Real estate site Redfin files for IPO(techcrunch.com)
techcrunch.com
Real estate site Redfin files for IPO
https://techcrunch.com/2017/06/30/real-estate-site-redfin-files-for-ipo/
316 comments
Let me offer a different viewpoint.
Redfin absolutely serves a purpose, but in some markets, notably for my case very hot markets, it's a significant impediment. I really wanted redfin to work, shopping in seattle 2 years ago. I tried for almost a year, but they would consistently be not as contactable or prompt as we wanted, and gave us very erroneous advice when it came to crafting offers on some houses we wanted. As a result we lost out on houses when we could have been competitive.
Eventually we got a very solid realtor, who was aggressive in finding us houses that would slip through our normal searches (the house we ended up buying had been on the market for a long time at a higher price than they eventually relisted it for, in an area we had discounted.) When a bidding war started, he worked with us by being connected with the selling agent, gave us very accurate hints on how we'd need to push and what would work to our advantage, and landed both the deal and some back and forth that happened after.
Downside, this was after 2 years of searching and losing out on houses I frankly today still regret not getting. An hour+ commute sucks, and I attribute some of my early failures to not getting an experienced/knowledgeable/active realtor earlier.
YMMV but that's the caveat from my experience.
Redfin absolutely serves a purpose, but in some markets, notably for my case very hot markets, it's a significant impediment. I really wanted redfin to work, shopping in seattle 2 years ago. I tried for almost a year, but they would consistently be not as contactable or prompt as we wanted, and gave us very erroneous advice when it came to crafting offers on some houses we wanted. As a result we lost out on houses when we could have been competitive.
Eventually we got a very solid realtor, who was aggressive in finding us houses that would slip through our normal searches (the house we ended up buying had been on the market for a long time at a higher price than they eventually relisted it for, in an area we had discounted.) When a bidding war started, he worked with us by being connected with the selling agent, gave us very accurate hints on how we'd need to push and what would work to our advantage, and landed both the deal and some back and forth that happened after.
Downside, this was after 2 years of searching and losing out on houses I frankly today still regret not getting. An hour+ commute sucks, and I attribute some of my early failures to not getting an experienced/knowledgeable/active realtor earlier.
YMMV but that's the caveat from my experience.
I bought a house in SF three years ago through Redfin. The realtor that Redfin gave us was prompt, aggressive, and thorough in the bidding/closing process.
What he didn't do is drive us around to open houses or suggest places to us. Which we didn't want anyway.
I suspect that the individual realtor you get through Redfin has a big impact on your experience with the site. It sounds like you got a bad one and were unhappy. We got a good one and were happy.
What he didn't do is drive us around to open houses or suggest places to us. Which we didn't want anyway.
I suspect that the individual realtor you get through Redfin has a big impact on your experience with the site. It sounds like you got a bad one and were unhappy. We got a good one and were happy.
We got, unfortunately, MULTIPLE realtors through redfin; some on our own request, some when they simply would disappear from the company/stop answering our emails. There was neither quality nor consistency, and we had marginal ability to impact that choice on our own, whereas with a personal realtor we went with someone highly recommended from work peers.
I absolutely agree the individual realtor impacts the experience, that's pretty much the crux of my whole issue :) My conclusion was that Redfin doesn't offer as much control/guarantee to ensure this, and in a hot market, this matters quite a bit.
(To be fair, I'd say the same thing about my experience with mortgage lenders, BoA did an abysmal job and very nearly left me in the lurch, whereas a smaller local lender picked up the slack and pulled our asses out of the fire. Perhaps my overarching statement should be to wonder if we (businesses) suck at scaling customer support? (I'm pretty much saying "well duh" to myself as I write this statement, frankly))
I absolutely agree the individual realtor impacts the experience, that's pretty much the crux of my whole issue :) My conclusion was that Redfin doesn't offer as much control/guarantee to ensure this, and in a hot market, this matters quite a bit.
(To be fair, I'd say the same thing about my experience with mortgage lenders, BoA did an abysmal job and very nearly left me in the lurch, whereas a smaller local lender picked up the slack and pulled our asses out of the fire. Perhaps my overarching statement should be to wonder if we (businesses) suck at scaling customer support? (I'm pretty much saying "well duh" to myself as I write this statement, frankly))
I've never used a buyer's agent and always written into my offers that the 3% buyers agent fee is to go back to the seller (and of course adjust the top-line offer accordingly).
I've never tried to buy in SF, but this strategy has always worked for me and saved a lot of money over the years. Frankly I can't understand the purpose of a buyers agent in this era, and taking 3% off the cost of a house is very substantial.
When the closing statement (HUD-1) is finally prepared, usually I can see that the seller's agent took some of the buyer's agent fee, e.g. they will end up with 4% instead of 3% in the end and the rest goes back to the seller. Since these offers usually mean more money for the seller'a agent they go to the top of the pile.
It's also important to disclose that you've purchased houses before, that you have funds, and that you are ready to close immediately. You don't need a buyers agent to tell you this.
I've never tried to buy in SF, but this strategy has always worked for me and saved a lot of money over the years. Frankly I can't understand the purpose of a buyers agent in this era, and taking 3% off the cost of a house is very substantial.
When the closing statement (HUD-1) is finally prepared, usually I can see that the seller's agent took some of the buyer's agent fee, e.g. they will end up with 4% instead of 3% in the end and the rest goes back to the seller. Since these offers usually mean more money for the seller'a agent they go to the top of the pile.
It's also important to disclose that you've purchased houses before, that you have funds, and that you are ready to close immediately. You don't need a buyers agent to tell you this.
So you reduce the top-line offer by 3%? Or, if your written offer specifies 3% back to you, how does the seller's agent manage to take 4% in contradiction to the offer? Not sure what jurisdiction you're operating in, but I wasn't aware that offers could dictate chagnes to the terms of a pre-existing listing agreement between the seller and their agent. Would love more details on how to effect something like this.
>but I wasn't aware that offers could dictate changes to the terms of a pre-existing listing agreement between the seller and their agent.
Exactly. Sounds like this borders on interference. The seller can't sign such an offer without breaking a previous contract. It may have worked for him because the broker was amendable to changing their agreement but by not having representation the person above may still have overpaid by 2%. What if the pricing strategy was to price 5% over what the seller really wanted knowing people would negotiate down.
Additionally the previous the buyer doesn't know what the co-broke fee, if any, is being offered to an agent that procures a buyer.
Exactly. Sounds like this borders on interference. The seller can't sign such an offer without breaking a previous contract. It may have worked for him because the broker was amendable to changing their agreement but by not having representation the person above may still have overpaid by 2%. What if the pricing strategy was to price 5% over what the seller really wanted knowing people would negotiate down.
Additionally the previous the buyer doesn't know what the co-broke fee, if any, is being offered to an agent that procures a buyer.
The buyers agent commission rate is public and actually shown in the listing.
I'm not dictating at all the commission received by the sellers agent. I'm saying you just write explicitly in the offer that you have no buyers agent and waive any claim to any buyers agent commission, and consider that dolllar amount to remain with the seller.
Sometimes the agreement between the seller and their agent stipulates some higher commission is paid when there is no buyers agent, but it's none of my business. The fact is it's 2.5-3% of the total price which isn't being paid to a 3rd (4th) party, and that means more money on the table for everyone else.
I'm not dictating at all the commission received by the sellers agent. I'm saying you just write explicitly in the offer that you have no buyers agent and waive any claim to any buyers agent commission, and consider that dolllar amount to remain with the seller.
Sometimes the agreement between the seller and their agent stipulates some higher commission is paid when there is no buyers agent, but it's none of my business. The fact is it's 2.5-3% of the total price which isn't being paid to a 3rd (4th) party, and that means more money on the table for everyone else.
> It may have worked for him because the broker was amendable to changing their agreement but by not having representation the person above may still have overpaid by 2%.
Or you might have representation and still overpay by 2%. It's kind of how investing in a mutual fund with a 3% load doesn't guarantee that you'll beat the market.
Or you might have representation and still overpay by 2%. It's kind of how investing in a mutual fund with a 3% load doesn't guarantee that you'll beat the market.
Yes, reduce the top-line offer by 3%, or slightly less than 3% -- so everyone is actually coming out ahead.
You're absolutely right, I can't dictate the agreement between the seller and their agent. But when I put in writing, "hereby relinquish any and all claim to the 3% buyer's agent fee ($XX,XXX)" it gets the point across. Then it's between the seller and their agent, usually the agent will get a small bump (from 3% to 4%) and the seller keeps the rest.
It's important to try to convince the seller at the same time, that the sale will be easier without the buyer's agent, not harder. Also important to refuse to sign any kind of "dual agency" agreement with the seller's agent.
You're absolutely right, I can't dictate the agreement between the seller and their agent. But when I put in writing, "hereby relinquish any and all claim to the 3% buyer's agent fee ($XX,XXX)" it gets the point across. Then it's between the seller and their agent, usually the agent will get a small bump (from 3% to 4%) and the seller keeps the rest.
It's important to try to convince the seller at the same time, that the sale will be easier without the buyer's agent, not harder. Also important to refuse to sign any kind of "dual agency" agreement with the seller's agent.
This, exactly. If you're comfortable enough with the property you're buying and know what to look for, the selling agent has a decent reputation (i.e. he has something to lose if he tries to cheat you), and have been through the process before, you can easily approach the selling agent without an agent of your own. An experienced agent will understand what's going on and know that this leaves another 3% to work with. I'll probably never use a buyer's agent again in my home market, though I would probably use one in an unfamiliar city.
Another data point confirming your 1% as in line with seller's agent additional effort in handling buyer-side paperwork, communication et al. I just sold through a discount broker, independent and therefore free to set his own rates. His fee for buyers without their own agents: 1%. This was in Mountain View, California.
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This is really confusing. I just bought a house in the UK, and the process is as follows:
1. Look for house on Rightmove or Zoopla. 2. Call the estate agent or private seller to arrange a viewing. 3. Show up at the appropriate time. Look at house. 4. Make an offer. Offer gets accepted/rejected/they want more. Repeat until you get it or get outbid or give up. 5. Offer agreed (hopefully). Now do all the actual buying through mortgage brokers and solicitors.
The estate agents charge the sellers a percentage, which is cheeky because they do almost nothing - the only reason you should ever use one is if you are incapable of taking photos or really can't spare a few evenings to show people around the house.
But nobody ever drives you to see houses or finds them for you. How does it work in America?
1. Look for house on Rightmove or Zoopla. 2. Call the estate agent or private seller to arrange a viewing. 3. Show up at the appropriate time. Look at house. 4. Make an offer. Offer gets accepted/rejected/they want more. Repeat until you get it or get outbid or give up. 5. Offer agreed (hopefully). Now do all the actual buying through mortgage brokers and solicitors.
The estate agents charge the sellers a percentage, which is cheeky because they do almost nothing - the only reason you should ever use one is if you are incapable of taking photos or really can't spare a few evenings to show people around the house.
But nobody ever drives you to see houses or finds them for you. How does it work in America?
In the US, the real estate industry controls the MLS "multiple listing service" which essentially makes them the Google of houses, with negligible competition coming from classified ads, Craigslist, and the like. They charge a standardized 6% commission to the seller, which they split with the buyer's agent, and both agents end up giving some to the brokers that handle the actual transaction.
In recent years, they've been losing ground on the commission so often it's less than 6%, and the buyer may end up getting some share of his/her agent's cut as well, but so far it's pretty hard in most markets to work around the cartel.
In recent years, they've been losing ground on the commission so often it's less than 6%, and the buyer may end up getting some share of his/her agent's cut as well, but so far it's pretty hard in most markets to work around the cartel.
USA has a different system than in the U.K. Or Australia.
In the US, buyers go and get a buyers agent to help them buy the house. Buyers agents get 3% and sellers agents get 3%. (Actual amounts varies wildly)
In UK and Australia, 99% of people do not use buyers agents. The agent showing buyers through the house and answering all the questions works for the seller. There is only one agent so only one commission.
Selling privately is popular in the U.K., but much less popular in Australia however the segment is growing). USA less so again.
In the US, buyers go and get a buyers agent to help them buy the house. Buyers agents get 3% and sellers agents get 3%. (Actual amounts varies wildly)
In UK and Australia, 99% of people do not use buyers agents. The agent showing buyers through the house and answering all the questions works for the seller. There is only one agent so only one commission.
Selling privately is popular in the U.K., but much less popular in Australia however the segment is growing). USA less so again.
Rightmove is a property portal, Redfin is an online residential estate agency.
Older people are hesitant because traditionally before the internet, for sale by owner homes had a bad reputation(iffy homes sold by cheap asses with hidden issues) and the real estate agent was the best choice for most.
I was helping my parents sell they're home and get rid of those con-artist real estate agent....they acted as though I suggested crazy talk for months on end to do for sale by owner.
Lastly some seller agents will refuse to visit or show for sale by owner as a professional courtesy issue(protectionism).
I was helping my parents sell they're home and get rid of those con-artist real estate agent....they acted as though I suggested crazy talk for months on end to do for sale by owner.
Lastly some seller agents will refuse to visit or show for sale by owner as a professional courtesy issue(protectionism).
I can only speak of hot markets in America, which are VERY different than many others, but at least within that:
A "reasonable" house goes on the market. ("reasonable" defined by <1 mil, within an hour commute of a city center) This house will usually be sold within a week or two. Usually less. Definitely less, if it's actually priced within middle-class-affordability (and I laughably define that as ~400-500k). I've seen houses sell the day they listed. The selling process involves showing up at the house during an open house (viewings are possible but rarer in hot markets as typically it's a race to get your offer in and sellers know they don't need to be accommodating; even viewing my house during the closing process was a "if we can fit it in" sort of thing from the seller side) You don't really get to "repeat". If you're very lucky they MAY tell you a competing bid went over your escalation threshold, but for 80% of the houses I put offers on, they look at the escalation guidelines and offers and just make a choice right there. Typically at least someone has offered +50/100k in cash and is going without a loan, so they'll often nab the house without a back and forth with any of the other offers. If the seller agrees, the closing begins. The buyer usually gets 1 shot to make an impression for a given house, usually having to put the offer together within 12 hours/a couple of days max, having seen the house once, usually with a bunch of other people.
A real estate agent helped me in multiple steps of the above.
- Having an offer ready ahead of time with lots of contingencies/tradeoffs well understood so we could tune it quickly and get it out and under the wire.
- Knowing how and where to look for houses before listing, IMMEDIATELY after listing, and that may have been listed ages ago/at bad prices.
- Able to get us contacts with the sellers if an open house time won't work/if we need to ask questions.
- When our BOA agent left us high and dry, he hooked us up with a trusted local lender with a good reputation and used his prior working relationship with her to get our file pushed through in a ridiculous timeline over a weekend so that we could put in a competing bid. (as I said, timelines are nutso)
- Gave us advice on what parts of our offer would have what impact, to what sellers. e.g. 5k vs 3k vs 10k escalation steps? What other caveats? Should compromise on preinspection? etc.
- If anything went wrong, if we had followup questions, needed contacts, he would be extremely accessible, would give us contiguous care (and thus knew what our preferences were, what we were looking for, what offers we were comfortable with/what our finances were) which saved time in rehashing that every few weeks with a new agent; and given that you WILL lose most of the offers you make, this process can go on a very long time so continuity is nice. (we were on the market 1-2 years)
A "reasonable" house goes on the market. ("reasonable" defined by <1 mil, within an hour commute of a city center) This house will usually be sold within a week or two. Usually less. Definitely less, if it's actually priced within middle-class-affordability (and I laughably define that as ~400-500k). I've seen houses sell the day they listed. The selling process involves showing up at the house during an open house (viewings are possible but rarer in hot markets as typically it's a race to get your offer in and sellers know they don't need to be accommodating; even viewing my house during the closing process was a "if we can fit it in" sort of thing from the seller side) You don't really get to "repeat". If you're very lucky they MAY tell you a competing bid went over your escalation threshold, but for 80% of the houses I put offers on, they look at the escalation guidelines and offers and just make a choice right there. Typically at least someone has offered +50/100k in cash and is going without a loan, so they'll often nab the house without a back and forth with any of the other offers. If the seller agrees, the closing begins. The buyer usually gets 1 shot to make an impression for a given house, usually having to put the offer together within 12 hours/a couple of days max, having seen the house once, usually with a bunch of other people.
A real estate agent helped me in multiple steps of the above.
- Having an offer ready ahead of time with lots of contingencies/tradeoffs well understood so we could tune it quickly and get it out and under the wire.
- Knowing how and where to look for houses before listing, IMMEDIATELY after listing, and that may have been listed ages ago/at bad prices.
- Able to get us contacts with the sellers if an open house time won't work/if we need to ask questions.
- When our BOA agent left us high and dry, he hooked us up with a trusted local lender with a good reputation and used his prior working relationship with her to get our file pushed through in a ridiculous timeline over a weekend so that we could put in a competing bid. (as I said, timelines are nutso)
- Gave us advice on what parts of our offer would have what impact, to what sellers. e.g. 5k vs 3k vs 10k escalation steps? What other caveats? Should compromise on preinspection? etc.
- If anything went wrong, if we had followup questions, needed contacts, he would be extremely accessible, would give us contiguous care (and thus knew what our preferences were, what we were looking for, what offers we were comfortable with/what our finances were) which saved time in rehashing that every few weeks with a new agent; and given that you WILL lose most of the offers you make, this process can go on a very long time so continuity is nice. (we were on the market 1-2 years)
Did you look at areas that haven't been gentrified?
Plenty within 1 hour of Seattle that are affordable.
Plenty within 1 hour of Seattle that are affordable.
That's more or less where I ended up buying, and managed ~400 for a respectable 3b2b. That being said, the gentrification is spreading so aggressively and was already well in place even when I bought; in the last month 3 of my neighbors went on sale, all sold within a week at far higher prices than comparable for when I bought. (I only had... 2 other bidders, if I recall, when I bought, so it's certainly less hot than redmond where 10-15 competing was common)
In Canada realtors actually do something, they look for houses for you after you tell them what you want, they attend the viewing with you, get feedback, understand what you are after.
Is that worth 5% - no. Could they be removed by tech: probably. But they are far better than the low-life estate agents in the UK who are I think the least trusted profession, perhaps now undercut by bankers.
Is that worth 5% - no. Could they be removed by tech: probably. But they are far better than the low-life estate agents in the UK who are I think the least trusted profession, perhaps now undercut by bankers.
Was it Kenny? I, too, bought a house in the Bay Area a bit less than 3 years ago, and your experience is exact to what mine was. It was really pleasant, especially compared to the times I had gone along with my parents when they were house shopping with a traditional realtor.
I bought a house in Seattle 2 years ago through Redfin, and had a GREAT experience. We had started with a more traditional realtor first, but the Redfin one was way more responsive. Maybe it's realtor-specific.
Same, bought a place in Seattle through Redfin towards the end of 2014. Went from attending a free Redfin homebuying class to getting the keys to our new place in 30 days. Loved the website and the experience and didn't feel pressured.
> they would consistently be not as contactable or prompt as we wanted, and gave us very erroneous advice when it came to crafting offers
YMMV indeed. I had the reverse experience buying a house through Redfin. We had used a traditional Realtor previously and it did not go well and ended up bailing on that person in favor of Redfin. The Realtor there was very sharp, knowledgable and responsive, and helped us through a tricky purchase to a positive outcome.
YMMV indeed. I had the reverse experience buying a house through Redfin. We had used a traditional Realtor previously and it did not go well and ended up bailing on that person in favor of Redfin. The Realtor there was very sharp, knowledgable and responsive, and helped us through a tricky purchase to a positive outcome.
That sounds like the Seattle manager is slacking. I had the opposite experience in DC, which makes me wonder how good a handle they have on agent quality.
I had a similar experience, although I caught on very quickly that the Redfin process was not going to work for me.
We were first time home buyers relocating and were looking for a house in a new area. Wife and I looked for months online and actually found a house on Redfin. Contacted them to put in an offer and I get back "well, why don't you schedule some time to come down and look at some houses". On top of that, the guy I actually spoke to was a remotely located coordinator that knew nothing about the area, and said we would be handed off to someone else local once we actually scheduled a viewing. Here I am wanting to put in an offer now and there was zero sense of urgency. In a hot market, I'm going to pay a little bit extra to be able to actually get the house we want.
I called a local traditional agent and we got an offer in the same day.
Another coworker that relocated had the same experience; tried Redfin, agent didn't even show, got a traditional local agent and closed quickly.
We were first time home buyers relocating and were looking for a house in a new area. Wife and I looked for months online and actually found a house on Redfin. Contacted them to put in an offer and I get back "well, why don't you schedule some time to come down and look at some houses". On top of that, the guy I actually spoke to was a remotely located coordinator that knew nothing about the area, and said we would be handed off to someone else local once we actually scheduled a viewing. Here I am wanting to put in an offer now and there was zero sense of urgency. In a hot market, I'm going to pay a little bit extra to be able to actually get the house we want.
I called a local traditional agent and we got an offer in the same day.
Another coworker that relocated had the same experience; tried Redfin, agent didn't even show, got a traditional local agent and closed quickly.
Weird, totally different experience with me. Found a place on Redfin, clicked the "buy"/etc button about 11pm. By 7am agent replied back to start offer. Was fast and great
How to: Find a good Redfin agent.
1. Search local Redfin web site for agents who have done deals near your locale of interest.
2. Check internal reviews of agents on Redfin. Bad reviews don't get posted, so "chose not leave a review" on a transaction means either: a) client had unreasonable expectations, or b) agent performed badly.
3. Interview agents in person, and ask challenging questions. If you don't get responses that are either: a) correct and candid, or b) "I will get back to you tomorrow with an answer", move on to the next agent.
This recipe led me to a very good Redfin agent, working inside an office run by a very bad but "senior" agent.
1. Search local Redfin web site for agents who have done deals near your locale of interest.
2. Check internal reviews of agents on Redfin. Bad reviews don't get posted, so "chose not leave a review" on a transaction means either: a) client had unreasonable expectations, or b) agent performed badly.
3. Interview agents in person, and ask challenging questions. If you don't get responses that are either: a) correct and candid, or b) "I will get back to you tomorrow with an answer", move on to the next agent.
This recipe led me to a very good Redfin agent, working inside an office run by a very bad but "senior" agent.
I had the exact same experience in SF. I really wanted to use Redfin, but it was just impossible. Every person we dealt with from Redfin was uninformed and unhelpful.
Finally went to a traditional local buyers agent who did a great job, showed us houses in different neighborhoods that matched what we wanted, and we finally closed after looking for about 2 months. The other interesting thing we noticed was that the houses we were seeing with the agent wouldn't show up on Redfin until weeks after we got to see them. I learned that one thing a good local agent can do is get you in to see stuff before it's officially "on the market".
Finally went to a traditional local buyers agent who did a great job, showed us houses in different neighborhoods that matched what we wanted, and we finally closed after looking for about 2 months. The other interesting thing we noticed was that the houses we were seeing with the agent wouldn't show up on Redfin until weeks after we got to see them. I learned that one thing a good local agent can do is get you in to see stuff before it's officially "on the market".
Similar experience. They spend almost zero time analyzing, explaining pros and cons. Not once did they bid less than the asking price of the home. The tour agents just stand there while we tour. They answer a few questions passively. After a few attempts, they called and said they don't want to work with me anymore, because we took too many tours. About an year later, we went for a traditional buyer broker. He explained a lot of things about the home, negotiated hard, started a bid $15k below the asking price and finally got the home for about $6000 less even with 4 other bidders.
Strange. I just bought a condo with them in DC. We were in a competitive bidding situation and the speed at which we were able to close (compared to other offers) was the thing that sealed the deal.
I added a lender I hadn't considered at their recommendation and they were wonderful (super fast response, competitive rates, willing to get appraiser to drop everything and knock things out really fast) and their use of online tools made things easy (esign and a digital document repository and deadline tracker).
I added a lender I hadn't considered at their recommendation and they were wonderful (super fast response, competitive rates, willing to get appraiser to drop everything and knock things out really fast) and their use of online tools made things easy (esign and a digital document repository and deadline tracker).
Haha, I actually bought my house through Redfin while working there. My place was new construction and I felt I learned so much about real estate that I probably didn't need an agent :P
Which part of Seattle did you buy in? Was it somewhere hot like cap hill or Fremon/Ballard?
Were your agents well reviewed or new? I suspect they don't let loose the rookies in the more competitive areas.
Which part of Seattle did you buy in? Was it somewhere hot like cap hill or Fremon/Ballard?
Were your agents well reviewed or new? I suspect they don't let loose the rookies in the more competitive areas.
I had the same experience. I really wanted to use Redfin, and heavily used it for all my research and self-searches, but when the time came, I found my success with an agent.
> where any buyer can view photos of a house for sale online real estate agents still expect to receive 6%
It's not the same as buying a car as you have to gain access to the property to look at it which involves another agent and much work even after an offer has been accepted or negotiated.
The only thing that is 'absurd' is that the commission generally stays the same whether the house is 1.5 million or 150,000. And as others have mentioned that is split between various parties that are needed to sell a house which is a big one time purchase that most people need help with.
The other important thing is this. Agents spend a great deal of time with buyers who don't end up buying anything from them. Driving them around, setting up appointments, dealing with the listing agent and so on. Unless they make a sale they are not paid. Most of the agents in this country are not selling million dollar real estate either. And in the end they aren't really earning that much money either in a typical market.
Just yesterday I requested information on a property from an agent on something that I honestly don't think I have a serious interest in buying. They took time on the phone and I could easily setup an appointment with them to view the property and waste more of their time. In the end unless I buy now or in the future or refer someone to them they will end up eating that time and getting nothing in terms of pay.
It's not the same as buying a car as you have to gain access to the property to look at it which involves another agent and much work even after an offer has been accepted or negotiated.
The only thing that is 'absurd' is that the commission generally stays the same whether the house is 1.5 million or 150,000. And as others have mentioned that is split between various parties that are needed to sell a house which is a big one time purchase that most people need help with.
The other important thing is this. Agents spend a great deal of time with buyers who don't end up buying anything from them. Driving them around, setting up appointments, dealing with the listing agent and so on. Unless they make a sale they are not paid. Most of the agents in this country are not selling million dollar real estate either. And in the end they aren't really earning that much money either in a typical market.
Just yesterday I requested information on a property from an agent on something that I honestly don't think I have a serious interest in buying. They took time on the phone and I could easily setup an appointment with them to view the property and waste more of their time. In the end unless I buy now or in the future or refer someone to them they will end up eating that time and getting nothing in terms of pay.
That commission is huge. I just bought a 280k house which means the agent gets ~7,800 $. Sure they maybe keep some fraction of that but that is such a crazy big dollar amount. That's several month salary for me and they did it in a few hours of work.
Plus, because this is paid through what eventually becomes my mortgage I'm paying that inflated price for decades.
With those kinds of numbers I see why it is such a guarded industry.
Plus, because this is paid through what eventually becomes my mortgage I'm paying that inflated price for decades.
With those kinds of numbers I see why it is such a guarded industry.
You are comparing a case where it only took them 'a few hours' for your particular transaction with all the time they had to spend either showing that house and getting nothing or showing other houses and getting nothing.
Do you honesty believe the majority of transactions they do are so quick and easy?
What do you think they are doing a transaction like that per week? There is an overhead cost to dealing with people and with sales. I would take a wild guess that in a year of work the agent that you dealt with (or a typical agent that sells $280k houses) is making less than $100k per year. That's not a crazy amount of money, even in a lower cost community.
Do you honesty believe the majority of transactions they do are so quick and easy?
What do you think they are doing a transaction like that per week? There is an overhead cost to dealing with people and with sales. I would take a wild guess that in a year of work the agent that you dealt with (or a typical agent that sells $280k houses) is making less than $100k per year. That's not a crazy amount of money, even in a lower cost community.
They were very rarely available to show us homes and instead just gave us the lock box codes to we could walk through on our own.
It was also suspicious they felt the need to justify their existence saying the hard part is drawing up the contracts. But as far as we could tell the loan company did all that work. The realtor just showed up to the signing and let the loan officers answer any questions we had.
Sure, most transactions are not as fast and easy for them but it seems with these numbers if they are with one client for 2 weeks straight and sell a house at the end they are still way ahead. Even if they sell 1 house a month at that rate it's still a killing.
It was also suspicious they felt the need to justify their existence saying the hard part is drawing up the contracts. But as far as we could tell the loan company did all that work. The realtor just showed up to the signing and let the loan officers answer any questions we had.
Sure, most transactions are not as fast and easy for them but it seems with these numbers if they are with one client for 2 weeks straight and sell a house at the end they are still way ahead. Even if they sell 1 house a month at that rate it's still a killing.
I take it this is your first transaction buying a house. You are basing what you think on that and what people are saying online. I can assure you as someone that buys real estate (as investments) it typically isn't that easy, at least in a typical market and for most transactions. And I have been doing this since the 1980's fwiw.
You're right it was my first house.
I do believe it is sometimes more complicated. But is the value of a realtor's time to me, as a buyer or seller, really several hundred dollars per hour? Is buying a 600k house really twice as difficult a transaction than a 300k house? Why are they not paid a flat fee?
I do believe it is sometimes more complicated. But is the value of a realtor's time to me, as a buyer or seller, really several hundred dollars per hour? Is buying a 600k house really twice as difficult a transaction than a 300k house? Why are they not paid a flat fee?
Seller's agents aren't paid a flat fee to align their interest with that of the seller; they want the deal to close at the highest price possible.
Why buyer's agents are paid on sale-price-commission is, OTOH, a real question.
Why buyer's agents are paid on sale-price-commission is, OTOH, a real question.
> Why buyer's agents are paid on sale-price-commission is
Once again buyer's agents are a large part of the equation. They have to drive around the actual buyers and waste time showing properties with nothing to show for it often.
So the way it works is the people who actually buy (or sell) make more money to compensate for people that do not buy.
Once again buyer's agents are a large part of the equation. They have to drive around the actual buyers and waste time showing properties with nothing to show for it often.
So the way it works is the people who actually buy (or sell) make more money to compensate for people that do not buy.
But a sales price commission, of all possible completion-based pay structures, makes the interest of the agent misaligned with (opposed to, in some respect) that of the principal.
Have you read Freakanomics? They find that agents are more interested in closing add getting paid rather than the extra couple hundred dollars of commission a $10000 swing in price gets them. I'd gladly fight to save a buyer I represent $10000 on price even if it "costs" me $200-$300 of less commission.
But in a sellers market, paying $10,0000 more is aligned with closing the deal AND more comission.
Can I just pay a real estate agent per hour instead? That solves the problem of me deciding to not buy a house from them later.
I tried this when purchasing my last house. I offered a pretty hefty hourly fee, knowing full well there's no way the hourly fees would approach 3% of the transaction. IIRC the response was essentially that they are prohibited from doing so by their Realtor organization (?). This was in Georgia.
That's dependant on your state (state laws) and the broker. I know of a broker that offers showings at $50 per hour.
Sort of, you can always find someone to write you an offer for a flat fee.
We bought our house with no agents at all, buyer or seller. We used a notary public to do all the legal paperwork. Savings: $20,000 (Canada).
If you can possibly avoid using a real estate agent, then do so. They may bring some value but it is not nearly commensurate with their commissions.
If you can possibly avoid using a real estate agent, then do so. They may bring some value but it is not nearly commensurate with their commissions.
Until you find yourself in a situation with contingencies that aren't properly dealt with. One could lose their earnest money or be liable for damages for breach of contact. Or possibly worse finding yourself in a situation where the deal falls through and your have no remedy or recourse because the "contract" you came up with is inside or not enforceable and are now homeless or scrambling to find housing.
Those sound line legal questions and issues, not realtor issues. Your lawyer will charge you hourly for their time.
If you are worried about the validity of a contract wouldn't retaining a real estate lawyer make far more sense than someone with no legal training?
Let me guess, that ~$5k is less than 1% of what you would pay in total.
No offense (and sorry for being off-topic) but I never get how people obsess over the under 1 or 2% cost savings while completely ignoring the overvalued principal. Two other examples,
- People go over to buy a $50-$70k car and later boast how "they made" the salesman give them a $500 or $1k discount. (well what about a fully-functioning $20k car, or the same car but 2-3 years old but costing $8-12k?)
- People buying stupid stuff off amazon etc, and worse, travelling to random places, just because they have credit-card cashback and travel rewards, and looking at you funny when you tell them you only have one credit-card and you make sure you don't overspend but never paid attention to how many points you accumulate.
No offense (and sorry for being off-topic) but I never get how people obsess over the under 1 or 2% cost savings while completely ignoring the overvalued principal. Two other examples,
- People go over to buy a $50-$70k car and later boast how "they made" the salesman give them a $500 or $1k discount. (well what about a fully-functioning $20k car, or the same car but 2-3 years old but costing $8-12k?)
- People buying stupid stuff off amazon etc, and worse, travelling to random places, just because they have credit-card cashback and travel rewards, and looking at you funny when you tell them you only have one credit-card and you make sure you don't overspend but never paid attention to how many points you accumulate.
Bigger picture is that agents conventionally get 6%, which is obnoxious in the Internet age. Sure 1% maybe is not much, but anything that helps to squeeze that industry is great. No?
Yes. Is there even another real estate market in the world where intermediaries capture so much of the gain on sale?
Maybe. Though I haven't gotten over the obnoxious housing prices in the first place, so I guess I'm not seeing what you're seeing.
Just speaking for myself, 5k is a lot of money. So is 1k, so is $500. I can do a lot with that money. Percentages are arbitrary.
I agree however that people buying luxury items and then boasting is kinda dumb. If you're willing pay premiums for luxuries, getting a slight discount on said premiums is hardly a victory. It's like people who buy stuff they don't need and won't use because it's "on sale" and then brag about how they "saved money".
I agree however that people buying luxury items and then boasting is kinda dumb. If you're willing pay premiums for luxuries, getting a slight discount on said premiums is hardly a victory. It's like people who buy stuff they don't need and won't use because it's "on sale" and then brag about how they "saved money".
Ideally the real estate agent does help you get max value for your home.
So you make more even with commission. For bad sales people, impatient, or delusional folks, etc . A commission bad real estate agent is a great idea.
However bad real estate agents like house dumpers are satan's spawn.
They work the seller instead of the buyer.
So you make more even with commission. For bad sales people, impatient, or delusional folks, etc . A commission bad real estate agent is a great idea.
However bad real estate agents like house dumpers are satan's spawn.
They work the seller instead of the buyer.
>you only have one credit-card
nothing inherently wrong with that. You won't have maximum access to credit and multiple bank relationships but those consequences may not be relevant to you.
> you make sure you don't overspend
That's great, but not related to the number of credit cards someone has.
> never paid attention to how many points you accumulate.
Some people obsess with points but there's a difference between not accumulating optimally and not accumulating at all. It's incredibly simple to get a 1-2% discount on all money you spend by using credit cards. But, again, that opportunity cost may not be relevant to you.
nothing inherently wrong with that. You won't have maximum access to credit and multiple bank relationships but those consequences may not be relevant to you.
> you make sure you don't overspend
That's great, but not related to the number of credit cards someone has.
> never paid attention to how many points you accumulate.
Some people obsess with points but there's a difference between not accumulating optimally and not accumulating at all. It's incredibly simple to get a 1-2% discount on all money you spend by using credit cards. But, again, that opportunity cost may not be relevant to you.
> No offense (and sorry for being off-topic) but I never get how people obsess over the under 1 or 2% cost savings while completely ignoring the overvalued principal.
Here's my counterpoints:
1. ~5k is enough to pay for two amazing vacations for me and my fiancee. I'd be enthralled to save that amount of money.
2. Correct me if I'm wrong, but it sounds like you're making the implication that people should instead be searching for cheaper housing. Easier said than done.
Here's my counterpoints:
1. ~5k is enough to pay for two amazing vacations for me and my fiancee. I'd be enthralled to save that amount of money.
2. Correct me if I'm wrong, but it sounds like you're making the implication that people should instead be searching for cheaper housing. Easier said than done.
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You have not considered leverage in the equation.
If you really want to get your blood boiling about buyer's agents, watch this - https://youtu.be/jxcCJxN8aJE
Red Fin doesn't operate in my area but if it did I'd be all over it in a heartbeat when I bought my house.
Red Fin doesn't operate in my area but if it did I'd be all over it in a heartbeat when I bought my house.
First two minutes of that video states the issue is limited to the case where the agent represents both the buying and selling parties which is only legal in canada.
I'm not canadian. I dont know how commonplace this is. But as an american it sounds pretty foolish of someone to accept a deal on your next mortgage with someone who openly controls both parties.
I'm not canadian. I dont know how commonplace this is. But as an american it sounds pretty foolish of someone to accept a deal on your next mortgage with someone who openly controls both parties.
Double-ended deals are legal in some US states e.g. California, and they are indeed an opportunity for breach of fiduciary duty. The way it works is that a crooked agent would get the seller to sign a listing contract that stipulates 3% to whatever agent represents the buyer irrespective of who that agent was working for. Then present only double-ended offers, or lowball outside offers to the seller -- hiding any higher offers that came through buyer's agents. And naive sellers have been defrauded this way.
The seller's defense is simple: Refuse to sign any listing contract that stipulates more than a 1% commission to a buyer's agent that is in any financial way affiliated with the listing agent's office. 1% being roughly in line with the actual effort required from the listing agent to deal with buyer-side coordination as well.
Such a stipulation doesn't quite close the door on collusion through favor trading, among agents in the local old-boy-and-girl network. But it's enough to shield you the seller from the grosser frauds out there.
The seller's defense is simple: Refuse to sign any listing contract that stipulates more than a 1% commission to a buyer's agent that is in any financial way affiliated with the listing agent's office. 1% being roughly in line with the actual effort required from the listing agent to deal with buyer-side coordination as well.
Such a stipulation doesn't quite close the door on collusion through favor trading, among agents in the local old-boy-and-girl network. But it's enough to shield you the seller from the grosser frauds out there.
I think in a lot of cases realtors aren't the necessity they used to be, because of tools like Redfin. It used to be VERY hard (or near impossible?) to pull past sale data, comps, and various other bits of info on your own.
As a buyer, a realtor is rarely a bad choice because they likely won't cost you any money, as they usually negotiate out of he seller's fees. They help out a ton when it comes to bidding, what we could likely ask for, and the personal relationship they may have with the selling realtor. Need recommendations for an inspector or mortgage broker? They likely have some good contacts.
As a buyer, I'll probably always use a realtor, likely the last realtor I used- she was so smart and tactical that she probably would be successful in any career path she chose.
We moved from Seattle to Portland about a year ago, I grew up in Portland and didn't need any help figuring out where to live- I sure did need help in figuring out how to stand out when we were consistently one of multiple offers (one house had 13 offers three hours after the open house and closed for ~25% over asking). The inspector we used was recommended by our realtor and was so good/such a bulldog he even got the construction company to repair things they initially considered 'within spec' (we bought brand new).
Counter to that, my mom sold her house for $60K (about 15%) over what some realtor estimated she could, using only Redfin. She received 5 offers on day one.
As a buyer, a realtor is rarely a bad choice because they likely won't cost you any money, as they usually negotiate out of he seller's fees. They help out a ton when it comes to bidding, what we could likely ask for, and the personal relationship they may have with the selling realtor. Need recommendations for an inspector or mortgage broker? They likely have some good contacts.
As a buyer, I'll probably always use a realtor, likely the last realtor I used- she was so smart and tactical that she probably would be successful in any career path she chose.
We moved from Seattle to Portland about a year ago, I grew up in Portland and didn't need any help figuring out where to live- I sure did need help in figuring out how to stand out when we were consistently one of multiple offers (one house had 13 offers three hours after the open house and closed for ~25% over asking). The inspector we used was recommended by our realtor and was so good/such a bulldog he even got the construction company to repair things they initially considered 'within spec' (we bought brand new).
Counter to that, my mom sold her house for $60K (about 15%) over what some realtor estimated she could, using only Redfin. She received 5 offers on day one.
If your mom's house was also in Portland, I'm not that surprised by the outcome for the same reason that a house closing at 25% over doesn't seem that extraordinary: Portland's housing market is bonkers.
I wanted redfin to work when we solf our house in the SF Bay area a few months ago.
Redfin's issue is the selling agent was located 45 minutes away and just ran random comps and said our house was 120k lower then market. She said it would never sell for what I thought it was worth. So we ended up going with a local agent who put it on market for more then we thought and it sold for 1% over asking.
Redfin's issue is the selling agent was located 45 minutes away and just ran random comps and said our house was 120k lower then market. She said it would never sell for what I thought it was worth. So we ended up going with a local agent who put it on market for more then we thought and it sold for 1% over asking.
This happens with full price agents too. In my experience, their "expertise" is really just confidence and bluster. Commissions are high not because real estate salespeople are good, but because they are inefficient and because they operate under a de facto cartel.
I agree, we just ended up going with someone who specialized in the area instead of dealing with Redfin agent who said it would never sell.
I love their site for searching.
I love their site for searching.
It depends on the agent.
Some are pretty good at getting you more. The opposite is a house dumper or bad one(the house dumper is pro, excellent for buying).
I've sold in other industries before....good ones are worth every penny and know how to twist arms.
Granted it is a cartel that hopefully Zillow will destroy. I suspect the agent will still be around for the lazy, elderly, or those who can't sell well.
Some are pretty good at getting you more. The opposite is a house dumper or bad one(the house dumper is pro, excellent for buying).
I've sold in other industries before....good ones are worth every penny and know how to twist arms.
Granted it is a cartel that hopefully Zillow will destroy. I suspect the agent will still be around for the lazy, elderly, or those who can't sell well.
I used Redfin to sell a house and the realtor helped get the property ready for market (which took a while) and pulled multiple comps to help watch the market trend. Place sold quickly for much more than I thought it would.
Well, technically the brokers get most of that.
Actually, they typically get 1/2.
Many brokerages get nothing except a flat fee per transaction and a "desk fee".
Some take nothing at all if you're a top producer and refer your clients to their title and mortgage operations.
HomeSmart is the largest, I believe
Some take nothing at all if you're a top producer and refer your clients to their title and mortgage operations.
HomeSmart is the largest, I believe
Is this true in high-demand, low-supply markets? I've found the brokerages get much more greedy in these situations. See: Seattle, San Francisco, NYC.
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I'm not sure I follow what's happening here.
Doesn't the person selling the house pay the real estate agent? Why would someone sell their house for ~$5k less?
This reads a lot like buying a vacuum cleaner at 10% off sale and thinking you saved 10%.
Redfin helped sell the house at the price the market would bear.
Doesn't the person selling the house pay the real estate agent? Why would someone sell their house for ~$5k less?
This reads a lot like buying a vacuum cleaner at 10% off sale and thinking you saved 10%.
Redfin helped sell the house at the price the market would bear.
When you buy through redfin, they pay you part of the commission they receive.
For instance, in my neighborhood, there is a house listed for $294,000. Redfin states you would receive a refund of $904 if you bought the property through them. It doesn't scale linearly, so a $395,000 house has a $1,785 refund, nearly twice as much. It also differs by market. These are in Boston and thus are probably lower than other markets because here it is a 2.5+2.5 split rather than the 3+3 in most markets.
For instance, in my neighborhood, there is a house listed for $294,000. Redfin states you would receive a refund of $904 if you bought the property through them. It doesn't scale linearly, so a $395,000 house has a $1,785 refund, nearly twice as much. It also differs by market. These are in Boston and thus are probably lower than other markets because here it is a 2.5+2.5 split rather than the 3+3 in most markets.
> there is a house listed for $294,000. Redfin states you would receive a refund of $904 if you bought the property through them.
People still fall for these marketing gimmicks. If the listed price is $294,000 with a $904 refund then the price is $293096.
The only reason I can find for listing it as two figures (list price + refund) is because it makes the buyer take longer to tell the story about buying their house. "I paid x but got a y refund" has more talking points than "I paid x".
Especially so if the "refund" is applied long after the transaction / settlement has occurred as it now compels you to tell the story again: "I just got my y refund from my house purchase!".
And the agency gets to maintain a slush fund of hundreds of thousands of dollars of pending "refunds".
Marketing.
I thoroughly disagree with these sorts of practices and personally believe they should be regulated out of existence. But people seem to love them, so there's that. And I'm skeptical that more regulation is ever the correct answer to anything. Perhaps.
People still fall for these marketing gimmicks. If the listed price is $294,000 with a $904 refund then the price is $293096.
The only reason I can find for listing it as two figures (list price + refund) is because it makes the buyer take longer to tell the story about buying their house. "I paid x but got a y refund" has more talking points than "I paid x".
Especially so if the "refund" is applied long after the transaction / settlement has occurred as it now compels you to tell the story again: "I just got my y refund from my house purchase!".
And the agency gets to maintain a slush fund of hundreds of thousands of dollars of pending "refunds".
Marketing.
I thoroughly disagree with these sorts of practices and personally believe they should be regulated out of existence. But people seem to love them, so there's that. And I'm skeptical that more regulation is ever the correct answer to anything. Perhaps.
The real estate business, especially in Canada is essentially the mafia.
after I bought a house with an excellent agent I can't imagine how you can't use an agent. at least for your first house it's awesome. pictures online are no substitute for going in person. the agents main value is being correct in paperwork and knowing the neighborhood.
I think they are a great tool but not a replacement. great agents are very useful
I think they are a great tool but not a replacement. great agents are very useful
Redfin has agents who walk you through houses, help you with paperwork, and live in the neighborhood... (And you still save thousands over a traditional agent)
Do agents even write up most of the paperwork? I was under the impression that they just contract that out to a lawyer.
my agent walked me through the entire 150+ page offer and I asked a lot of questions, they knew. they found errors with me during escrow signing. they were with Alain pinel so I'm betting there's corporate help available but she really knew her stuff
I'm still waiting for someone to completely eliminate the realtor and charge a reasonable flat fee ($1000?) to buy/sell a house and handle all the related details.
Why do we need realtors at this point? Everyone finds houses themselves online nowadays. Why does anyone need to pay a whopper commission to some middle-man?
Why do we need realtors at this point? Everyone finds houses themselves online nowadays. Why does anyone need to pay a whopper commission to some middle-man?
With Open Listings we started flat fee on the buy side but had a couple problems.
First, it was very hard to communicate the value prop to customers. We went to market with something like "we refund the buyer's commission minus our flat fee". This brought up all kinds of questions and often buyers thought we were more expensive than realtors. Saying that we're 50% the price of a traditional realtor ended up being a more compelling message even though there's less savings in many cases.
Second, when we're acquiring customers we compete with all of the people charging a much fatter commission. If a realtor is making a 50k commission, they can afford to spend 10k on acquiring a single customer. Assuming an efficient market (which the acquisition side kind of is), a flat fee kind of caps your addressable market because you can only compete with ads at a certain price point (buyers at <400k price points in CA for instance). In some ways this is counteracted by the fact that you can save $1M buyers way more money with the flat fee, but only if you can communicate that message effectively.
That said, it looks like redfin found that there's more price elasticity on the sell side. The seller has likely been through the process before, seen how little work agents do, and feels the full agent fee more viscerally at the time of listing. For the buyer, the agent fee is this murky thing that your agent will tell you is paid for by the seller... first time buyers usually don't find out how much it is until they sign the final closing docs. The other difficulty is that the typical 2.5% being offered to the buyer's agent is essentially an advertising cost... in the existing market agents will often steer clients away from low commission listings (not ethical but it happens).
First, it was very hard to communicate the value prop to customers. We went to market with something like "we refund the buyer's commission minus our flat fee". This brought up all kinds of questions and often buyers thought we were more expensive than realtors. Saying that we're 50% the price of a traditional realtor ended up being a more compelling message even though there's less savings in many cases.
Second, when we're acquiring customers we compete with all of the people charging a much fatter commission. If a realtor is making a 50k commission, they can afford to spend 10k on acquiring a single customer. Assuming an efficient market (which the acquisition side kind of is), a flat fee kind of caps your addressable market because you can only compete with ads at a certain price point (buyers at <400k price points in CA for instance). In some ways this is counteracted by the fact that you can save $1M buyers way more money with the flat fee, but only if you can communicate that message effectively.
That said, it looks like redfin found that there's more price elasticity on the sell side. The seller has likely been through the process before, seen how little work agents do, and feels the full agent fee more viscerally at the time of listing. For the buyer, the agent fee is this murky thing that your agent will tell you is paid for by the seller... first time buyers usually don't find out how much it is until they sign the final closing docs. The other difficulty is that the typical 2.5% being offered to the buyer's agent is essentially an advertising cost... in the existing market agents will often steer clients away from low commission listings (not ethical but it happens).
Aha! I knew I wasn't crazy... I had told multiple people that Open Listings was the true incarnation of "this should be a fixed fee, not percent of transaction" only to be proven wrong by your current pricing page.
Maybe like Vanguard you could do a sliding scale as the home price goes up? That is, instead of doing 50% off at all points (and I know you're focused on CA, but bear with me) you could increase the discount at higher price points. That way a $2.5M home on OpenListings is suddenly really attractive to the high end, while you'd still be the best option at the lower end (your pricing comparison to Redfin is genius, since I believed they did a 50/50 split).
Did different portions of California respond differently to your pricing? I'm seriously sad that people buying a home wouldn't do the math to see that your flat fee was drastically lower than any percentage.
Maybe like Vanguard you could do a sliding scale as the home price goes up? That is, instead of doing 50% off at all points (and I know you're focused on CA, but bear with me) you could increase the discount at higher price points. That way a $2.5M home on OpenListings is suddenly really attractive to the high end, while you'd still be the best option at the lower end (your pricing comparison to Redfin is genius, since I believed they did a 50/50 split).
Did different portions of California respond differently to your pricing? I'm seriously sad that people buying a home wouldn't do the math to see that your flat fee was drastically lower than any percentage.
That's a cool idea. Our long term vision is definitely to get transaction costs approaching 0 so that home ownership becomes more accessible.
> Did different portions of California respond differently to your pricing?
As a young startup the sample size was pretty small, but I didn't see a regional difference. I'd say the mentality split was more experienced vs first time homebuyers. Experienced deal seekers understood commissions and were already looking for hacks around using a full-price agent (e.g. getting their own license, going direct to the seller), but the FTHBs often thought it was an additional fee. However, our product naturally attracted more of the latter group and as a team it's just easier to get excited about helping young families become homeowners than helping millionaires save 100k. That said, we didn't really see a dip in the deal seeker audience when we switched the pricing (it's still very competitive).
> Did different portions of California respond differently to your pricing?
As a young startup the sample size was pretty small, but I didn't see a regional difference. I'd say the mentality split was more experienced vs first time homebuyers. Experienced deal seekers understood commissions and were already looking for hacks around using a full-price agent (e.g. getting their own license, going direct to the seller), but the FTHBs often thought it was an additional fee. However, our product naturally attracted more of the latter group and as a team it's just easier to get excited about helping young families become homeowners than helping millionaires save 100k. That said, we didn't really see a dip in the deal seeker audience when we switched the pricing (it's still very competitive).
Thanks again for the informative reply. I agree on the "feels better helping families" angle. I think of high-end items as helping to subsidize the expected value (so drawing more high end homes means more absolute marketing / advertising dollars, allowing you to be even more competitive at the lower end). NVIDIA's Quadros and Teslas effectively pay for the GeForce price point, and both are required to be successful (GeForce drives volume, otherwise Quadro/Tesla would have to be ridiculously expensive).
I realize now that my assumption is likely wrong: selling lots of expensive homes at a lower commission doesn't generate nearly enough additional revenue. That is, there are only X000 units per year that trade hands at that price point, so unless you get a drastic change in behavior that doesn't move the needle. Interesting challenge!
I realize now that my assumption is likely wrong: selling lots of expensive homes at a lower commission doesn't generate nearly enough additional revenue. That is, there are only X000 units per year that trade hands at that price point, so unless you get a drastic change in behavior that doesn't move the needle. Interesting challenge!
This is a great answer.
I was also going to say that from an economic standpoint, agents tend to make a rather low median income even if the commission is really high, simply because the realtor job is very accessible. (There is a tight correlation, if not simple causality, between home prices variations and the variations of the amount of realtors)
Acquisition becomes proportionally harder the bigger the commission is because of the amount of people it attracts.
Conversely, if you reduced the commission by law to half, you would lose a lot of realtors, which could reduce liquidity and thus the value of the homes.
I was also going to say that from an economic standpoint, agents tend to make a rather low median income even if the commission is really high, simply because the realtor job is very accessible. (There is a tight correlation, if not simple causality, between home prices variations and the variations of the amount of realtors)
Acquisition becomes proportionally harder the bigger the commission is because of the amount of people it attracts.
Conversely, if you reduced the commission by law to half, you would lose a lot of realtors, which could reduce liquidity and thus the value of the homes.
Assuming an efficient market, a flat fee kind of caps your addressable market because you can only compete with ads at a certain price point
Unless you plan to be in business for the next 7-10 years and instead invest heavily in building a brand around your value proposition. So short term you make less, however long term when you have made the other guys irrelevant you own most of entire market.
Unless you plan to be in business for the next 7-10 years and instead invest heavily in building a brand around your value proposition. So short term you make less, however long term when you have made the other guys irrelevant you own most of entire market.
Thank you. A very illuminating description of how things work.
"seen how little work agents do..."
This is going to sound condescending, but you honestly do not know much about the business you're in.
This is going to sound condescending, but you honestly do not know much about the business you're in.
I'm not an agent myself, but I did help start a brokerage and spend most of my time automating busywork for our agents. Our top agents do 5-15 transactions per month in very competitive markets, have competitive acceptance and close rates, and great NPS scores. Agents are absolutely necessary to negotiate with sellers and talk stressed out buyers through the process, but most spend the majority of their time doing lead generation. I talked to an agent from a respectable brokerage in LA the other day who said she spends 95% of her time prospecting for new clients.
I'm not by any means saying agents are lazy, I maybe phrased that poorly. Just that if you're looking at the hourly rate the agent is making for the ~10 hours they're spending from offer to close, it's kind of wacky compared to most other types of high skill work (e.g. 10 hours on a 500k home with the typical 2.5% commission is $1,250/hour).
I'm not by any means saying agents are lazy, I maybe phrased that poorly. Just that if you're looking at the hourly rate the agent is making for the ~10 hours they're spending from offer to close, it's kind of wacky compared to most other types of high skill work (e.g. 10 hours on a 500k home with the typical 2.5% commission is $1,250/hour).
"I'm still waiting for someone to completely eliminate the need for a software engineer and charge a reasonable flat fee to bolt together some libraries and handle all the related details.
Why do we even need software engineers at this point? Everyone can find the libraries and open source tools they need online nowadays. Why does anyone need to pay a whopper paycheck to some middle-man?"
You're paying for someone's expertise, like in most industries.
Why do we even need software engineers at this point? Everyone can find the libraries and open source tools they need online nowadays. Why does anyone need to pay a whopper paycheck to some middle-man?"
You're paying for someone's expertise, like in most industries.
I generally have a different opinion. I am somewhat in the industry (construction side) and I feel that generally most realtors dont really have much knowledge of what they are selling. Furthermore, it is relatively easy to get a real estate license (at least where I live) and the handful of acquaintances that have gotten their license really dont know more than the average person.
I actually find the lack of knowledge of most realtors very surprising (not that there arent some really good ones out there). When we were working with one to find a home, we would walk into a place and our realtor would look through the listing sheet and be like "oooh they supposedly have a good quality insulation in their walls", I would then need to explain to him what an R value means and that no they truly didnt have good insulation and what they were using as a marketing point was in fact the minimum required by code. I would then point out a few other items (jump ducts, hollow core doors, etc) that would make me feel like I was walking into a Habitat for Humanity type of home, not a $600,000+ residence.
Buying a home is the largest single investment people are likely to make in their lifetime and they have almost 0 knowledge about what they are buying and do almost no research into it other than the location. They then rely on input from someone regarding what they are buying that has very little additional information other than comparable sales and "knowledge" of the market. I wrote a business plan a little while around this, but never took past just putting some ideas on paper.
I actually find the lack of knowledge of most realtors very surprising (not that there arent some really good ones out there). When we were working with one to find a home, we would walk into a place and our realtor would look through the listing sheet and be like "oooh they supposedly have a good quality insulation in their walls", I would then need to explain to him what an R value means and that no they truly didnt have good insulation and what they were using as a marketing point was in fact the minimum required by code. I would then point out a few other items (jump ducts, hollow core doors, etc) that would make me feel like I was walking into a Habitat for Humanity type of home, not a $600,000+ residence.
Buying a home is the largest single investment people are likely to make in their lifetime and they have almost 0 knowledge about what they are buying and do almost no research into it other than the location. They then rely on input from someone regarding what they are buying that has very little additional information other than comparable sales and "knowledge" of the market. I wrote a business plan a little while around this, but never took past just putting some ideas on paper.
This is so true. Not only do they typically not know anything more about nay given home that you, the buyer, do. If they are on the selling side they will also outright lie about home features. I experienced this so many times on houses I visited and even on the house I ultimately purchased.
You just have you shrug your shoulders and fix whatever they misrepresented.
You just have you shrug your shoulders and fix whatever they misrepresented.
In my state you should file a complaint against that agent with the department/office that oversees real estate licensing. And you might be eligible to be compensated for the agents misrepresentations if you can prove them.
I'd love to. Some of the things seem difficult to prove. Such as
> Welcome Home!!! Take a seat on the PORCH SWING on your COVERED DECK and enjoy the Fall Season! Come inside this cozy home and view it's OPEN FLOOR PLAN [calling this open floor plan is a big stretch], Original HARDWOOD Floors [and they are destroyed as a result. Water damage. literally cut through to put in a furnace in the basement in one place. Covered by a carpet in the living room and destroyed as a result] and FRESH Neutral Paint. Two bedrooms and a LARGE full bath [probably as small as it gets while still being a full bath] on the Main Floor with a SUNNY eat-in Kitchen and Conveniently located MUDROOM, additional bedroom/office in the basement [not legally a bedroom]. This home features Updated ELECTRICAL [in some places sure. Half the house is still crappy old cloth wrapped wire], Updated PLUMBING throughout, Living Room is WIRED for SURROUND SOUND, [broken] SPRINKLER SYSTEM and NEW Roof with a LIFETIME transferrable Warranty! Detached Garage has HEAT & A/C, Wired for Cable and LAN line [a CAT5 cable that terminates in the floor and is not accessible to be hooked up to anything because it's in the floor!], has Electric [electricity to the building no where near code because it is fed from two sources] and a HUGE Attic space to Provide LOTS of EXTRA STORAGE. This home has a Private COVERED PATIO in the back where you can relax and enjoy YOUR NEW HOME!
There was more in the listing than this but that's just the basic bio.
> Welcome Home!!! Take a seat on the PORCH SWING on your COVERED DECK and enjoy the Fall Season! Come inside this cozy home and view it's OPEN FLOOR PLAN [calling this open floor plan is a big stretch], Original HARDWOOD Floors [and they are destroyed as a result. Water damage. literally cut through to put in a furnace in the basement in one place. Covered by a carpet in the living room and destroyed as a result] and FRESH Neutral Paint. Two bedrooms and a LARGE full bath [probably as small as it gets while still being a full bath] on the Main Floor with a SUNNY eat-in Kitchen and Conveniently located MUDROOM, additional bedroom/office in the basement [not legally a bedroom]. This home features Updated ELECTRICAL [in some places sure. Half the house is still crappy old cloth wrapped wire], Updated PLUMBING throughout, Living Room is WIRED for SURROUND SOUND, [broken] SPRINKLER SYSTEM and NEW Roof with a LIFETIME transferrable Warranty! Detached Garage has HEAT & A/C, Wired for Cable and LAN line [a CAT5 cable that terminates in the floor and is not accessible to be hooked up to anything because it's in the floor!], has Electric [electricity to the building no where near code because it is fed from two sources] and a HUGE Attic space to Provide LOTS of EXTRA STORAGE. This home has a Private COVERED PATIO in the back where you can relax and enjoy YOUR NEW HOME!
There was more in the listing than this but that's just the basic bio.
I guess I'm looking for different expertise. I wouldn't trust them to have any building knowledge. I want them to know the local market. I bought a house in Los Angeles a few years ago. Because everything is so expensive we were fairly open to different areas in a radius around our jobs. It was easy to overlook neighborhoods that were a good fit just by looking at a map of house sales. I reached out to a few realtors in different parts of town. They could help answer questions about schools (and charter schools), what was low and high for the neighborhood, and other things I could find out myself, but would take too much time if I did it for a dozen neighborhoods.
They also were really helpful in scheduling walkthroughs before the house would go on the market, and scheduling all of the inspections--they also offered to be on site if I couldn't make it.
I also think they keep the sale rational when either side can get too sentimental. After inspectors found a few, minor things, the seller only offered to address them after adding another 5k onto the price (at no point was 'as-is' mentioned). This was after a few other petty things from the seller and I considered walking away. The house had been in escrow with no backup bids before we showed up. So I wouldn't be surprised if that happened last time, too.
They also were really helpful in scheduling walkthroughs before the house would go on the market, and scheduling all of the inspections--they also offered to be on site if I couldn't make it.
I also think they keep the sale rational when either side can get too sentimental. After inspectors found a few, minor things, the seller only offered to address them after adding another 5k onto the price (at no point was 'as-is' mentioned). This was after a few other petty things from the seller and I considered walking away. The house had been in escrow with no backup bids before we showed up. So I wouldn't be surprised if that happened last time, too.
Yes, yes, yes, this is so true.
When I was buying my house every time I asked a seller's agent a question about a house their answer was "I don't know." Every single damn time! If it wasn't written on the MLS they don't have a clue. That's even assuming the seller's agent was even physically there for the showing, only a few were.
My loan agent also told us that the taxes listed on the MLS were almost always flat out wrong so he always has to ignore the MLS and call the town when drafting up mortgages. I can't help but wonder if that's not so accidental. The taxes listed on the MLS for the house I ended up buying were wrong, for what its worth. Two municipals tax my house and the MLS only listed the tax for one of them.
When I was buying my house every time I asked a seller's agent a question about a house their answer was "I don't know." Every single damn time! If it wasn't written on the MLS they don't have a clue. That's even assuming the seller's agent was even physically there for the showing, only a few were.
My loan agent also told us that the taxes listed on the MLS were almost always flat out wrong so he always has to ignore the MLS and call the town when drafting up mortgages. I can't help but wonder if that's not so accidental. The taxes listed on the MLS for the house I ended up buying were wrong, for what its worth. Two municipals tax my house and the MLS only listed the tax for one of them.
Any rules of thumb/advice you can offer on evaluating home quality from your experience?
That is a tough one. I have been in the industry for 10+ years and a lot of it in the higher end custom home side. To me a couple of things that standout as super cheap are jump ducts (basically they didnt bother to put a return air duct in a room and just put a whole in a wall with grills on either side to allow air transfer), hollow core interior doors (you can hear/feel the difference if you knock on a hollow core door versus a solid door), all stucco exterior (cheapest clading material where I live), sometimes upper floor water pressure is almost non-existent and they dont put in a booster pump, and on and on... I feel like it really varies from project to project. I have seen some where they actually spent a decent amount on the cabinet drawer/door fronts, but then didnt bother to spend a couple of hundred more on good undermount drawer guides. Others where they didnt bother to think about layout/flow in a kitchen (aka the island looks great, but if I open my fridge I cant squeeze by the island and the door to actually get anything out of it). I think generally a lot of what people are trying to build today qualifies as "modern" but to me it just looks/feels cheap. To truly do modern well is very expensive. I dont particularly like the look, but thats just my opinion.
Older construction is another area entirely. When flipping houses became popular a lot of people got into the industry who didnt know what they were doing, or they went about trying to do it as quick and cheaply as possible. I have heard that the less you know about a place you are trying to flip the better. AKA if I dont open up any walls to see if the electrical doesnt actually meet code, then I dont have to spend a bunch of money replacing it! Or I didnt get a structural engineer to look at the foundation so I dont know if there are any issues with it and therefore I dont need to disclose anything to a potential buyer.
Older construction is another area entirely. When flipping houses became popular a lot of people got into the industry who didnt know what they were doing, or they went about trying to do it as quick and cheaply as possible. I have heard that the less you know about a place you are trying to flip the better. AKA if I dont open up any walls to see if the electrical doesnt actually meet code, then I dont have to spend a bunch of money replacing it! Or I didnt get a structural engineer to look at the foundation so I dont know if there are any issues with it and therefore I dont need to disclose anything to a potential buyer.
I assume most folks hire an inspector or appraiser before signing the final line?
I agree real estate agents are way too trusted. The good ones are great but any moron or scumbag can get a license.
I agree real estate agents are way too trusted. The good ones are great but any moron or scumbag can get a license.
I'm sure there are exceptions, but I've never met a realtor in the US that wasn't an outright impediment to an easy sale. For one thing, their incentives are usually adverse to one or both parties. Also, they're usually in the habit of pushing volume, and are lazy/terrible at marketing even the most compelling properties. They fail to grasp the fundamentals of customer service and fall back on scammy guilt trips and pressure sales tactics. Meanwhile, they're cutting every corner they can find.
In Japan, I had the opposite experience. Here, realtors worked really hard for me, and most of them are on a meager salary without commissions.
In Japan, I had the opposite experience. Here, realtors worked really hard for me, and most of them are on a meager salary without commissions.
Expertise at what, exactly? It's often incredibly difficult to assign any value to realtors except 'knowledge of market', which should be the easiest part to automate.
Knowledge of process, not just market. Which, don't get me wrong should also be easy to automate.
The hubris of this forum is astounding sometimes.
Zillow and Redfin have attempted to automate just the valuation of properties (with enourmous resources behind them), and still aren't as accurate as traditional appraisers. It's easy?
Edit: Even Zillow agrees. There's a million dollar prize if you can do better.
http://www.marketwatch.com/amp/story/guid/D24B68EC-4090-11E7...
Zillow and Redfin have attempted to automate just the valuation of properties (with enourmous resources behind them), and still aren't as accurate as traditional appraisers. It's easy?
Edit: Even Zillow agrees. There's a million dollar prize if you can do better.
http://www.marketwatch.com/amp/story/guid/D24B68EC-4090-11E7...
So? Real estate agents aren't appraisers and shouldn't do "official" appraisals because of misaligned incentives (among other reasons).
Appraisals are kind of weird anyways, they are only an somewhat educated guess until someone actually buys the property and they are pretty individually subjective. My friend had 3 different appraisers come to her house and do three different appraisals and they all varied by quite a bit and one was absurdly high, much higher than the others, and extremely unrealistic (IMO). Appraisers also have information that algorithms don't because they actually go to the house and view the property with their own eyes. They can take into account better the condition of the property and "soft," more subjective inputs that you can only tell by actually viewing the property. It's not really directly comparable to an algorithm since there's just a subjective bend to the whole process and there's much more information available to appraisers.
Not only that but when the bank does an appraisal for a mortgage the appraiser's job is only to justify the selling price. They start with the agreed upon selling price and they use data to justify it, they don't go into it blind, they consider and analyze the agreement of sale as part of the valuation. Zillow obviously can't take that info account as Zillow doesn't have that information. So you're comparing apples (a market analysis based on public information) to oranges (a justification of a privately agreed upon sale price).
An appraisal is also cheap, especially compared to a real estate agent. Ours was a flat $425.
https://theappraisercoach.com/why-most-purchase-appraisals-s...
Appraisals are kind of weird anyways, they are only an somewhat educated guess until someone actually buys the property and they are pretty individually subjective. My friend had 3 different appraisers come to her house and do three different appraisals and they all varied by quite a bit and one was absurdly high, much higher than the others, and extremely unrealistic (IMO). Appraisers also have information that algorithms don't because they actually go to the house and view the property with their own eyes. They can take into account better the condition of the property and "soft," more subjective inputs that you can only tell by actually viewing the property. It's not really directly comparable to an algorithm since there's just a subjective bend to the whole process and there's much more information available to appraisers.
Not only that but when the bank does an appraisal for a mortgage the appraiser's job is only to justify the selling price. They start with the agreed upon selling price and they use data to justify it, they don't go into it blind, they consider and analyze the agreement of sale as part of the valuation. Zillow obviously can't take that info account as Zillow doesn't have that information. So you're comparing apples (a market analysis based on public information) to oranges (a justification of a privately agreed upon sale price).
An appraisal is also cheap, especially compared to a real estate agent. Ours was a flat $425.
https://theappraisercoach.com/why-most-purchase-appraisals-s...
If you don't know the difference between an appraiser and a real estate agent, you should stop commenting in such a condescending tone.
Fair point! A realtor can still walk a property to perform a market analysis, which is still more accurate than an automated valuation.
I'm exhausted by the never ending comments here "it's easy! Anyone can do this!" when it's clearly not. I'm simply countering the disingenuity, whether the source is ignorance or arrogance.
I'm exhausted by the never ending comments here "it's easy! Anyone can do this!" when it's clearly not. I'm simply countering the disingenuity, whether the source is ignorance or arrogance.
>A realtor can still walk a property to perform a market analysis, which is still more accurate than an automated valuation
Wow, how on earth do you know that!? That's a pretty bold statement and I don't really see anything to justify it at all. You start with "algorithm aren't as accurate as traditional appraisers" and then conclude from that "real estate agents (who aren't appraisers!) can give a more accurate market analysis than algorithms." There's a big leap there.
Even if this was true that real estate agents do a better job than automatic algorithms it's still kind of irrelevant because an appraiser cost somewhere in the neighborhood of $300-$600 where as an agent costs $5,000-$10,000+. If you need an appraisal you hire an appraiser, not an agent.
Wow, how on earth do you know that!? That's a pretty bold statement and I don't really see anything to justify it at all. You start with "algorithm aren't as accurate as traditional appraisers" and then conclude from that "real estate agents (who aren't appraisers!) can give a more accurate market analysis than algorithms." There's a big leap there.
Even if this was true that real estate agents do a better job than automatic algorithms it's still kind of irrelevant because an appraiser cost somewhere in the neighborhood of $300-$600 where as an agent costs $5,000-$10,000+. If you need an appraisal you hire an appraiser, not an agent.
Anyone can do this. In fact, I do it every time I walk into a home and decide what I might be willing to pay for it.
Anyone can do an estimate; whether they can do it better than Zillow, etc., algorithms is a different question.
As buyers, we simply hired an appraisal firm. I think it cost around $300. Then we hired a notary public to handle the paperwork, about $2500.
Honestly, if you think real estate agents are the only ones capable of managing this process, then I can only assume you've never bought a house.
Honestly, if you think real estate agents are the only ones capable of managing this process, then I can only assume you've never bought a house.
In markets where anything can happen and buyers overbid on the order of 100-300k over asking price simply because they want it and will do anything to get it, it is very difficult to accurately estimate the value and/or selling price of a home.
also, ever wonder why the home appraisal comes in right at the offer price during the loan process? its not a coincidence. the appraised price typically has more to do with conducting a business transaction in the interest of all parties involved and less to do with an actual valuation of the home.
also, ever wonder why the home appraisal comes in right at the offer price during the loan process? its not a coincidence. the appraised price typically has more to do with conducting a business transaction in the interest of all parties involved and less to do with an actual valuation of the home.
The market value of a thing is what someone is willing to pay for it. The appraisal usually comes in at the offer amount because the appraisal is ordered by the bank providing the loan. The appraiser knows/has the offer and works backwards to ensure that other people would likely offer the same amount as the current offer/buyer.
Thats what I'm saying. It's rare at that late stage of the process (at least according to my real estate agent friend) for the appraisal to come in off the mark. Nobody wants to see the deal fall through in the last stages.
I agree with you! That's why you can't automate a valuation, unless you can magically poll through digital means potential buyers in a market on demand. You don't know what the property is worth until it's on the market and you have bona fide offers in hand.
Don't professional appraisers actually go to the property and look around?
As for the rest, why should the process of selling a house require "expertise"? Apart from inspections, which require domain knowledge of infrastructure.
As for the rest, why should the process of selling a house require "expertise"? Apart from inspections, which require domain knowledge of infrastructure.
>why should the process of selling a house require "expertise"?
At a fundamental level, one could say sellers don't require outside expertise to sell a home. Real estate agents are optional. There is a concept called "for sale by owner" which is a strategy some homeowners use. They can list the house on their own (not on MLS though), vet potential buyers, coordinate the showing of the home (appointments and/or open houses), etc. They can also get a real-estate lawyer to draw up contract papers, handle earnest money, etc.
However, most sellers do not want to mess with all the above. They literally do not have the "expertise" to do it all themselves. (Yes, the homeowners can sell a car on Craigslist but selling a home is a step change in complexity.) Hence, you end up with middlemen like real estate agents.
Some people think real-estate agents only exist because they have a monopoly on the MLS computer listings. That's not true. Even if somebody disrupted MLS database with Zillow listings, real estate agents would still exist. Selling a house is a complicated enough affair that intermediaries who specialize in it would always be a natural emergent phenomenon. The real economic question is whether they can keep charging 6% commissions as the internet evolves.
At a fundamental level, one could say sellers don't require outside expertise to sell a home. Real estate agents are optional. There is a concept called "for sale by owner" which is a strategy some homeowners use. They can list the house on their own (not on MLS though), vet potential buyers, coordinate the showing of the home (appointments and/or open houses), etc. They can also get a real-estate lawyer to draw up contract papers, handle earnest money, etc.
However, most sellers do not want to mess with all the above. They literally do not have the "expertise" to do it all themselves. (Yes, the homeowners can sell a car on Craigslist but selling a home is a step change in complexity.) Hence, you end up with middlemen like real estate agents.
Some people think real-estate agents only exist because they have a monopoly on the MLS computer listings. That's not true. Even if somebody disrupted MLS database with Zillow listings, real estate agents would still exist. Selling a house is a complicated enough affair that intermediaries who specialize in it would always be a natural emergent phenomenon. The real economic question is whether they can keep charging 6% commissions as the internet evolves.
Most of the time you can list a FSBO house on the MLS for a small fee. Our MLS has plenty of the FSBO houses listed.
https://fsbo.com/flat-fee-mls
The thing is, a lot of time FSBO houses tend to be overpriced, which is very unfortunate.
https://fsbo.com/flat-fee-mls
The thing is, a lot of time FSBO houses tend to be overpriced, which is very unfortunate.
To be listed on an MLS you still need to offer a co-broke fee to any agent procuring a buyer.
The real economic question is whether they can keep charging 6% commissions as the internet evolves
That's the point. In pre-internet ages, there was a huge information imbalance that kind of validated that 6% (also, there wasn't such a ridiculous housing bubble).
Someone mentioned a real estate agent making 1250 dollars/hour. I would be willing to jump whatever hoops were needed to make that kind of money if I were in the U.S.
That's the point. In pre-internet ages, there was a huge information imbalance that kind of validated that 6% (also, there wasn't such a ridiculous housing bubble).
Someone mentioned a real estate agent making 1250 dollars/hour. I would be willing to jump whatever hoops were needed to make that kind of money if I were in the U.S.
>That's the point.
Well, the percentage is only part of the point. Some commenters in this thread are truly perplexed why the agents even _exist_.
They exist because sellers want them to exist. I'm saying it's naive to think that a new revolutionary website with a slick UI/UX would make agents obsolete. Agents may make less money (e.g. forces of free market lowers their median income from $45k to $20k) but the agents won't go away. If you have a population of people that don't want to do something (hassle work of selling) and a segment of population willing to specialize in relieving that hassle, then boom, you inevitably end up with agents. A new website or smartphone app doesn't remove the desires for that business relationship.
>Someone mentioned a real estate agent making 1250 dollars/hour.
Most agents don't make much money[1]. (Median is ~$45k.) There are a handful of superstar agents selling multi-million dollar mansions but most agents are selling more modest properties.
[1] https://www.google.com/search?q=average+real+estate+agent+in...
Well, the percentage is only part of the point. Some commenters in this thread are truly perplexed why the agents even _exist_.
They exist because sellers want them to exist. I'm saying it's naive to think that a new revolutionary website with a slick UI/UX would make agents obsolete. Agents may make less money (e.g. forces of free market lowers their median income from $45k to $20k) but the agents won't go away. If you have a population of people that don't want to do something (hassle work of selling) and a segment of population willing to specialize in relieving that hassle, then boom, you inevitably end up with agents. A new website or smartphone app doesn't remove the desires for that business relationship.
>Someone mentioned a real estate agent making 1250 dollars/hour.
Most agents don't make much money[1]. (Median is ~$45k.) There are a handful of superstar agents selling multi-million dollar mansions but most agents are selling more modest properties.
[1] https://www.google.com/search?q=average+real+estate+agent+in...
Getting the appraisal from the place that's selling to you seems like an inherent and obvious conflict of interest. Ideally the appraisal should be a flat flee from a third party.
In the context of your comment, what value do you see realtors providing w/r/t appraisals?
In the context of your comment, what value do you see realtors providing w/r/t appraisals?
I'd say that Zillow and Redfin are better on average than traditional appraisers.
Traditional appraisers might be better in certain markets or conditions though (probably Zillow and Redfin are more generic).
I've worked on homeowners insurance and I've seen wildly differing appraisals.
Traditional appraisers might be better in certain markets or conditions though (probably Zillow and Redfin are more generic).
I've worked on homeowners insurance and I've seen wildly differing appraisals.
Are you sure traditional appraiser is the right term? They cannot predict actual sales price.
The developer's expertise is often not needed, such as Wix, Google Sheets/Excel, Wordpress, etc. Developers will be middlemen less and less as technology progresses, same as realtors.
I can see some of the expertise coming into play on the selling side.
Can you give me a few examples of what kinds of value one gets while buying?
From what I can tell the main service that my realtor offered when I buying my place was access to the MLS. We found the houses we wanted to look at and he gave us access. Dollars per hour he was doing very well working with me, although I might be an exception.
Can you give me a few examples of what kinds of value one gets while buying?
From what I can tell the main service that my realtor offered when I buying my place was access to the MLS. We found the houses we wanted to look at and he gave us access. Dollars per hour he was doing very well working with me, although I might be an exception.
In my most recent homebuying experience, my realtor was able to point out several facts about the house based on the surrounding market that saved me about $40k. It also helps that I don't pay for the realtor on the buy side.
What's your argument against a good realtor who saves you any amount when it's coming out of the seller's fee?
Edit: By the time you've come to visit a home you're buying, the seller has already agreed to the commission percentage with their agent. The money is already spent.
What's your argument against a good realtor who saves you any amount when it's coming out of the seller's fee?
Edit: By the time you've come to visit a home you're buying, the seller has already agreed to the commission percentage with their agent. The money is already spent.
The money from the seller isn't free. For example there is a chance that I could get them to sell the house to me for less than what I am buying it for. If for example the seller met me half way on those fees that's a decent amount off of cash.
When I was buying my home the loan person I worked with is family so she helped me more than my realtor. Looked into neighborhoods for me etc. It could be that they were looking out for me more than normal.
I am in a market where houses sell instantly, more or less you look at a house and make an offer within out 24 hours or else it's gone. Which is crazy but the realtor didn't even get much of a chance to look into things here for us.
When I was buying my home the loan person I worked with is family so she helped me more than my realtor. Looked into neighborhoods for me etc. It could be that they were looking out for me more than normal.
I am in a market where houses sell instantly, more or less you look at a house and make an offer within out 24 hours or else it's gone. Which is crazy but the realtor didn't even get much of a chance to look into things here for us.
Yes, your loan person was definitely going far beyond what service any normal customer would receive from their loan person.
I'll make sure and call her and tell her I love her!
You're surely paying for the realtor in a pass through fashion on the sale price of the home.
>Can you give me a few examples of what kinds of value one gets while buying?
If a buyer is unfamiliar with the area (e.g. job relocation), a competent agent can point out the desirable & the unpublicized undesirable aspects of particular neighborhoods. The agent knows the area intimately and that knowledge can be worth paying for to avoid buying the wrong house.
If I'm living in the same house for 20 years and I see a house right down the street from me go up sale that would be perfect for my elderly parents so I could keep an eye on them, I wouldn't need a buyer's agent since I would already know more about that house/neighborhood than any agent would.
If a buyer is unfamiliar with the area (e.g. job relocation), a competent agent can point out the desirable & the unpublicized undesirable aspects of particular neighborhoods. The agent knows the area intimately and that knowledge can be worth paying for to avoid buying the wrong house.
If I'm living in the same house for 20 years and I see a house right down the street from me go up sale that would be perfect for my elderly parents so I could keep an eye on them, I wouldn't need a buyer's agent since I would already know more about that house/neighborhood than any agent would.
> If a buyer is unfamiliar with the area (e.g. job relocation), a competent agent can point out the desirable & the unpublicized undesirable aspects of particular neighborhoods.
This is just utter rubbish. Buyer's agent has absolutely no incentives to publicize undesirable aspects as the agent is still paid half of the commission on the sale price which means that the agent has all the incentives to inflate the price.
But lets pretend that this is the exclusively buyers agent? Well, the thing is - if this buyer's agent is not working for buyers only brokerage he or she is still going to be not on a right side because the brokerage needs cooperation of the sellers agents. In fact, the customer of a buyers agent is seller's agent, NOT the buyer. Even worse, where a buyer can do 2-3 transaction via agent ( unlikely really but possible ) the agents that represent the other side are likely to do dozens of transactions with him or her.
It is even worse for the buyer only brokerages ( they do exist but they are super rare ).
This entire agent industry needs to be destroyed.
This is just utter rubbish. Buyer's agent has absolutely no incentives to publicize undesirable aspects as the agent is still paid half of the commission on the sale price which means that the agent has all the incentives to inflate the price.
But lets pretend that this is the exclusively buyers agent? Well, the thing is - if this buyer's agent is not working for buyers only brokerage he or she is still going to be not on a right side because the brokerage needs cooperation of the sellers agents. In fact, the customer of a buyers agent is seller's agent, NOT the buyer. Even worse, where a buyer can do 2-3 transaction via agent ( unlikely really but possible ) the agents that represent the other side are likely to do dozens of transactions with him or her.
It is even worse for the buyer only brokerages ( they do exist but they are super rare ).
This entire agent industry needs to be destroyed.
Seems like an awful large price to pay for some low-quality, fear-mongering, dog whistling. Seems like a great way to encourage people to spend more than they want to!
Isn't that basically what SaaS is? Companies that would have had to hire engineers to do bespoke work can contract out to a SaaS vendor and get what they need for a fixed fee.
SaaS doesn't make sense every case, just like Redfin doesn't, but it's still valid.
SaaS doesn't make sense every case, just like Redfin doesn't, but it's still valid.
Those SaaS vendors are still paying developers; if a cookie cutter self-service model works for your needs as a customer, more power to you.
Rarely has that appeared to be the case in the dozens of real estate transactions I've been through, and it might explain why Redfin can't grow faster; people want to have their hand held through the largest transaction of their life, and those who can charge more for those services will.
Rarely has that appeared to be the case in the dozens of real estate transactions I've been through, and it might explain why Redfin can't grow faster; people want to have their hand held through the largest transaction of their life, and those who can charge more for those services will.
Meh, at some point, it always becomes a matter of perspective. If the same work is getting done, then you just shift around who does it or how it's paid for.
Rarer, but more valuable, is discovering new work to do, or old work that doesn't need to be done, and then either inserting it or taking it out of an existing market/process/role/job/company, while still managing to get paid for your own contributions.
Rarer, but more valuable, is discovering new work to do, or old work that doesn't need to be done, and then either inserting it or taking it out of an existing market/process/role/job/company, while still managing to get paid for your own contributions.
Agree. But you are wasting your time on HN arguing those points. On HN (many) people are curious, think they rise to a challenge, and think they have the time and bandwidth to defeat any obstacle or achieve any goal they want. And are additionally willing to DIY it just for sport. The shocking thing is how little they understand how 'normal' folks operate. Wanting simple, easy and not necessarily having either the time, intelligence or desire to cut out a useful middleman.
Also I love when people decide that the way someone else earns a living makes them overpaid and not worth what the market is paying them.
In the end as I said in another comment most people selling real estate aren't making tremendous money doing it with all the time wasted on people who don't end up buying.
Also I love when people decide that the way someone else earns a living makes them overpaid and not worth what the market is paying them.
In the end as I said in another comment most people selling real estate aren't making tremendous money doing it with all the time wasted on people who don't end up buying.
The problem isn't that real estate agents are offering the service, it's that you're pretty much forced into using it.
You are not 'forced' into using it.
You can compile your own information of houses that may be for sale that aren't for sale and approach the owner directly and try to buy it. You can also approach people who had their houses listed that took them off the market and approach them after the listing expired.
Think I am making this up? That is exactly what I did with one property that I bought. It was listed one year and never sold. I wrote a letter to the owner saying I wanted to buy it, struck a deal, and bought it. Simple common sense.
Let's say you are interested in a condo (as only one example could be houses in a development) in a particular building. Send a postal letter to everyone in the building. Say you are a serious buyer and ask them if they want to sell. In a large enough building you will get people that are thinking about selling and you can strike a deal.
Management offices (at condos) often know who might be selling as well. Contact them.
I have gotten deals for buying real estate from property management companies as well. They send me leads and I don't have to use a realtor at all. They know I am a buyer because I have communicated that to them. Also helps to buy small gifts for the person that holds that info or at least be super nice.
You can compile your own information of houses that may be for sale that aren't for sale and approach the owner directly and try to buy it. You can also approach people who had their houses listed that took them off the market and approach them after the listing expired.
Think I am making this up? That is exactly what I did with one property that I bought. It was listed one year and never sold. I wrote a letter to the owner saying I wanted to buy it, struck a deal, and bought it. Simple common sense.
Let's say you are interested in a condo (as only one example could be houses in a development) in a particular building. Send a postal letter to everyone in the building. Say you are a serious buyer and ask them if they want to sell. In a large enough building you will get people that are thinking about selling and you can strike a deal.
Management offices (at condos) often know who might be selling as well. Contact them.
I have gotten deals for buying real estate from property management companies as well. They send me leads and I don't have to use a realtor at all. They know I am a buyer because I have communicated that to them. Also helps to buy small gifts for the person that holds that info or at least be super nice.
> You can compile your own information of houses that may be for sale that aren't for sale and approach the owner directly and try to buy it. You can also approach people who had their houses listed that took them off the market and approach them after the listing expired.
In some markets it is not possible due to what is known as "pocket listings".
In some markets it is not possible due to what is known as "pocket listings".
People that are thinking about selling that don't have a listing will not usually give you a very good deal (e.g. "make me move" offers).
If you're not getting market or below market rate, there isn't much point in bypassing the agent.
If you're not getting market or below market rate, there isn't much point in bypassing the agent.
""I'm still waiting for someone to completely eliminate the need for a software engineer and charge a reasonable flat fee to bolt together some libraries and handle all the related details."
That can be done (and is done) for cookie-cutter projects such as websites.
A company I consulted for offers 600 dollar CMS websites, no extra fees.
I've also paid amazingly low prices for other kind of "bolt-library-together" projects.
A lot of companies do overpay, but there's also a lot of variance between projects.
That can be done (and is done) for cookie-cutter projects such as websites.
A company I consulted for offers 600 dollar CMS websites, no extra fees.
I've also paid amazingly low prices for other kind of "bolt-library-together" projects.
A lot of companies do overpay, but there's also a lot of variance between projects.
I used to think the same way, but then I bought my first house and my realtor was insanely helpful. The entire process is filled with random quagmires that I would have never known how to manage otherwise.
Someone with more experience may be more able to go it alone obviously, but my realtor was invaluable.
Someone with more experience may be more able to go it alone obviously, but my realtor was invaluable.
> The entire process is filled with random quagmires
OK, but why is that? And how many of those "random quagmires" are coming from realtors?
The real estate industry reminds me of the tax preparation industry or car sales in the USA. My opinion is they are all (by design) intentionally annoying, cumbersome, overly complex, overly expensive, and excessively time consuming, seemingly for no reason other than to protect vested interests. These areas are ripe for dramatic disruption.
OK, but why is that? And how many of those "random quagmires" are coming from realtors?
The real estate industry reminds me of the tax preparation industry or car sales in the USA. My opinion is they are all (by design) intentionally annoying, cumbersome, overly complex, overly expensive, and excessively time consuming, seemingly for no reason other than to protect vested interests. These areas are ripe for dramatic disruption.
They usually come from City Councils, county boards, school levies, HOAs, insurance requirements on page 192.PGP.168, etc. that are changing all the time. Depending on where you are in the US, it really can be that bad very quickly. Ever buy a house? The contract you sign is literally thousands of pages of legalese that may or may not contradict everything else in it. The Real Estate Agents (REAs) give you 'cover' and smooth out all bumps. Joan knows Frank on XYZ council, therefore you'll never ever catch any flack. Freddy is a REA you used and therefore everything is 'above board' as far as a judge cares, next case please. Ahmed knows good and bad home inspectors, it'll take you 3 months of 8 hour days to begin to figure them out. Etc. Yes, corruption/nepotism sucks, PM me when it has passed from the face of the Earth. If you are buying a home in anywhere near a 'desirable' market, use a REA. 5k for 'peace of mind' is more than worth it.
In the 10 or so real estate deals that I have done over the past few years, I have to say that the realtor (even the exceptionally good ones) never pointed out any of the nuances of the perils related to the entities you mentioned above. In all cases, it was me, due to bad past experiences with HOAs for example, who was proactively demanding that I be given the HOA restrictions before making the contract; there were plenty of deals I walked away from when I thought the HOA was power hungry and ridiculous. EDIT: I am not dismissing the role of realtors - they had good tips that I use to this day. Here is one: start the homeowner's insurance purchase/quotes during the option period to ensure that any related surprises here will enable you to walk away during the option period than trying to deal with killing the deal with the much-higher earnest money amount at stake.
I have to say that the most insightful article I have ever read about realtors came from the controversial Freakonomics. It clearly outlined the separation of concerns and interests and made it clear to me that if a real estate deal is to work well, the only person responsible is me and me alone.
I have to say that the most insightful article I have ever read about realtors came from the controversial Freakonomics. It clearly outlined the separation of concerns and interests and made it clear to me that if a real estate deal is to work well, the only person responsible is me and me alone.
> start the homeowner's insurance purchase/quotes during the option period to ensure that any related surprises here will enable you to walk away during the option period than trying to deal with killing the deal with the much-higher earnest money amount at stake.
Wow, this is great advice and something I would never think of doing.
Wow, this is great advice and something I would never think of doing.
> The contract you sign is literally thousands of pages of legalese that may or may not contradict everything else in it. The Real Estate Agents (REAs) give you 'cover' and smooth out all bumps. Joan knows Frank on XYZ council, therefore you'll never ever catch any flack.
That's why you pay for real estate lawyer to go with you to closing. That's the only person qualified to help you. It is the only person who represents you if you pay them.
That's why you pay for real estate lawyer to go with you to closing. That's the only person qualified to help you. It is the only person who represents you if you pay them.
You paid for a lawyer to go with you to the closing? Did they point out anything you had missed? (I've never heard of anyone doing that.)
Yes. It was money well spent. One of the docs was changed.
As someone who bought my first house without a realtor involved at all. I don't know what value they could have added. Thanks to Zillow, Redfin and the like it was a piece of cake to locate a house. I found one that was for sale by owner that I liked, we negotiated on a price and came to an agreement. There was a lot of paperwork, but I'm literate and can read. Most of the complex stuff was with the loan and the title company, both of which were more than happy to walk me through the steps of each.
I really have no idea what tens of thousands of dollars extra would have bought me. I don't need someone to hold my hand and look at cars with me either.
I really have no idea what tens of thousands of dollars extra would have bought me. I don't need someone to hold my hand and look at cars with me either.
> I found one that was for sale by owner that I liked, we negotiated on a price and came to an agreement.
Sounds like you don't live in a very competitive market. Here in the Bay Area, you don't even talk to the owner of the house, as they will have a seller's agent. Generally if a house is desirable, there will be anywhere from 5 to 20 offers on a house. The only way to get your foot in the door is to have your buyer's agent go to bat for you. Ideally they will have a prior relationship with the seller's agent, and have insight as to what kind of offer to make to make you competitive with other offers. I can't imagine buying a house around here without having the expertise that an agent can offer.
> I really have no idea what tens of thousands of dollars extra would have bought me.
As a buyer, you are not paying anything extra. The commission comes out of the seller's fees.
> I don't need someone to hold my hand and look at cars with me either.
Buying a house is an order of magnitude more complex and expensive than buying a car. Not really a fair comparison.
Sounds like you don't live in a very competitive market. Here in the Bay Area, you don't even talk to the owner of the house, as they will have a seller's agent. Generally if a house is desirable, there will be anywhere from 5 to 20 offers on a house. The only way to get your foot in the door is to have your buyer's agent go to bat for you. Ideally they will have a prior relationship with the seller's agent, and have insight as to what kind of offer to make to make you competitive with other offers. I can't imagine buying a house around here without having the expertise that an agent can offer.
> I really have no idea what tens of thousands of dollars extra would have bought me.
As a buyer, you are not paying anything extra. The commission comes out of the seller's fees.
> I don't need someone to hold my hand and look at cars with me either.
Buying a house is an order of magnitude more complex and expensive than buying a car. Not really a fair comparison.
Actually some would prefer no agent buyers due to contract arrangement.
For example, the buyer and seller will split commission but in some cases one side can collect all of it.
For example, the buyer and seller will split commission but in some cases one side can collect all of it.
If i didnt have my realtor I would not have landed my house because of how competitive my market is. My realtor called me at 6 am on a Saturday morning before the listing was even up on zillow or redfin. I was there to see the house that afternoon and had a P&S agreement accepted before Monday morning before anyone else even had a chance to see the house.
Also the realtor had contacts of contractors and inspectors that she trusted so that the inspection and repair stages all went way more smoothly than if I was calling random contractors for quotes.
Again this doesnt apply depending on the market and price range that you are in.
Also the realtor had contacts of contractors and inspectors that she trusted so that the inspection and repair stages all went way more smoothly than if I was calling random contractors for quotes.
Again this doesnt apply depending on the market and price range that you are in.
You clearly don't live in a hot market
I agree. I live in a small isolated town, and I thought realtors were artificially increasing the home prices (not values, but prices) in the small pool of housing available here. But their local knowledge was invaluable in both buying and selling a home.
That said, if a buyer and seller agree on a sale independently of any realtor here, we can go to a local realtor and they'll happily facilitate the sale for a flat fee of around $1000. I've done that once, and had a number of friends who also did so. Most of the realtors recognize that the bulk of their commission comes from the listing and marketing process, and the paperwork is just something they know how to do correctly. $1000 is a fair price for knowing that's all being done correctly and fairly.
That said, if a buyer and seller agree on a sale independently of any realtor here, we can go to a local realtor and they'll happily facilitate the sale for a flat fee of around $1000. I've done that once, and had a number of friends who also did so. Most of the realtors recognize that the bulk of their commission comes from the listing and marketing process, and the paperwork is just something they know how to do correctly. $1000 is a fair price for knowing that's all being done correctly and fairly.
You don't need a realtor, fyi, just a good real estate lawyer, which you generally need anyway when buying/selling a house.
A lot of the apparent value of realtors disappears when you do the process yourself. source: have FSBO bought, and FSBO sold, and redfin bought, and worked for Coldwell Banker.
Getting on the MLS is cheap/easy now with discount MLS listings--I wouldn't do fsbo without it, even though you usually pay buyer's agents.
A lot of the apparent value of realtors disappears when you do the process yourself. source: have FSBO bought, and FSBO sold, and redfin bought, and worked for Coldwell Banker.
Getting on the MLS is cheap/easy now with discount MLS listings--I wouldn't do fsbo without it, even though you usually pay buyer's agents.
>You don't need a realtor, fyi, just a good real estate lawyer,
Lawyer prices will obviously be different in different parts of the country, (so maybe a lot cheaper where you are) but I knew someone who arranged a transaction without a realtor and paid a lawyer a lot more than $1,000 to put together all the necessary documents. One thousand seems like a good deal.
>...which you generally need anyway when buying/selling a house.
You've found it necessary to always consult a lawyer when buying/selling even though realtors were involved? Why? What value did they add?
Lawyer prices will obviously be different in different parts of the country, (so maybe a lot cheaper where you are) but I knew someone who arranged a transaction without a realtor and paid a lawyer a lot more than $1,000 to put together all the necessary documents. One thousand seems like a good deal.
>...which you generally need anyway when buying/selling a house.
You've found it necessary to always consult a lawyer when buying/selling even though realtors were involved? Why? What value did they add?
A house sale is really a large contract agreement with a number of finer points. The legal fees were maybe $750 - 1200 but memory is sketchy on that. There are filings necessary with the state and other items that make it legal, and at least in Massachusetts USA, it is a lot different than say selling a mountain bike. Banks need certain info for loans, there's the deed, etc, inspections, etc.
When you are signing your 20th piece of paper, you realize you needed the lawyer. One dirty secret of realtors is that all this work is handled by lawyers, and the impossible-looking parts of a real estate transaction are handled by lawyers who understand it and have it down to a fixed-price cookie-cutter process for their locality. They did "consult" with me a bit and gave some "free" advice, but I just paid the fix price for doc generation mainly.
When you are signing your 20th piece of paper, you realize you needed the lawyer. One dirty secret of realtors is that all this work is handled by lawyers, and the impossible-looking parts of a real estate transaction are handled by lawyers who understand it and have it down to a fixed-price cookie-cutter process for their locality. They did "consult" with me a bit and gave some "free" advice, but I just paid the fix price for doc generation mainly.
I agree it would be a bit risky to buy/sell real estate without any outside help. My point was just that if you are already using a realtor, it shouldn't generally be necessary to also hire a lawyer.
The realtor and bank rely on the lawyer for your transaction and documentation.
When I say "you need a lawyer anyway", even if you used a realtor, a lawyer drew up the docs for closing, and you hired the lawyer who put together the closing docs, although you may not realize it. You are paying the lawyer directly as a line item in your closing costs, so they are technically "your lawyer." Most people think the realtor had something net-positive to do with the magic house-transfering documents, but, not really.
This may vary by state/locale.
When I say "you need a lawyer anyway", even if you used a realtor, a lawyer drew up the docs for closing, and you hired the lawyer who put together the closing docs, although you may not realize it. You are paying the lawyer directly as a line item in your closing costs, so they are technically "your lawyer." Most people think the realtor had something net-positive to do with the magic house-transfering documents, but, not really.
This may vary by state/locale.
>...This may vary by state/locale.
Yea might be different where I am. Like any signed document, I am sure a lawyer somewhere created the templates for the selling agreement, the purchase agreement, the loan documents and closing documents etc but I don't recall seeing any line item for a lawyer's time on any document nor did I ever talk to a lawyer. (Thank goodness for this as a real estate lawyer I know charges about 400 an hour. Fortunately there is nothing unusual about most loans/purchases/closings and lawyers don't typically have to get involved in each transaction - around here loan processors, escrow officers, etc actually do the work and they are much less expensive than a lawyer would be.)
Yea might be different where I am. Like any signed document, I am sure a lawyer somewhere created the templates for the selling agreement, the purchase agreement, the loan documents and closing documents etc but I don't recall seeing any line item for a lawyer's time on any document nor did I ever talk to a lawyer. (Thank goodness for this as a real estate lawyer I know charges about 400 an hour. Fortunately there is nothing unusual about most loans/purchases/closings and lawyers don't typically have to get involved in each transaction - around here loan processors, escrow officers, etc actually do the work and they are much less expensive than a lawyer would be.)
How do you get a mortgage without a lawyer? Our bank required the lawyer to do the title search, title settlement, and title recording - according to my closing disclosure, which I just consulted.
Might be different in different areas. In places I've lived, the title company handles all of this - the seller doesn't hire a lawyer - a large title company likely has a corporate lawyer in case something comes up, but otherwise they have people whose job is it to do the search and put together the closing documents.
Aren't you paying for it ultimately though?
http://imgur.com/Zc4t0to
Title company? Blah, blah. Still goes through lawyer! I'm paying for this at the end.
SRSLY! I hate to be a dick but.... come on...
cooperate lawyer? Who cares?
http://imgur.com/Zc4t0to
Title company? Blah, blah. Still goes through lawyer! I'm paying for this at the end.
SRSLY! I hate to be a dick but.... come on...
cooperate lawyer? Who cares?
Just to keep pricing in context, the media home value in the US is right around $200k. So the transfer cost ends up being ~$12k. If the RE attorneys (on each side) each spent a full day @ $200/hour on the closing, you're looking at $3,200. That creates an extra $9k to split between the parties. And there's no way a closing takes a full day for an attorney (and most will be less than $200/hr).
The best part is that that same $3,200 will transfer a house that costs a lot more. The more expensive the house, the more you should want to use a lawyer over a realtor.
The best part is that that same $3,200 will transfer a house that costs a lot more. The more expensive the house, the more you should want to use a lawyer over a realtor.
>... That creates an extra $9k to split between the parties. And there's no way a closing takes a full day for an attorney (and most will be less than $200/hr).
Yes, most brokers use standard forms, there isn't much actual expense there for them - which is a good thing because a real estate attorney I know bills at more than $400 per hour.
A good realtor does a LOT more than just fill out the contracts for you to sign. The realtor will spend lots of time scheduling inspections, helping find contractors, being at the property to watch contractors, scheduling the photographer, putting the ad on MLS, running open houses, answering questions from buyers, negotiating with buyers, working with the title company, arranging to hand the keys off to the buyer, etc, etc. You are paying for their experience to know what needs to be done and for the time it takes to do all those tasks that I mentioned (and others). The standard commission costs are high, but there are brokers like Redfin who are less expensive.
Yes, most brokers use standard forms, there isn't much actual expense there for them - which is a good thing because a real estate attorney I know bills at more than $400 per hour.
A good realtor does a LOT more than just fill out the contracts for you to sign. The realtor will spend lots of time scheduling inspections, helping find contractors, being at the property to watch contractors, scheduling the photographer, putting the ad on MLS, running open houses, answering questions from buyers, negotiating with buyers, working with the title company, arranging to hand the keys off to the buyer, etc, etc. You are paying for their experience to know what needs to be done and for the time it takes to do all those tasks that I mentioned (and others). The standard commission costs are high, but there are brokers like Redfin who are less expensive.
You (the buyer) schedules the inspection, you can ask the real estate agent to do it for you but it's a simple phone call.
I don't understand the contractors statement, a contractor is not a usual part of a real estate transaction, at least in my experience?
Once again, scheduling photographs is a simple phone call to a photographer.
Putting an ad on the MLS can be done yourself for a small fee - https://fsbo.com/flat-fee-mls
Buyer's questions can be better answered yourself, most sellers agents are unable to answer any questions and they'll have to relay most questions to you anyways, once again, my experience.
Open houses are more about generating leads for the agent then they are about showing your house.
Negotiating with buyers can be done yourself easily.
Working with the title company isn't something real estate agents do, not around here anyways. My lawyer handled all the title stuff. Plus what sort of "work" does an agent need to do with the title company?
Handing off the keys? Seriously? That is done at closing and shouldn't cost $5,000+.
I don't understand the contractors statement, a contractor is not a usual part of a real estate transaction, at least in my experience?
Once again, scheduling photographs is a simple phone call to a photographer.
Putting an ad on the MLS can be done yourself for a small fee - https://fsbo.com/flat-fee-mls
Buyer's questions can be better answered yourself, most sellers agents are unable to answer any questions and they'll have to relay most questions to you anyways, once again, my experience.
Open houses are more about generating leads for the agent then they are about showing your house.
Negotiating with buyers can be done yourself easily.
Working with the title company isn't something real estate agents do, not around here anyways. My lawyer handled all the title stuff. Plus what sort of "work" does an agent need to do with the title company?
Handing off the keys? Seriously? That is done at closing and shouldn't cost $5,000+.
>You (the buyer) schedules the inspection, you can ask the real estate agent to do it for you but it's a simple phone call.
Yes obviously you can do that. But you have to take the time to research the different companies a little to find a good one and you have to be there while the inspection is done.
>...I don't understand the contractors statement, a contractor is not a usual part of a real estate transaction, at least in my experience?
In selling, often there are either things that come up on inspection that need to be fixed or improvements that are done to make the property sell better - new paint, new carpeting, etc. Obviously a seller can do this, but it takes time to get bids and to be at the house to let them in, etc.
>...Putting an ad on the MLS can be done yourself for a small fee - https://fsbo.com/flat-fee-mls
Yes, obviously this can be done, and yes you can also take the time to look at a number of listings and write the ad copy if you choose.
>...Buyer's questions can be better answered yourself, most sellers agents are unable to answer any questions and they'll have to relay most questions to you anyways, once again, my experience.
A good agent can save you time here.
>...Open houses are more about generating leads for the agent then they are about showing your house.
One way or the other, you need someone there during an open house. Either you have to be there or you need to pay someone to be there.
>...Negotiating with buyers can be done yourself easily.
Obviously a seller can negotiate themselves and maybe they are as good at negotiating and know as much about the local market as people who do this everyday and maybe they know the agents to avoid. Though maybe it isn't that uncommon that the seller hasn't sold many properties and is better off having someone else help them.
>...Working with the title company isn't something real estate agents do, not around here anyways. My lawyer handled all the title stuff. Plus what sort of "work" does an agent need to do with the title company?
Different situations in different parts of the country I guess.
>...Handing off the keys? Seriously?
In this part of the country, it is done later - agent meets the person at the house. Again, no reason you couldn't do it, but it is time out of your day.
>...That is done at closing and shouldn't cost $5,000+.
Not sure where the number comes from - there is no need to put words in my mouth. Simply listing some of the the things the agent did when my place was sold. If I had to take time off of work to try and handle all these details, it would have cost me a lot more than the commission the agent got.
Yes obviously you can do that. But you have to take the time to research the different companies a little to find a good one and you have to be there while the inspection is done.
>...I don't understand the contractors statement, a contractor is not a usual part of a real estate transaction, at least in my experience?
In selling, often there are either things that come up on inspection that need to be fixed or improvements that are done to make the property sell better - new paint, new carpeting, etc. Obviously a seller can do this, but it takes time to get bids and to be at the house to let them in, etc.
>...Putting an ad on the MLS can be done yourself for a small fee - https://fsbo.com/flat-fee-mls
Yes, obviously this can be done, and yes you can also take the time to look at a number of listings and write the ad copy if you choose.
>...Buyer's questions can be better answered yourself, most sellers agents are unable to answer any questions and they'll have to relay most questions to you anyways, once again, my experience.
A good agent can save you time here.
>...Open houses are more about generating leads for the agent then they are about showing your house.
One way or the other, you need someone there during an open house. Either you have to be there or you need to pay someone to be there.
>...Negotiating with buyers can be done yourself easily.
Obviously a seller can negotiate themselves and maybe they are as good at negotiating and know as much about the local market as people who do this everyday and maybe they know the agents to avoid. Though maybe it isn't that uncommon that the seller hasn't sold many properties and is better off having someone else help them.
>...Working with the title company isn't something real estate agents do, not around here anyways. My lawyer handled all the title stuff. Plus what sort of "work" does an agent need to do with the title company?
Different situations in different parts of the country I guess.
>...Handing off the keys? Seriously?
In this part of the country, it is done later - agent meets the person at the house. Again, no reason you couldn't do it, but it is time out of your day.
>...That is done at closing and shouldn't cost $5,000+.
Not sure where the number comes from - there is no need to put words in my mouth. Simply listing some of the the things the agent did when my place was sold. If I had to take time off of work to try and handle all these details, it would have cost me a lot more than the commission the agent got.
>you have to take the time to research the different companies a little to find a good one and you have to be there while the inspection is done.
You should ALWAYS be there when inspection is done. Always. You're paying for it after all. Research? Yes, you should regardless. I couldn't imagine not being there and/or not researching. Real estate agents are useless in this step. How does this have to do with an agent other than "can use the phone?"
Anything about the contractor, lol, yeah, doesn't happen in real life...
>it takes time to get bids and to be at the house to let them in, etc.
Nothing about a real estate transaction has anything to do with this.
> you can also take the time to look at a number of listings and write the ad copy if you choose
???? !!! ????? Wat!? LOL
How old are you!?!
>A good agent can save you time here.
LOL!!!! Yeah, this doesn't happen. Have you ever talked to a sellers agent??? LOL!!! Asking a basic question of a sellers agent = idk. I would laugh if it wasn't sad... Actually, I laugh anyways. If it isn't on the MLS, they don't have a clue.
>One way or the other, you need someone there during an open house. Either you have to be there or you need to pay someone to be there.
PROTIP - Your agent doesn't schedule an open house for you, she schedules an open house for her. Open houses are a lead generator, nothing more.
>agent meets the person at the house.
Wat!? At closing the keys are hand over. There isn't any other way. You're there anyways. Give me a break that agents try to justify their cost that ways??!!
$5,000+ comes from 3% of 200,000, which is $6,000.
Come on!! Give me a break!! I don't even hate agents but, for Christ sake, try harder!!
You should ALWAYS be there when inspection is done. Always. You're paying for it after all. Research? Yes, you should regardless. I couldn't imagine not being there and/or not researching. Real estate agents are useless in this step. How does this have to do with an agent other than "can use the phone?"
Anything about the contractor, lol, yeah, doesn't happen in real life...
>it takes time to get bids and to be at the house to let them in, etc.
Nothing about a real estate transaction has anything to do with this.
> you can also take the time to look at a number of listings and write the ad copy if you choose
???? !!! ????? Wat!? LOL
How old are you!?!
>A good agent can save you time here.
LOL!!!! Yeah, this doesn't happen. Have you ever talked to a sellers agent??? LOL!!! Asking a basic question of a sellers agent = idk. I would laugh if it wasn't sad... Actually, I laugh anyways. If it isn't on the MLS, they don't have a clue.
>One way or the other, you need someone there during an open house. Either you have to be there or you need to pay someone to be there.
PROTIP - Your agent doesn't schedule an open house for you, she schedules an open house for her. Open houses are a lead generator, nothing more.
>agent meets the person at the house.
Wat!? At closing the keys are hand over. There isn't any other way. You're there anyways. Give me a break that agents try to justify their cost that ways??!!
$5,000+ comes from 3% of 200,000, which is $6,000.
Come on!! Give me a break!! I don't even hate agents but, for Christ sake, try harder!!
>...At closing the keys are hand over. There isn't any other way.
What you mean to say is that you can't imagine that things could be done differently than how it was done where you are located. That pretty much sums up every comment you made here...
What you mean to say is that you can't imagine that things could be done differently than how it was done where you are located. That pretty much sums up every comment you made here...
In my case, there was always a lawyer involved in the contract with a fixed for dealing with documentation, as part of the closing costs. I never explicitly involved a lawyer but have always been intrigued by the idea of doing a FSBO deal with a lawyer generating all of the real estate contracts for a fixed fee.
Or just a title company. I have twice gone without realtors in transactions. Sales contracts in my state, Florida, have a uniform structure. The title company, if its large enough, probably has a staff attorney. In one case, I was able to escalate issues to the attorney when the seller was tussling with me about changes to the contract. No additional costs other than normal closing fee's associated with title insurance and such.
Do they make you sign a contract or can you put 3% discount for person to person sale?
That way they are paying their agent if they decide to use one.
In the MLS listing, you put the amount of commission you are offering for buyer's agent. Then the real estate lawyer draws up the final contract with that included and it comes out of what you get. For direct person to person, I imagine you can just skip that part. If you put that you are willing to pay 0% commission, I think what will happen is that everyone who is actually relying on their buyer's agent to source houses to look at will not be brought to your property, as there is nothing in it for them.
You might lose out on a profitable bidding war, or the one customer who might buy the house coming through by doing that, but you might get an extra 2.5% if it works out.
You might lose out on a profitable bidding war, or the one customer who might buy the house coming through by doing that, but you might get an extra 2.5% if it works out.
It seems the takeaway from all these comments here is that there needs to be more education in the home buying experience.
Agents and brokers tend to make the home buying process as complicated and as murky as possible on purpose, job security.
Bulk of commission actually covers prospecting. This is how the Redfin model works. It saves the agents time by funneling customers to them through the website :)
Agreed, for most people this is by far the single largest monetary transaction they will make (aside from another home purchase) in their entire life. Some form of "assistance" during the process is necessary.
I'm a big DIYer and will go to great length to research and do things on my own. My Realtor (Redfin agent) payed for himself and then some during the home buying process. Your paying for their experience and knowledge.
My agent making statements like "I had our lawyer review our signed purchase agreement and because of X,Y,Z we are still ok" helped me understand why I'm paying a big company a lot of money to help me out.
I'm a big DIYer and will go to great length to research and do things on my own. My Realtor (Redfin agent) payed for himself and then some during the home buying process. Your paying for their experience and knowledge.
My agent making statements like "I had our lawyer review our signed purchase agreement and because of X,Y,Z we are still ok" helped me understand why I'm paying a big company a lot of money to help me out.
Have you used TurboTax or an alternative to file your taxes? Would something like that, with step by step and explaining why's and how's not be enough for this purpose?
I think for stable markets; ie: markets where neither the buyer or seller has a distinct advantage; probably. But I just bought in a market where the sellers have a clear advantage and buyers are competing aggressively against one another. Houses in my market have an average listing time of 8 days, almost all with multiple offers, many with dozens of offers.
I thought my RE agent wasn't really worth what I knew I would be paying him until we actually went to make an offer. Their knowledge of our circumstance and the local market let us put together an offer that despite not being the highest offer, nor the most favorable closing (I used a VA loan which takes on average 50% longer to close), we still were able to come out on top. My agent helped us get an inspection on the property the day we saw it so that we could wave inspection contingency, knew that we needed to put up more than the standard earnest money to account for our weak closing position, and they were able to accurately predict what the house would appraise for so that we could ensure that we didn't overbid and waive the under appraisal contingency.
I thought my RE agent wasn't really worth what I knew I would be paying him until we actually went to make an offer. Their knowledge of our circumstance and the local market let us put together an offer that despite not being the highest offer, nor the most favorable closing (I used a VA loan which takes on average 50% longer to close), we still were able to come out on top. My agent helped us get an inspection on the property the day we saw it so that we could wave inspection contingency, knew that we needed to put up more than the standard earnest money to account for our weak closing position, and they were able to accurately predict what the house would appraise for so that we could ensure that we didn't overbid and waive the under appraisal contingency.
That doesn't explain why they should earn a percentage of the purchase price, and not a flat fee.
They don't get paid unless there is a successful sale. Listing contracts are for a fixed period. There are marketing expenses and time invested to list and market a property. If they don't successfully sell your home they don't get paid and they are out any of their time invested and marketing expenses.
High risk, high reward.
High risk, high reward.
> There are marketing expenses and time invested to list and market a property
Putting a house on Zillow takes, what, 15 minutes?
Perhaps the exception is very high end real estate, but from what I've seen most of the high end realtors are just really good at networking and schmoozing.
Putting a house on Zillow takes, what, 15 minutes?
Perhaps the exception is very high end real estate, but from what I've seen most of the high end realtors are just really good at networking and schmoozing.
Add up all the time an agent spends previewing the property before listing, taking calls (especially from crazies) and arranging for showings, showings (including driving to and from), negotiating (writing up offers and counter offers), after acceptance arrangements such as coordinating inspections, final readings, closing arrangements. They only get paid if the deal closes.
The amount of effort is variable and unknown upfront (high risk, high reward).
Would you be willing to pay an hourly rate or per service rendered UPFRONT fee? I'm sure there are some brokers that offer such things. Most people don't want to part ways with their money before they know they actually sold their home (another nice thing about not having to pay until closing... the seller only pays if and at closing!)
How much do knowledgeable and experienced consultants make per hour?
The amount of effort is variable and unknown upfront (high risk, high reward).
Would you be willing to pay an hourly rate or per service rendered UPFRONT fee? I'm sure there are some brokers that offer such things. Most people don't want to part ways with their money before they know they actually sold their home (another nice thing about not having to pay until closing... the seller only pays if and at closing!)
How much do knowledgeable and experienced consultants make per hour?
Knowledgeable and experienced consultants typically don't make more than maybe 250 per hour (as a cost the client) that I've seen. That's pretty high at that.
Having gone through four home-buying episodes, where my wife (an ex-realtor) spent massive amounts of time trolling Trulia, RedFin, calling police departments, gathering reports from the local City Hall, I can tell you there is still a service to be provided by agents. And anyone who has bought a house knows that the collection of contracts that represents "buying a house" is not a small collection, and errors can be logistical disasters down the road.
A good agent is worth 10x their commission. A bad agent, of which there are many, is a waste of money. And the big rub is that people who could be buying homes probably aren't simply because they don't know the dozens of tricks that can be employed to make an unaffordable situation affordable, or able to identify a good deal.
If you're comfortable buying a home without any background check, then I guess you don't need a realtor, but I wouldn't do it.
Oh, and the laws that protect realtors, toss 'em. What we really need is Yelp for realtors.
A good agent is worth 10x their commission. A bad agent, of which there are many, is a waste of money. And the big rub is that people who could be buying homes probably aren't simply because they don't know the dozens of tricks that can be employed to make an unaffordable situation affordable, or able to identify a good deal.
If you're comfortable buying a home without any background check, then I guess you don't need a realtor, but I wouldn't do it.
Oh, and the laws that protect realtors, toss 'em. What we really need is Yelp for realtors.
> A good agent is worth 10x their commission.
You actually think a 'good' realtor deserves a 60% commission? I can tell you're married to a realtor.
You actually think a 'good' realtor deserves a 60% commission? I can tell you're married to a realtor.
I'm currently working on solving this problem, hoping to launch in the next year. The truth is the average real estate agent doesn't have a college degree and has been in the business for less than 3 years. And in a hot market, when houses sell in a week, the agent is worth even less. What marketing plan is going to sell a house in a week? None at market value.Furthermore, buyers are walking into transactions thinking they aren't paying for a realtor when they are paying for both sides in the price of the house.
> What marketing plan is going to sell a house in a week? None at market value.
Do not agree. Markets are only collections of people, and brokers know people, some of whom are buyers and a few of whom are the perfect buyers. Reaching those people is the marketing plan. Also, this is not buying airplane tickets, this is the single most costly and complicated process buyers and sellers will likely go through in their whole lives, so time frames of a week are fantasy.
Do not agree. Markets are only collections of people, and brokers know people, some of whom are buyers and a few of whom are the perfect buyers. Reaching those people is the marketing plan. Also, this is not buying airplane tickets, this is the single most costly and complicated process buyers and sellers will likely go through in their whole lives, so time frames of a week are fantasy.
Depends entirely on your market. A former co-worker sold his father's house for tens (possibly hundreds, I don't want to oversell this, but I can't recall for sure) of thousands of dollars over list in Denver in less than 3 days. If you count closing, it's definitely more than a week, but a contract was signed very quickly.
I hear you -- I'd only say the marketing, showing, offer and acceptance took three days but selling of the house, by any meaningful/legal definition, took much longer.
"This is the single most costly and complicated process people will go through. .." so why hire someone for 5-7% of the purchase price, who doesn't have a college degree and has been in the industry for 3 years or less. Furthermore, notice the incentives if you're a buyer literally everyone in the transaction from real estate agent to mortgage broker wants the price to be as high as possible. The incentives all point toward increasing the house price. We're going to fix this. And hopefully help many in the process. I say all of this as a real estate broker and lawyer to boot.
>so why hire someone for 5-7% of the purchase price
What's a few hundred basis points of exaggeration when trying to make a point, right?
>who doesn't have a college degree
Anecdote time: I know well five brokers, all who have degrees, one with an advanced degree.
>and has been in the industry for 3 years or less.
Now here, you have described Redfin agents almost perfectly. Huge turnover, low compensation, bad broker work and no long term interest in a career that facilitates a race to the bottom.
> Furthermore, notice the incentives if you're a buyer literally everyone in the transaction from real estate agent to mortgage broker wants the price to be as high as possible.
Yes some buyers can avoid involving intermediaries, and that's where Redfin and its ilk can work well. But it is a fact that without negotiation skill and deep experience in the product, all that upward price pressure goes unanswered. Markets aren't magic, they are collections of people, and agents who earn their keep are persons skilled at high touch, high risk transactions between people.
> We're going to fix this.
Redfin's had 12 years and what's more, its flat-rate business model predates the web. Would you like a few more decades?
What's a few hundred basis points of exaggeration when trying to make a point, right?
>who doesn't have a college degree
Anecdote time: I know well five brokers, all who have degrees, one with an advanced degree.
>and has been in the industry for 3 years or less.
Now here, you have described Redfin agents almost perfectly. Huge turnover, low compensation, bad broker work and no long term interest in a career that facilitates a race to the bottom.
> Furthermore, notice the incentives if you're a buyer literally everyone in the transaction from real estate agent to mortgage broker wants the price to be as high as possible.
Yes some buyers can avoid involving intermediaries, and that's where Redfin and its ilk can work well. But it is a fact that without negotiation skill and deep experience in the product, all that upward price pressure goes unanswered. Markets aren't magic, they are collections of people, and agents who earn their keep are persons skilled at high touch, high risk transactions between people.
> We're going to fix this.
Redfin's had 12 years and what's more, its flat-rate business model predates the web. Would you like a few more decades?
How is your solution any different to the other hundreds of FSBO platforms currently operating? What value does it bring over Redfin or Zillow? Why would real estate agents, escrow agents, mortgage brokers want to work with you if it means a lower fee for them?
What is the purpose of calling police departments?
To determine if any possible meth activity is associated with the home.
Crime in the area, for one.
When I was young before the Internet, it was impossible to book overseas travel without a travel agent. As more and more information became available and presented in a user friendly manner booking travel online became the norm.
It will take much longer for the information required to buy or sell to become easily accessible over the Internet but I have no doubt this day will come.
It will take much longer for the information required to buy or sell to become easily accessible over the Internet but I have no doubt this day will come.
Having just left a job in this exact field, maybe I can give you an insight I haven't seen on here yet:
There's a huge monopoly present in real estate data right now. At a very high level: The NAR (National Association of Realtors) licenses real estate agents, they pretty much allow you to do business and you cannot sell houses in the US without their approval. MLSes (Multiple Listing Service) are organizations created for a region/state/city, depending on the size/market. These are exclusively permitted by the NAR. All realtors MUST put their house data on an MLS. These realtors are also forced to pay large amounts to access these feeds. All traditional real estate data only lives in these organizations, with high barriers to extracting and manipulating the data since they want to keep their monopoly.
Basically, the real estate world is very entrenched in these monopolistic practices, and we're only now seeing significant efforts to accumulate and dissipate the data in a way that makes it more accessible. Personally, I wouldn't expect any major overhaul as the NAR is a HUGE lobbying group and have gotten a good amount of legislation around real estate on their side.
Hope that helps!
There's a huge monopoly present in real estate data right now. At a very high level: The NAR (National Association of Realtors) licenses real estate agents, they pretty much allow you to do business and you cannot sell houses in the US without their approval. MLSes (Multiple Listing Service) are organizations created for a region/state/city, depending on the size/market. These are exclusively permitted by the NAR. All realtors MUST put their house data on an MLS. These realtors are also forced to pay large amounts to access these feeds. All traditional real estate data only lives in these organizations, with high barriers to extracting and manipulating the data since they want to keep their monopoly.
Basically, the real estate world is very entrenched in these monopolistic practices, and we're only now seeing significant efforts to accumulate and dissipate the data in a way that makes it more accessible. Personally, I wouldn't expect any major overhaul as the NAR is a HUGE lobbying group and have gotten a good amount of legislation around real estate on their side.
Hope that helps!
>I'm still waiting for someone to completely eliminate the realtor [...] Why do we need realtors at this point? Everyone finds houses themselves online nowadays.
The need for realtors comes mostly from the sellers not the buyers. (Yes, some buyers also contract a "buyer's agent" but the point remains that realtors are still desirable to help market and show a home.)
Unlike the "dis-intermediation" that happened to travel agents (online flight/hotel booking), and librarians (google searches), or video rental clerks (Netflix), the elimination of realtors to represent the most expensive component in an owner's net worth is not going to happen because of a slick point & click housing website.
Consider that the vast majority of people don't even post their garage items on ebay for sale. Compared to that, selling a house is a much more complicated transaction. There's a categorization in sales called "low touch" and "high touch" transactions. A "low touch" transaction would be buying a loaf of bread from the grocery store. For the forseeable future (at least decades), selling homes will be a "high touch" transaction and sellers will want the reassurance and "warm & fuzzies" from another human middleman to help them fetch the best price. (E.g., the owner would presumably hire the appropriate realtor with the reputation and track record to quickly sell homes similar to his/her property.)
However, that doesn't mean more efficiencies can't be wrung from the system. Many think the typical realtor's commission of ~6% is way too high so it seems inevitable that entrepreneurs will revolutionize the market. Regardless of the new landscape (e.g. maybe no more MLS), the human intermediaries will still be there.
The need for realtors comes mostly from the sellers not the buyers. (Yes, some buyers also contract a "buyer's agent" but the point remains that realtors are still desirable to help market and show a home.)
Unlike the "dis-intermediation" that happened to travel agents (online flight/hotel booking), and librarians (google searches), or video rental clerks (Netflix), the elimination of realtors to represent the most expensive component in an owner's net worth is not going to happen because of a slick point & click housing website.
Consider that the vast majority of people don't even post their garage items on ebay for sale. Compared to that, selling a house is a much more complicated transaction. There's a categorization in sales called "low touch" and "high touch" transactions. A "low touch" transaction would be buying a loaf of bread from the grocery store. For the forseeable future (at least decades), selling homes will be a "high touch" transaction and sellers will want the reassurance and "warm & fuzzies" from another human middleman to help them fetch the best price. (E.g., the owner would presumably hire the appropriate realtor with the reputation and track record to quickly sell homes similar to his/her property.)
However, that doesn't mean more efficiencies can't be wrung from the system. Many think the typical realtor's commission of ~6% is way too high so it seems inevitable that entrepreneurs will revolutionize the market. Regardless of the new landscape (e.g. maybe no more MLS), the human intermediaries will still be there.
http://walawrealty.com/
Flat fee, and for "all the related details" - they represent you as lawyers. I had an exceedingly positive experience buying with them in 2012. I wish their model would become dominant.
Flat fee, and for "all the related details" - they represent you as lawyers. I had an exceedingly positive experience buying with them in 2012. I wish their model would become dominant.
I agree. I've been waiting for this disruption for a while. In the past 5 years all the realtors I had to interact with had to do was to open the property I found and later prepare the documents and tell me where to sign and who to pay, and obviously collect a good chunk of money every year for rentals and the % for sales. Every time I needed their help for something I wouldn't get.
I can't see how that could not been replaced by a system of some sort.
I can't see how that could not been replaced by a system of some sort.
In many states, real estate brokers are responsible for ensuring that laws are followed and held accountable by a state government office. This means brokers take on risk and liability. Many states require a brokers license in order to sell real property for another for a fee. Yes, brokers are trying to protect their generous income structure.
Brokers (and salespeople) are only paid on successfully selling the property. The truth is not many people want to pay someone per hour or per showing to see houses. You can certainly sell or buy a home without a broker. You are bearing the risks in that case. If you buy and sell a home on your own and the deal falls apart, if the contract was not valid or not enforceable you could owe or lose thousands of dollars. Yes, you can have a lawyer draft the contract but a lawyer can't (in many states) show the property (ADD: and a lawyer is going to charge for each and every offer you written up. You pay regardless of if the sell happens or not).
With time I see brokers fees approaching a flat fee for facilitation services only (so long as they don't represent the seller or buyer in the transaction).
Why do we still have sports agents? Can't players and teams negotiate on their own?
Brokers (and salespeople) are only paid on successfully selling the property. The truth is not many people want to pay someone per hour or per showing to see houses. You can certainly sell or buy a home without a broker. You are bearing the risks in that case. If you buy and sell a home on your own and the deal falls apart, if the contract was not valid or not enforceable you could owe or lose thousands of dollars. Yes, you can have a lawyer draft the contract but a lawyer can't (in many states) show the property (ADD: and a lawyer is going to charge for each and every offer you written up. You pay regardless of if the sell happens or not).
With time I see brokers fees approaching a flat fee for facilitation services only (so long as they don't represent the seller or buyer in the transaction).
Why do we still have sports agents? Can't players and teams negotiate on their own?
Buying a house is among the largest purchases of many peoples' lives. It could be worth the $5,000-$50,000 (~6% of value in U.S.) for the piece of mind. People are used to using realtors. I don't think enough economists and business people give culture enough credit for its impact on businesses and finances. It's common enough that if the buyer tries to make direct contact with the seller, all parties are startled and the deal falls through entirely.
Next, there are established network effects in the real estate industry. Companies that have tried to offer a flat-fee house brokerage service at scale have been met by massive resistance from existing realtors, who then dissuade their many buyers and sellers from even considering those services. I think this has been a brick wall for a long time.
Next, there are established network effects in the real estate industry. Companies that have tried to offer a flat-fee house brokerage service at scale have been met by massive resistance from existing realtors, who then dissuade their many buyers and sellers from even considering those services. I think this has been a brick wall for a long time.
That fee could easily be 3-6 months salary. That's a hefty price to pay for culture and piece of mind.
Spread over a 30 year mortgage? I'm not saying it's nothing but many people really value peace of mind.
Is your argument that agents are so expensive that hiring them necessitates taking out a 30-year loan? That's not a great argument.
I don't think the time horizon of the mortgage is relevant. 3-month's income is 3-month's income.
I don't think the time horizon of the mortgage is relevant. 3-month's income is 3-month's income.
> I don't think the time horizon of the mortgage is relevant.
I think that view is less prevalent than it might seem. Many people look at this as one large purchase which they intend to use for decades, which involves a number of other upfront expenses but almost always also assumes significant tax savings and appreciation over that same time period.
I've heard plenty of people talk about that as just the price to pay for getting in on that long-term gain and clearly it hasn't caused that many people to not buy houses or bail to an alternative so far. One of the reasons for that seems to be that some people value having what they perceive as an expert representing them. I like RedFin – and had a great experience using them when I bought my current house – but it was interesting seeing how some people thought it was great when we mentioned that but others — generally but not exclusively older — were really scared that there was going to be some sort of unnoticed problem with the house[1] or a technicality which would cause the deal to fall through.
1. Yes, they knew this was replacing the realtor and not the inspector. No, that did not end the concern.
I think that view is less prevalent than it might seem. Many people look at this as one large purchase which they intend to use for decades, which involves a number of other upfront expenses but almost always also assumes significant tax savings and appreciation over that same time period.
I've heard plenty of people talk about that as just the price to pay for getting in on that long-term gain and clearly it hasn't caused that many people to not buy houses or bail to an alternative so far. One of the reasons for that seems to be that some people value having what they perceive as an expert representing them. I like RedFin – and had a great experience using them when I bought my current house – but it was interesting seeing how some people thought it was great when we mentioned that but others — generally but not exclusively older — were really scared that there was going to be some sort of unnoticed problem with the house[1] or a technicality which would cause the deal to fall through.
1. Yes, they knew this was replacing the realtor and not the inspector. No, that did not end the concern.
The reason direct contact fails is due to the contract sellers repped by an agent sign: voiding the contract by going around they're back still is a fee.
It lasts 6 months or so...after it fails to sell, you should be good assuming they don't switch to another one immediately.
Some buyer agents might not want to deal with FSO though.
It lasts 6 months or so...after it fails to sell, you should be good assuming they don't switch to another one immediately.
Some buyer agents might not want to deal with FSO though.
I'm pretty sure purplebricks in the UK are flat-fee.
I can't really speak on the aspect of buying a home, but when we sold my grandmothers home having a solid real estate agent certainly was mutually beneficial. They knew what needed to be done in regards to quick fix repairs that were far cheaper than the value added to the home when sold, and in turn earned a higher commission fee for themselves.
I'm not sure how good redfin is to work with on the sell side of things, but I have a hard time imagining that a flat fee gets you the personal attention needed to be able to sell a home for 10% above what you were hoping to get.
I'm not sure how good redfin is to work with on the sell side of things, but I have a hard time imagining that a flat fee gets you the personal attention needed to be able to sell a home for 10% above what you were hoping to get.
I recently bought from someone selling through Homie. https://www.homie.com
About $1000. Initial couple hundred to take pictures, put up a nice sign, and list your house. The balance is paid when you close. Scheduling viewings and offer submission is done through their site. They also offer legal advice.
The only really nice feature they lack is HelloSign/similar integration for the paperwork.
About $1000. Initial couple hundred to take pictures, put up a nice sign, and list your house. The balance is paid when you close. Scheduling viewings and offer submission is done through their site. They also offer legal advice.
The only really nice feature they lack is HelloSign/similar integration for the paperwork.
I was looking for a company like this to sell my house, instead of through traditional realtor. I see their about page says "On average, we save Utahns over $8,000 per transaction." Is the service only available in Utah?
Probably...I thought that might be case but didn't see it on their website when I looked.
I live in Utah.
I'm sure Homie or similar will be very common within 5 years in most places.
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There are also "flat-fee listing services" that have been around for a long time. They usually only satisfy any legal requirements and get you onto the offical listing sites, but you may want to search for that.
I live in Utah.
I'm sure Homie or similar will be very common within 5 years in most places.
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There are also "flat-fee listing services" that have been around for a long time. They usually only satisfy any legal requirements and get you onto the offical listing sites, but you may want to search for that.
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Isn't the main value of a realtor the ability to provide access to the home for sale, monitor the visitor, and provide insight in regards to the construction & quality of the home?
I don't think most people expect the realtor to recommend random homes based on the buyers preferences, as most people use services, such as RedFin, to narrow down the homes that match their best fit.
I don't think most people expect the realtor to recommend random homes based on the buyers preferences, as most people use services, such as RedFin, to narrow down the homes that match their best fit.
And that's worth 3%? The issue with realtors is the exorbitant fees they still charge.
In my experience a good realtor will either save you 3% when buying or get you an extra 3% when selling by knowing the area, knowing the right improvements to make, home staging, and negotiating.
Have you ever worked with a realtor? The fee may seem exorbitant because you pay it in a lump sum. But if you were to try and calculate their hourly fee, you'll see even the mediocre ones who are only moderately attentive to their clients are often making only a few dollars an hour.
Exactly. I worked with a buyer's agent for 2+ years, and during that time saw over 100 houses and submitted about 30 written offers. None of the offers were accepted, so he made $0 from me. I felt kind of bad, but the money he makes from his successful transactions probably makes it worth it. Not my problem.
I don't know if they deserve a % of the purchase price, but they definitely ought to at least charge by the hour.
I don't know if they deserve a % of the purchase price, but they definitely ought to at least charge by the hour.
It's only exorbitant since the price of housing has skyrocketed in the past 20 years
RE agents in most of the rest of the world charge 1-2%. 6% is insane, and the buyers agent I really dont think adds value.
do you really think the value prop of a realtor is that simple? that people willingly pay tens of thousands of dollars for a few "related details"? if it were that easy, why not just throw that business together over the weekend yourself? maybe put the thinking cap on for a few seconds before making a flippant comment about a $100B+ industry?
(just one tiny hint: you have to dismantle the MLS network in the process.)
yes, it's inefficient, but it's not a valueless middleman. yes, there is additional value that could be unlocked through greater efficiency. but there is a huge contingent of professionals vested in the continuation of the current regime. there are systemic and regulatory hurdles. which politician wants to dismantle an industry that still provides determined but not necessarily highly educated individuals the chance to break into the upper middle class?
(just one tiny hint: you have to dismantle the MLS network in the process.)
yes, it's inefficient, but it's not a valueless middleman. yes, there is additional value that could be unlocked through greater efficiency. but there is a huge contingent of professionals vested in the continuation of the current regime. there are systemic and regulatory hurdles. which politician wants to dismantle an industry that still provides determined but not necessarily highly educated individuals the chance to break into the upper middle class?
Redfin does more to move in that direction than other listing websites such as Trulia. Redfin is the actual broker on your side of the sale, and they take a smaller cut than most other brokers.
The reason it's not cheaper is that few brokers compete on price.
The reason it's not cheaper is that few brokers compete on price.
I was recently a first time homebuyer and my real estate agent was really helpful in basically holding my hand through the process.
He walked me through a contract to buy and sell, since I'd never seen one before. He helped me figure out a competitive offer for the house I wanted. He was able to spend time on things like searching for houses or setting up tours while I was working, it was great.
Just looking at houses online only scratches the surface of the homebuying process, IMO, and frankly with my full-time job it would have taken me much longer to find a house... assuming I would have even known how to get to closing, which I didn't.
He walked me through a contract to buy and sell, since I'd never seen one before. He helped me figure out a competitive offer for the house I wanted. He was able to spend time on things like searching for houses or setting up tours while I was working, it was great.
Just looking at houses online only scratches the surface of the homebuying process, IMO, and frankly with my full-time job it would have taken me much longer to find a house... assuming I would have even known how to get to closing, which I didn't.
Isn't this basically Redfin? It might not be a flat fee, but it is a reduced fee. Also intermediaries are still needed for guidance and walkthroughs, its not like viewing homes online is all there is to it.
I agree with your point, but realtors are protected but layers of legislation. In many areas the realtor groups almost operate like the taxi cartels.
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> Why does anyone need to pay a whopper commission to some middle-man?
Not just a whopper commission, but a commission that causes the buyer's broker to be absolutely incentivized against your interest as a buyer.
What a throwback to earlier economic times.
Not just a whopper commission, but a commission that causes the buyer's broker to be absolutely incentivized against your interest as a buyer.
What a throwback to earlier economic times.
Back in the early 2000's, there was a realtor group that advertised a $900 flat fee for selling homes. Not sure what happened to them though - could have been a dot com bust.
If I were to guess: they probably went their separate ways to join the RE/Maxes, Coldwell Bankers and Century 21s of the world, where they could more than double their take for the same work.
Mainly they are protected by the MLS listing service. You can buy a house with a flat fee now with a decent RE lawyer.
I'm very interested in why many people believe a realtor should receive a percentage of the home's sale price as compensation but not the:
- inspector (arguably a good one is more useful than realtor by pointing out foundation problems and other issues that can cost 10s of thousands)
- attorney (again, arguably more useful. they can point out clauses and things like flood zone, unpermitted work, liens on the property, etc.)
- appraiser (you might not even be able to get a loan if the house appraises for less than the purchase price, unless you can foot the difference and/or waive appraisal contingency)
- lender (unless you're paying all cash. some lenders have vastly different interest rates they can offer you, given a credit score. this can save you 10s of thousands).
Additionally, it doesn't really make sense. The realtor's value is not proportional to the price of the home. Even if you believe a realtor is extremely valuable, a house being twice as much in price wouldn't make them twice as valuable.
Redfin is definitely an interesting step in the right direction towards fixed fee realty.
- inspector (arguably a good one is more useful than realtor by pointing out foundation problems and other issues that can cost 10s of thousands)
- attorney (again, arguably more useful. they can point out clauses and things like flood zone, unpermitted work, liens on the property, etc.)
- appraiser (you might not even be able to get a loan if the house appraises for less than the purchase price, unless you can foot the difference and/or waive appraisal contingency)
- lender (unless you're paying all cash. some lenders have vastly different interest rates they can offer you, given a credit score. this can save you 10s of thousands).
Additionally, it doesn't really make sense. The realtor's value is not proportional to the price of the home. Even if you believe a realtor is extremely valuable, a house being twice as much in price wouldn't make them twice as valuable.
Redfin is definitely an interesting step in the right direction towards fixed fee realty.
Same reason that app stores charge a 30% commission instead of a flat fee. Prices are what the market will bear and prices are controlled by a cartel that runs the marketplace (the MLS members)
Am I misunderstanding your point about the lender?
They obviously get paid a percentage of the loan value rather than the home's sale price, but presumably those are fairly well correlated.
They obviously get paid a percentage of the loan value rather than the home's sale price, but presumably those are fairly well correlated.
Those guys make Bank on regular business unlike the sales guy who can have a bad month and earn zero.
Real estate agents as a model needs to go however for some folks, it's pretty good if they get a good salesman or buyer agent. I've dealt with a house dumper which is a nightmare as a seller but the best deal in town for a buyer(10-20% below market).
Before the internet, real estate agents were useful or needed so older folks are really hesitant to do for sale by owner.
Real estate agents as a model needs to go however for some folks, it's pretty good if they get a good salesman or buyer agent. I've dealt with a house dumper which is a nightmare as a seller but the best deal in town for a buyer(10-20% below market).
Before the internet, real estate agents were useful or needed so older folks are really hesitant to do for sale by owner.
lol, i paid an inspector to look at my newly constructed condo. easiest 500 bucks he ever made.
Here's a great piece by Ben Thompson discussing the economics and markets of such services:
Why the flat-fee brokerage Allre had to close shop:
Both limit growth: regular agents with a stake in the
current system steer home buyers away from Redfin
properties, and hiring and training agents who aren’t
interested in the upside from commission takes a lot of
time and money.
Why the flat-fee brokerage Allre had to close shop:
All of these internet companies that profess to want to
disintermediate the real estate business – just as they
did with the travel agency business (everyone even uses
the same analogy) – forget one major fact: buying and/or
selling a home is often the largest, most complicated
transaction a person may undertake.
>Here's a great piece by Ben Thompson discussing the economics and markets of such services:
Most of the article is about OpenDoor. I don't think that quote about Redfin describes the situation very well.
I don't think there is evidence that agents with buyers steer them away from Redfin and it wouldn't work very well since almost all buyers will go to a site with MLS listings and see what is on the market. Redfin takes a lowered commission on their business, they don't lower the commission to the buying agent.
In terms of hiring, they allow agents to get away from the continual cold calling/door knocking and self promotion they need to do to attract the next customer and they offer a stable salary and a support staff to take care of the mundane stuff like arranging inspections, etc. I don't think they have a problem getting job applicants. (Not associated with Redfin, but a happy customer.)
Most of the article is about OpenDoor. I don't think that quote about Redfin describes the situation very well.
I don't think there is evidence that agents with buyers steer them away from Redfin and it wouldn't work very well since almost all buyers will go to a site with MLS listings and see what is on the market. Redfin takes a lowered commission on their business, they don't lower the commission to the buying agent.
In terms of hiring, they allow agents to get away from the continual cold calling/door knocking and self promotion they need to do to attract the next customer and they offer a stable salary and a support staff to take care of the mundane stuff like arranging inspections, etc. I don't think they have a problem getting job applicants. (Not associated with Redfin, but a happy customer.)
I had a superb experience with them in 2012 despite being a nightmare customer. Chose Refin because their blog was so good. I bought a 2nd house in the same neighborhood. It started out odd because part of their onboarding is asking "Where do you want the check sent?", because, you know, you save so much using them. I knew it would be fake but whatever. (It wasn't--I did indeed get the $10K check almost immediately upon closing.) Problem is that my bank thought I was a terrorist, despite the fact that I have literally 12 accounts with them (several businesses, savings, checking, etc.). I put down 20% on an $890K loan. My income is closer to $800K than $500K and my other house in the neighborhood was already paid for. The simple act of moving the $200K into an account ready to write the check spooked the bank and they literally treated me like a terrorist. Suddenly everything took infinite amounts of time to handle and resulted in triple the usual paperwork. It was excruciating.
The bank (Bank of America, of course) caused so much trouble that I finally decided to pull out and lose my $20K earnest money. (I had chosen B of A on the theory that they already knew all about me, and also because they offered a killer ARM.) The mortgage officer literally quit his job over his bank's bungled handling of my sale. Somehow they came through, by this time, 3 months after I had made the offer. I was actually paying $100/day to the sellers because at this point they had moved out and were in a hotel and weren't able to close on their own new house.
Anyway, my agent at Redfin was a champ, even when I told her I was quitting. So she had way more trouble than a full-service agent with none of the upside. The whole thing on Redfin's side was precisely as advertised.
The bank (Bank of America, of course) caused so much trouble that I finally decided to pull out and lose my $20K earnest money. (I had chosen B of A on the theory that they already knew all about me, and also because they offered a killer ARM.) The mortgage officer literally quit his job over his bank's bungled handling of my sale. Somehow they came through, by this time, 3 months after I had made the offer. I was actually paying $100/day to the sellers because at this point they had moved out and were in a hotel and weren't able to close on their own new house.
Anyway, my agent at Redfin was a champ, even when I told her I was quitting. So she had way more trouble than a full-service agent with none of the upside. The whole thing on Redfin's side was precisely as advertised.
Bought my house via redfin and very satisfied with the process. It's also a bonus for buyers, they send you a refund check for a portion of the commission that normally all goes to agents.
Their agents may have less experience or knowledge, but as long as you get highly rated/reviewed service providers (lawyer/inspector/etc), that's all that matters. When I sell my current house it will definitely be via redfin. So much is now done online, why pay high commission to traditional realty companies?
This is indeed an industry ripe for change, and redfin is definitely doing just that.
Their agents may have less experience or knowledge, but as long as you get highly rated/reviewed service providers (lawyer/inspector/etc), that's all that matters. When I sell my current house it will definitely be via redfin. So much is now done online, why pay high commission to traditional realty companies?
This is indeed an industry ripe for change, and redfin is definitely doing just that.
I bought through Redfin five years ago.
Actually, we offered on two houses, backed out after poor inspections, and then purchased the third house in a competitive multi-bid environment all in a few months. With Redfin I never felt the kind of sales/relationship pressure to close a deal that I did when buying with traditional realtors. The only reason we didn't sell our Condo through Redfin is I wanted someone in the neighborhood who could help coordinate painting, staging, etc in the lead up to the listing.
All and all a great experience.
Actually, we offered on two houses, backed out after poor inspections, and then purchased the third house in a competitive multi-bid environment all in a few months. With Redfin I never felt the kind of sales/relationship pressure to close a deal that I did when buying with traditional realtors. The only reason we didn't sell our Condo through Redfin is I wanted someone in the neighborhood who could help coordinate painting, staging, etc in the lead up to the listing.
All and all a great experience.
Having completed thousands of home sales at Opendoor, I believe a system will works better for most home sales, but local expertise works better for high-end homes.
An agent always make you feel like their differentiation matters. Redfin advertises their refined process across thousands of homes to sell faster for more money. Your neighbor advertises their local expertise and awareness to get you an edge.
We joke that real estate is like politics – Everyone hates real estate agents, but loves their real estate agent.
An agent always make you feel like their differentiation matters. Redfin advertises their refined process across thousands of homes to sell faster for more money. Your neighbor advertises their local expertise and awareness to get you an edge.
We joke that real estate is like politics – Everyone hates real estate agents, but loves their real estate agent.
Does Opendoor primarily work with high-end homes or your "average" home (relative to the area of course)?
Also thoughts on Ben Thompson's analysis on your company (https://stratechery.com/2016/opendoor-a-startup-worth-emulat...)?
Also thoughts on Ben Thompson's analysis on your company (https://stratechery.com/2016/opendoor-a-startup-worth-emulat...)?
Our average purchase price is in the low 200,000's. We work with the middle 80% of homeowners.
Huge Ben Thompson fan, and waking up to his analysis that morning was a joy and big surprise.
Rob Hahn has also done some solid analysis on his blog: http://www.notorious-rob.com/2016/12/forest-for-the-trees-op...
Huge Ben Thompson fan, and waking up to his analysis that morning was a joy and big surprise.
Rob Hahn has also done some solid analysis on his blog: http://www.notorious-rob.com/2016/12/forest-for-the-trees-op...
Realtors have for the longest time seen other realtors as competitors. Its time they recognise that the true competition is from large sites like Redfin that will use tech to gain an advantage over them.
I realised this after several conversations with realtors about this open source project I've created to help them build decent websites:
https://github.com/etewiah/property_web_builder
Most of them figured if it was open source then any of their competitors could use it and be just as good as them. They would say this even if they recognised that my product would give them a better website than they currently had. Pretty strange way of thinking if you ask me....
I realised this after several conversations with realtors about this open source project I've created to help them build decent websites:
https://github.com/etewiah/property_web_builder
Most of them figured if it was open source then any of their competitors could use it and be just as good as them. They would say this even if they recognised that my product would give them a better website than they currently had. Pretty strange way of thinking if you ask me....
Some food for thought: "The future of employment: How susceptible are jobs to computerisation?"[1] which has been discussed on HN previously, lists "Appraisers and Assessors of Real Estate" at .9 probability of computerization and "Real Estate Brokers" at .97. It's certainly not a solved problem, but these two jobs are nearly at the top of the list (or bottom, as the list is in reverse order).
[1] PDF: http://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Futu...
[1] PDF: http://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Futu...
Having worked in the real estate industry for a time, it's ripe for disruption. Redfin is going to have a problem when it paves the way for a flat rate competitor, but right now it's doing a massive service to buyers and sellers.
seriously curious as I am about to pay 10k+ for selling my house. what are they doing that is so special?
I think buyers could brave buying a home without a realtor. It's a little crazy but doable.
Selling is another matter entirely. If you would like the peace of mind to know that your home is actually in your past once the money is in your bank account, use a broker. Having your past home haunt your future can be a miserable prospect.
Selling is another matter entirely. If you would like the peace of mind to know that your home is actually in your past once the money is in your bank account, use a broker. Having your past home haunt your future can be a miserable prospect.
Why can't my attorney provide me with that assurance while he's taking me through the closing process? What extra thing is the broker doing?
[deleted]
>What extra thing is the broker doing?
The broker is causing the closing to happen by finding and satisfying the buyer along with the buyer's many, many issues with most properties.
The broker is causing the closing to happen by finding and satisfying the buyer along with the buyer's many, many issues with most properties.
Cutting the fees in half.
cutting the fees by 25% actually. Redfin acts as the buyer or seller's broker and only gives you back half of their 3% commission. The other side's broker still gets their 3%. So you pay 4.5% instead of 6%.
That only accounts for the selling side, though. You also get a refund as a buyer and if you are buying and selling with Redfin (not uncommon), the savings are substantial.
They actually only charge 1% commission as the selling agent now, too, so vs a typical 6% combined commission, they save 33% for the seller. (Assuming just a sale)
Redfin doesn't seem to disclose how they calculate the refund anymore, though, so I'm not sure how much that works out to be. Seems to be around half a percent, so lower than it used to be.
All combined, it's close to half of the traditional fees that they either refund or don't collect.
They actually only charge 1% commission as the selling agent now, too, so vs a typical 6% combined commission, they save 33% for the seller. (Assuming just a sale)
Redfin doesn't seem to disclose how they calculate the refund anymore, though, so I'm not sure how much that works out to be. Seems to be around half a percent, so lower than it used to be.
All combined, it's close to half of the traditional fees that they either refund or don't collect.
How does a web site get licensed as a real estate broker, anyway?
They are registered brokers with a website- just like Windermere. They took this path vs being just a website like Zillow.
zillow is much more than a website if you're an agent
They have physical brokers in each region (I think the unit is more granular than each state, iirc?)
Yeah I think it's by metro area. I live in DC and the same office handles DC and the Maryland and Virginia DC suburbs, and I think many of the agents are cross-licensed.
Disclaimer: After a decade of working in the real estate industry in various aspects I will say it is a sh*t show of incompetence, laziness and greed.
While most real estate sites are bad, zillow is awful and Realtor.com should be considered a crime against humanity. I have to say redfin seems "ok"
On that note I am surprised that redfin is missing basic marketing messaging.
While most real estate sites are bad, zillow is awful and Realtor.com should be considered a crime against humanity. I have to say redfin seems "ok"
On that note I am surprised that redfin is missing basic marketing messaging.
I like Redfin, but I have a couple of qualms with it:
1. They will tag a house as "hot" arbitrarily. The cynic in me thinks this tag is for sale.
2. They tend to hide information. I've seen houses come on the market, not sell for weeks, go out and then come back in the market for a lower price. But their "history" section does not list "price reduced"; they just pretend like the previous listing never existed. For example, the house at 110 Steiner Street ( https://www.google.com/search?q=110+Steiner+Street&ie=utf-8&... ). It came on the market, and now is nowhere to be found. But when it does come back on the market, they will completely erase the history of this house not having been sold.
3. They allow you to filter with other criteria, but Walkscore is not one of them. I have given them feedback several times, but no response.
1. They will tag a house as "hot" arbitrarily. The cynic in me thinks this tag is for sale.
2. They tend to hide information. I've seen houses come on the market, not sell for weeks, go out and then come back in the market for a lower price. But their "history" section does not list "price reduced"; they just pretend like the previous listing never existed. For example, the house at 110 Steiner Street ( https://www.google.com/search?q=110+Steiner+Street&ie=utf-8&... ). It came on the market, and now is nowhere to be found. But when it does come back on the market, they will completely erase the history of this house not having been sold.
3. They allow you to filter with other criteria, but Walkscore is not one of them. I have given them feedback several times, but no response.
>2. They tend to hide information.
Redfin does this to comply with local MLS rules. Zillow does not, so best to check both.
Redfin with its smaller cut of RE transactions on the seller side combined with the ability to circumvent MLS with it's own listing system could be the begining of the end for agents.
While I don't disagree with you, Redfin has been in business since 2004. 13 years is a long time to take to kill off realtors.
I'm in the process of selling my place and I'm using a realtor (who nearly matched Redfin's seller commission rate). The Redfin agent I first spoke to proposed a generic, templatized method to sell my property - list on N realtor sites, email my contacts, take nice pics - while the realtor I went with lives two doors down from me, knew the quirks of the HOA, had working knowledge of what potential buyers were looking for in my community based on recent deals he had been part of.
I'm in the process of selling my place and I'm using a realtor (who nearly matched Redfin's seller commission rate). The Redfin agent I first spoke to proposed a generic, templatized method to sell my property - list on N realtor sites, email my contacts, take nice pics - while the realtor I went with lives two doors down from me, knew the quirks of the HOA, had working knowledge of what potential buyers were looking for in my community based on recent deals he had been part of.
I agree. Realtors won't get killed- they'll just have their commissions reduced. I've bought a house through Redfin which was easy enough, but used an agent who agreed to Redfin level fees, but was much more knowledgeable and better at selling my house. From dressing up the house, doing open houses to following up with buyers, to negotiating. Redfin couldn't match him with their inexperienced agents/helpers, high volume and cookie cutter methods that are more suited to hot real estate markets where there's not much for realtors to do.
So the mere existence of Redfin has lowered their fees. Good for you :) and an example of the market at work.
Redfin is a big pile of nothing. It's a glorified real estate agency which is itself an anachronism or soon will be.
You can easily find online or other brokers ready to "sell" your house which just means listing it on the realtors' association multiple site listings for 1% or even a few hundred dollars. The realtors association still control everything in terms of having all the data on homes for sale.
They could have some opportunity in giving buyers rebates i.e. having a 1-2% margin for buyers which most agents don't give, mostly because it's a lot luck to find a buyer than to represent the sell-side.
The idea that it's worth around 8x revenues...a low margin business as a real estate agency is...is a stretch, though to be fair, their revenues are fast-growing without that much of a marketing spend.
Not sure how their quarterly sales vary (seems like a lot in their profitability at least) but their latest quarter was terrible with only $6 mn in gross income on nearly $60 million in revenues and then $30 mn in operating expenses.
They claim to have helped users buy/sell $40 billion in real estate last year but showed just $270 mn in revenues which is something like .8% of that market value (while it should be in the 1.5 to 2.5% range I think). Not sure why that it is.
You can easily find online or other brokers ready to "sell" your house which just means listing it on the realtors' association multiple site listings for 1% or even a few hundred dollars. The realtors association still control everything in terms of having all the data on homes for sale.
They could have some opportunity in giving buyers rebates i.e. having a 1-2% margin for buyers which most agents don't give, mostly because it's a lot luck to find a buyer than to represent the sell-side.
The idea that it's worth around 8x revenues...a low margin business as a real estate agency is...is a stretch, though to be fair, their revenues are fast-growing without that much of a marketing spend.
Not sure how their quarterly sales vary (seems like a lot in their profitability at least) but their latest quarter was terrible with only $6 mn in gross income on nearly $60 million in revenues and then $30 mn in operating expenses.
They claim to have helped users buy/sell $40 billion in real estate last year but showed just $270 mn in revenues which is something like .8% of that market value (while it should be in the 1.5 to 2.5% range I think). Not sure why that it is.
I am actively looking the house right now. And getting disappointed by Redfin these days.
Previously it showed listed price for sold properties but now it has gone. Only sold price is shown.
Not only this, but the property disappeared from MLS then re-listed with higher price tag doesn't show previously listed price.
Information should be transparent between seller and buyer but Redfin is leaning to seller side at this moment.
So, I am using Zillow more frequently than before.
Information should be transparent between seller and buyer but Redfin is leaning to seller side at this moment.
So, I am using Zillow more frequently than before.
I don't think that's true. If you scroll down to the "Property History" section on any Redfin sold listing, you should see the full details for that home, including list price, any price adjustments, and sold price. In some markets, this information is only visible to logged-in users due to MLS restrictions, so you may have to log into your account to view the data.
I had a positive experience with Redfin, but honestly feel like even with the refund check, I still overpayed for their contribution.
I shopped online, went to open houses on my own, and Redfin basically just contacted the seller on my behalf to present an offer. I'd be shocked if my agent did more than a few hours total work over the entire duration of the sale – though I liked him a lot, and he was super responsive the few times I needed him.
I shopped online, went to open houses on my own, and Redfin basically just contacted the seller on my behalf to present an offer. I'd be shocked if my agent did more than a few hours total work over the entire duration of the sale – though I liked him a lot, and he was super responsive the few times I needed him.
Guess how many California-licensed real estate BROKERS Redfin employs? The answer is here:
http://www2.dre.ca.gov/PublicASP/pplinfo.asp?License_id=0152...
A total of six BROKERS. Helped out by 528 SALESPERSONS, who have little or no financial responsibility.
A curious fact that no RE agent or Realtor will tell you: Under California law, the terms "real estate agent" or "Realtor" have no significance.
http://www2.dre.ca.gov/PublicASP/pplinfo.asp?License_id=0152...
A total of six BROKERS. Helped out by 528 SALESPERSONS, who have little or no financial responsibility.
A curious fact that no RE agent or Realtor will tell you: Under California law, the terms "real estate agent" or "Realtor" have no significance.
Good for Redfin. Disruption in any business that charges 6% transaction fees is great.
Having said that, real estate transactions are complex beasts with many moving parts. A lot of this process can be scripted and templated. But there are many situations where it cannot. Buyers and sellers are under immense stress as they face very large financial and legal decisions. They don't understand the process, the terminology, the legal and financial consequences, etc. There are local regulations and conventions that differ from region to region. E.g: Check out the differences in who pays fees across counties: http://chicagotitletransfertax.com/
Good agents absolutely earn their fees when uncertainty and complexity arise. I suspect Redfin is seeking to carve out the part of the market that comprises straight-forward, template driven transactions.
Having said that, real estate transactions are complex beasts with many moving parts. A lot of this process can be scripted and templated. But there are many situations where it cannot. Buyers and sellers are under immense stress as they face very large financial and legal decisions. They don't understand the process, the terminology, the legal and financial consequences, etc. There are local regulations and conventions that differ from region to region. E.g: Check out the differences in who pays fees across counties: http://chicagotitletransfertax.com/
Good agents absolutely earn their fees when uncertainty and complexity arise. I suspect Redfin is seeking to carve out the part of the market that comprises straight-forward, template driven transactions.
I think people should generally have professional help in buying or selling a house. But the rates that brokers charge is out-of-step with the help they provide.
For example, in a $600,000 house in an urban area, the two brokers earn $36,000. But I just bought a house without a broker, and hired a real estate lawyer. Not only was the lawyer much more versed in legal details of the transaction, but he wound up charging me $500. Yes, he didn't drive out and hold my hand, but he was extremely knowledgeable and knew exactly what to look out for in all steps of the transaction.
In my experience, whenever the question of broker commissions comes up, people come out to defend the expert advice of the real estate agent and argue that people shouldn't "go it alone" because the transaction is complex. And, generally, it's true that people probably should not go it alone on an expensive transaction such as buying or selling a home. But the agent's advice is often mediocre, and they still lack the detailed understanding of real estate transaction rules and law that a real estate lawyer provides. So why pay the agent thirty times as much as someone with more experience and formalized, specialized education in the area? The only remaining reason is "marketing", which is the service that is greatly devalued in the age of online brokers.
For example, in a $600,000 house in an urban area, the two brokers earn $36,000. But I just bought a house without a broker, and hired a real estate lawyer. Not only was the lawyer much more versed in legal details of the transaction, but he wound up charging me $500. Yes, he didn't drive out and hold my hand, but he was extremely knowledgeable and knew exactly what to look out for in all steps of the transaction.
In my experience, whenever the question of broker commissions comes up, people come out to defend the expert advice of the real estate agent and argue that people shouldn't "go it alone" because the transaction is complex. And, generally, it's true that people probably should not go it alone on an expensive transaction such as buying or selling a home. But the agent's advice is often mediocre, and they still lack the detailed understanding of real estate transaction rules and law that a real estate lawyer provides. So why pay the agent thirty times as much as someone with more experience and formalized, specialized education in the area? The only remaining reason is "marketing", which is the service that is greatly devalued in the age of online brokers.
>E.g: Check out the differences in who pays fees across counties: http://chicagotitletransfertax.com/
The complexities can be and already are structured in a table format? Seems like a job perfectly suited for a computer, not a human.
The complexities can be and already are structured in a table format? Seems like a job perfectly suited for a computer, not a human.
Sometimes transactions stick at the strangest places. For example, a buyer balks at paying a final $500 fee allotted to him because he has hit his financial stress limit - potentially killing the entire transaction.
Good agents are not just facilitating the transaction, but also acting as friends/confidants/therapists for buyers&sellers - helping them make responsible decisions. Good agents also come up with creative solutions to complete transactions - this pops up often in resolving inspection contingencies. Say there is some leakage discovered underneath a bathroom sink with some cabinetry damage. The buyer is getting cold feet. What do you do?
Good agents are not just facilitating the transaction, but also acting as friends/confidants/therapists for buyers&sellers - helping them make responsible decisions. Good agents also come up with creative solutions to complete transactions - this pops up often in resolving inspection contingencies. Say there is some leakage discovered underneath a bathroom sink with some cabinetry damage. The buyer is getting cold feet. What do you do?
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I guess my question is why is it so complex? What complexities arise that realtor's can help with.
I'm closing literally today on a house I bought through Redfin. It's my third Redfin buying experience. Redfin for buying is great. Their website makes it easy to look for properties and get alerts when properties you might like go on the market. No need to pay a realtor to do that part.
I'm still not using Redfin for selling. When you sell, you're paying for a salesman, and a salesman can make a big difference on how much you sell for, IMO. Redfin will save you 2%, so the question you have to ask yourself is: will a traditional agent make me 2% or more, compared with Redfin? I think the answer is yes, they likely can.
I'm still not using Redfin for selling. When you sell, you're paying for a salesman, and a salesman can make a big difference on how much you sell for, IMO. Redfin will save you 2%, so the question you have to ask yourself is: will a traditional agent make me 2% or more, compared with Redfin? I think the answer is yes, they likely can.
Indeed. When I needed to sell a house in the East Bay, the Redfin agent wanted to list the property for almost 20% less than it sold for. When I told her that I thought she was pricing it too low, she looked at me like I was crazy. The local agent that we ended up using instead (who had recently sold 3-5 houses in our same neighborhood) had a much better idea of what the house was actually worth, and also paid to stage the house--which Redfin would not have done.
We used Redfin to purchase that house, and our purchase experience was very positive, but selling the house with Redfin could have cost us a bundle. It would probably have been fine if property prices had not been rising so quickly at the time, but regardless, I am a believer in the value of staging which is a service not covered by Redfin's fees.
We used Redfin to purchase that house, and our purchase experience was very positive, but selling the house with Redfin could have cost us a bundle. It would probably have been fine if property prices had not been rising so quickly at the time, but regardless, I am a believer in the value of staging which is a service not covered by Redfin's fees.
> The local agent that we ended up using instead ... also paid to stage the house--which Redfin would not have done.
You paid for that.
You paid for that.
Yes, but it seems you've missed my main point entirely. If I had used Redfin, the house could have sold for $80-90k less than it otherwise did, whereas using the local agent cost me perhaps $5-6k more. The smaller point that I was making is that you often can't compare Redfin's fees to the local agent fees without also knowing if the local agent provides staging services, and many of them do. Granted, staging is only a couple thousand for a modest house (from what I understand), but it's something to be aware of.
I would guess that Redfin's problem is retaining talent. If an agent can make more money going off on their own, they likely will. The agent who helped us buy that house was amazing. But, guess what, he isn't at Redfin anymore. It's too bad. I love Redfin's site and want them to succeed, but perhaps they don't do enough to retain good agents (or their model financially prevents it). That's just a guess, though. Also, their agents may have to cover a larger geographic area than other agents, so it's not possible for them to be as intimately familiar with particular neighborhoods.
Semantic quibbling. GP paid their agent (presumably) 3%, which included staging. Redfin charges 1%, which doesn't include staging.
(exact numbers might vary based on locale, these are Seattle numbers)
(exact numbers might vary based on locale, these are Seattle numbers)
redfin maps + school ratings + real time alerts, and when I say real time I mean I was in a house in fremont with my realtor and I got an alert during the private viewing that the house just went pending, hah! In any case, this site was instrumental in helping us find a house. RDFN is definitely going in my portfolio.
To get rid of real estate agents: You have to find a way to create a free multiple listing service (satellite imagery maybe, looking for FOR SALE signs?). It's the MLS monopoly that has kept the real estate industry in the dark ages.
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Ah, so that's why it was name dropped on Silicon Valley recently...
i purchased my house thru RedFin and it was an amazing experience. Yes, a bit more hands on than conventional realtor but you never know how much a conventional relator was working on your behalf anwyay
Coming from a background in real estate as an active broker who has worked with Redfin agents, I'd like to point out a few things. Redfin's biggest asset is their website. It's a good user experience and grabs them a lot of leads. However, Redfin agents tend to be subpar agents when representing sellers and or buyers. Most wouldn't survive in a regular brokerage setting. If I am hiring an agent, I want a hungry service oriented agents, not someone who is fine with receiving a salary. Discounts are enticing to consumers, but from what I have noticed these discounts come at a cost to their clients. Rather than list a bunch of examples, from what I have witnessed, Redfin agents are not all that skilled in negotiating. They are actually horrible. Redfin needs to train better but training is a multi-faceted issue. They need experienced brokers who have been beaten up and have seen it all. I was lucky to have a mentor who played a significant role in redefining the industry back in 2001. Let's just say, nobody knew what the concept of Exclusive Buyer Agency was during the late 90s. Anyway, in order to have great agents, they need to learn from smarter battle tested agents in the office. An agent needs good instincts to represent clients well. This takes time - 10,000 hours easy and they need to see a lot of deal flow. You learn from the ugly deals, not the smooth ones. Fortunately, for Redfin most Redfin buyers/sellers won't realize how good their agent is until they have something to compare it to. Redfin does not have top agents nor can the attract high-quality agents. In order for them to succeed in the public market, they will need to increase fees because the cost of maintaining and attracting talent isn't cheap. Discounting gives companies a good chance to obtain market share. But market share will go down once they raise fees. Historically speaking, discount real estate companies don't do well in public markets. Let's look at one example of a company associated with discounts, Zip Realty. I think they did an IPO in 2004 or so. Over the years things didn't go well so they were forced to merge. Now, you might say, REDFIN is different. This is somewhat true but I am sure if you read the Redfin S1, you will see some of the concerns I have addressed.
This is coming from a non-traditional broker. I have always gone against the grain. I believe Redfin will need to evolve a lot to get the public market to embrace them. If I had to guess they will become a little more "traditional" overtime.
I hope Redfin trains better and figures things out. Otherwise, they will need to merge post-IPO.
Sorry for the long comment. I could write forever on this topic. I may do this on my site when I have a couple of hours.
This is coming from a non-traditional broker. I have always gone against the grain. I believe Redfin will need to evolve a lot to get the public market to embrace them. If I had to guess they will become a little more "traditional" overtime.
I hope Redfin trains better and figures things out. Otherwise, they will need to merge post-IPO.
Sorry for the long comment. I could write forever on this topic. I may do this on my site when I have a couple of hours.
I bought my house through Redfin last year, and not only did I save ~$5k in commissions compared to a conventional realtor, I also felt the process was much smoother and more pleasant than other times I've interacted with a conventional realtor.
It's simply absurd that in an era where any buyer can view photos of a house for sale online real estate agents still expect to receive 6% commission on the sale of a house.