are on deck to answer any questions you guys have. We're really excited to be in YC!
Hi guys. Cool site. Quick question - and I completely understand if you can't answer - any more details on your plans for expanding MLS coverage, or particulars on your current data arrangements?
Just curious because I know some realtors and it seems like the barrier to a national MLS equivalent has been opposition by industry organizations wanting to protect their data. Any thoughts?
Just curious because I know some realtors and it seems like the barrier to a national MLS equivalent has been opposition by industry organizations wanting to protect their data. Any thoughts?
Getting MLS data is hard. We had to become a registered California brokerage and join individual MLS organizations as participating agents. Each MLS runs on different servers with slightly different SOAP/XML APIs and slightly different data formats. We're ingesting from 3 right now in real-time. We're planning to get full CA coverage this way in the next month or so (CA is 15% of the national real estate market).
We might have a different approach when we scale nationally but so far this is working pretty well. There are a few third party companies that offer the data but it's not as fast or complete as a brokerage feed from the MLS (and speed matters in hot CA markets).
That said, we don't need the property in our system to put an offer on it so you can shop on Redfin or Zillow and come back to our site when you want to put a bid in. We will happily put an offer in on any home in California.
We might have a different approach when we scale nationally but so far this is working pretty well. There are a few third party companies that offer the data but it's not as fast or complete as a brokerage feed from the MLS (and speed matters in hot CA markets).
That said, we don't need the property in our system to put an offer on it so you can shop on Redfin or Zillow and come back to our site when you want to put a bid in. We will happily put an offer in on any home in California.
First, good luck on your business.
My question: How's this different from something like helpusell.com?
I used Helpusell over a decade ago in California. They saved me a nice chunk of change because the agent was smart, but ultimately the buyer came from listing on MLS and not their site. MLS drove buyers to my property very quickly.
My question: How's this different from something like helpusell.com?
I used Helpusell over a decade ago in California. They saved me a nice chunk of change because the agent was smart, but ultimately the buyer came from listing on MLS and not their site. MLS drove buyers to my property very quickly.
Thanks! We love new models like helpusell.
We're coming at it from the other side -- we're completely focused on buyers. You can input any address in California and we'll make your offer. The listings we have on our site are straight from the MLS (we have 100% coverage in LA and SF right now). However, you can shop on Redfin, Trulia, or Zillow and put the offer in or schedule a showing through our site.
Let me know if you have any more questions.
We're coming at it from the other side -- we're completely focused on buyers. You can input any address in California and we'll make your offer. The listings we have on our site are straight from the MLS (we have 100% coverage in LA and SF right now). However, you can shop on Redfin, Trulia, or Zillow and put the offer in or schedule a showing through our site.
Let me know if you have any more questions.
One observation from a novice homebuyer (only bought once, never sold) is that I thought commissions only came out of seller's proceeds (of course price is marked up accordingly). The website says "buy a home commission free" but to me I would pay more notice if it said "sell a home commission free".
Of course if I'm wrong please take this as a data point that users need education :)