26 ms·

Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

177 points by gamechangr 8y ago

ilamont 8y ago
That's a bold statement. Still, the NAR has data that suggests realtors are more likely to be involved in transactions than 18 years ago: 87% of buyers purchased their home through a real estate agent or broker—a share that has steadily increased from 69 percent in 2001. Source: National Association of Realtors (https://www.nar.realtor/research-and-statistics/quick-real-estate-statistics https://www.nar.realtor/research-and-statistics/quick-real-e...) ... But I'm curious if the definition of "broker" includes online marketplaces or other digital services. It's true that realtors (and other players, including real estate lawyers) do have expertise that can help buyers and sellers deal with the unique issues that come up with each home, not to mention the mandated paperwork. Streamlining those requirements may be extremely difficult. However, I think realtors have a demographic tidal wave about to hit them, consisting of first-time young home buyers and some slightly older home sellers who are used to doing things online and want nothing to do with realtor-mediated transactions ... or will scoff at the ridiculously high fees charged by brokers.
- hkmurakami 8y ago
  Both redfin and Opendoor go through licensed brokers in each state so is agree with what you posit.
  - whitepoplar 8y ago
    I thought Opendoor are themselves agents/brokers, no?
    - mox1 8y ago
      They are, I just opened some junkmail from opendoor and there was something about OpenDoor Brokerage <MYSTATE> LLC.
    - hkmurakami 8y ago
      oops, I realize now that with the way I wrote that post, it reads (inaccurately and unintentionally) to mean that they go through a 3rd party, rather than my intent that one way or another a broker licence is involved.
  - kingnothing 8y ago
    Redfin itself has a licensed brokerage sub company in many states.
- shdh 8y ago
  >I also think realtors have a demographic tidal wave about to hit them, consisting of first-time young home buyers and some slightly older home sellers who are used to online transactions and want nothing to do with realtor-mediated transactions. What platform will facilitate these transactions?
  - deleted 8y ago
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- brightball 8y ago
  It’s a essentially a giant network effect. Practically, the #1 reason to use a realtor is that if there is an issue with the home that should have been known ahead of time, there is a chain of insured entities that provides legal recourse. The shop and decide part is secondary to their value, but that is how they are so entrenched. The local MLS in any given area has the ability to cut off access to anyone. Some are even privately owned. In order to disrupt an area, you have to get a slice of listing larger than what’s available in the local MLS and then get more people’s eyeballs on those listings than the combined circulation that the existing MLS feeds were getting...and then still have some means of showing the houses in person. And you have to do that for EVERY single market you enter. A young buyer is welcome to shop for a home without using a buying realtor...but there are still very high odds that the seller used a realtor on their end. The only difference in that situation is that the selling realtor doesn’t have to split the commission and pockets more of it. This is ironic too, because realtors are more valuable to a buyer in most cases and there is more work involved for buyer representative realtors with no guarantee of a payoff. The entrenchment remains because realtors will often avoid FSBO showings and sellers aren’t interested in experimenting...they just want their house to sell.
  - megaman8 8y ago
    Not having a realtor as a buyer really helps, because you can add that 3% to the purchase price of the house saving you 3% which can be a huge amount in expensive markets like the bay area.
    - jpollock 8y ago
      Frankly, if you're worried about 3% on the purchase price of the house, you can't afford that house, regardless of the amount of money. Particularly in expensive markets in the Bay Area, the real estate agent is there to tell you when you're being stupid - unrealistic with your demands (under or _over_ paying) and keeping you from stomping away in a huff during the stressful negotiations. This is buying and selling the most expensive asset most people will ever own. People hire in help to buy and sell their business, this is equivalent.
- general8bitso 8y ago
  Well, until they coordinate to change laws at the state and federal laws, facilitating real estate transactions as a non-realtor will expose such individuals to legal action. Kinda like Tesla trying to sell in states that require a franchise dealership. Also, the term commission is ambiguous in the context of the headline. Do we mean a percentage of sales or an officiating body that controls an MLS or something at the state level, etc?
  - iwantedjusttom 8y ago
    this is not completely true because a seller can negotiate on behalf of themselves for their own home and a buyer can negotiate for themselves as well. Which I suppose is obvious. You can also have an attorney negotiate for you, at least in my state, and attorneys only charge a flat fee for handling a transaction in my area. A small percentage of what it costs to use an actual realtor.
    - general8bitso 8y ago
      That is still a two-party transaction. It is when a third party is involved, that gets you in trouble.
- Spooky23 8y ago
  > However, I think realtors have a demographic tidal wave about to hit them, consisting of first-time young home buyers and some slightly older home sellers who are used to doing things online and want nothing to do with realtor-mediated transactions ... or will scoff at the ridiculously high fees charged by brokers. No way. Find me the mythical millennial who wants to deal with a first-party negotiation. In some fantasy land where you ride your unicorn to work and shop for pre-fabricated houses on Amazon.com, sure. The reality is that your bank demands due diligence, houses are always in some state of disrepair, and nobody wants to deal with that.
  - ilamont 8y ago
    I get the due diligence part, which is where lawyers and inspectors come in. Not convinced realtors have to be the middleman facilitating those necessary transactions, let alone showing a home, making sure offers get to the seller, generating a list of comps from a database, etc., and charging huge fees to do it.
  - secabeen 8y ago
    The buyer doesn't see the cost, although 3% goes to the buyer's agent, it all comes out of the seller's proceeds. As such, there's a lot less incentive for a buyer to go without an agent.
- crysin 8y ago
  I'm a millennial, just bought my first home this past August. It never even crossed my mind not to use a realtor. Sure I did a lot of communication with my realtor over text and e-mail but I never even considered not using one. I had done a lot of research and looking around before going to our realtor but I trusted our realtor more than I trusted myself to make sure everything was covered. It was more of an ease of mind deal and our realtor wasn't pushy and let us choose homes we were interested in for the most part, only occasionally making suggestions.
itslennysfault 8y ago
...he hopes.
hkmurakami 8y ago
"Agents are entrenched, and they will put up a damn good fight to protect their margins" is how I read this. Also this is a PR move for Zillow to tell agents that they're on their side.
- nkozyra 8y ago
  > Also this is a PR move for Zillow to tell agents that they're on their side. And more likely that they have something in the pipeline intended to do that exact type of disruption.
  - matart 8y ago
    Or a competitor does and they are getting the agents on their side
- deleted 8y ago
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- linsomniac 8y ago
  Note that this is a 6 year old article. So we really should be discussing how that PR move worked for them. :-) Also note that a lot of agents, at least in our area, HATE Zillow. I guess I haven't been to a Realtor conference in a couple years, but there were well-attended talks about "how to keep your property out of Zillow". Some Realtors wanted to work with Zillow, but quite a few were trying to keep Zillow out.
btgeekboy 8y ago
This article is from 2012.
- igolden 8y ago
  +1 - has anyone successfully proved him right/wrong since?
  - Joakal 8y ago
    I'm not familiar with landscape in Australia but there's two most popular websites not owned by real estate companies: realestate.com.au and domain.com.au (both owned by competing media companies!)
    - erklik 8y ago
      neither of them tries to touch commissions though.
  - seltzered_ 8y ago
    Not quite answering your question, but a16z had a recent video talking about startups trying to disrupt commissions: https://youtu.be/IRPH3K1GXj0 https://youtu.be/IRPH3K1GXj0
  - harryh 8y ago
    opendoor.com appears to be doing quite well
Eire_Banshee 8y ago
Yeah and startups that tried to disrupt filing taxes failed... Turbotax has kept me from paying an accountant a commission to do my taxes for years. Someone will figure out how to streamline the process online.
- RobLach 8y ago
  Don’t you pay TurboTax? A virtual tax accountant is still a tax accountant. If someone makes a virtual real estate agent to replace real ones, I don’t doubt they’ll still charge a fee.
  - bspn 8y ago
    > Don’t you pay TurboTax? Yes, but the cost is significantly less. When I first moved to the US I used a tax accountant because I didn't know any better and it cost me ~$500 a year (this was in New York). I now file using either TurboTax or TaxAct and my costs are typically in the $60-70 range depending on which tier of service I select. Is it more work? Arguably yes, but I enjoy the freedom of being able to do it all from the comfort of my sofa and the tools have improved to such an extent that it rarely takes me more than half an hour start-to-finish. Real estate is obviously a very different proposition to tax filing, but if disruptors can cut out some of the fat/overhead to bring the costs down I think it would be appealing to a wide range of people.
    - FireBeyond 8y ago
      Or you can get the worst of both worlds (looking at you H+R Block), where you pay accountant prices for someone to walk through what is essentially a customized version of something like Turbo Tax. When I moved to the US I used them, once. I had just arrived, was working from home, had bought a hybrid vehicle, my spouse was a student. I/we literally sat there with someone entirely clueless as she read questions off a screen. "Okay, for Item X, how much do you want to claim?" "What can I claim?" "What do you mean?" "As in, what is claimable, what isn't?" "I'm not sure." "So why am I paying you to prepare my taxes?"
deleted 8y ago
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calbear81 8y ago
I've used buyers agents (1 traditional, 1 Redfin) when I've bought homes since they are being paid from the Seller's Fees and in most states I believe they are legally bound to act in your best interest. I've had a new construction seller try to convince me to not get an agent and would give a discount instead but felt that the risk wasn't worth it especially since most buyers agents I've engaged with have been open to refunding some of the fee if you're doing most of the legwork to find homes, tour them, etc.
- walrus01 8y ago
  The other thing you should absolutely never do, as a buyer, is use a home inspector recommended by either the seller's agent, the seller themselves, or even your own buyers agent. Choose one yourself. Anything else and they have too much of an incentive to produce an inspection report that will result in a quickly closed sale.
  - jermaustin1 8y ago
    Seems like they would open themselves up to some sort of liability if that happens.
    - deleted 8y ago
      [deleted]
  - paradygm 8y ago
    Disclosure: my spouse is a home inspector It's a bit extreme outright dismiss an inspector just because they are recommended by your own agent (there is no reason whatsoever to even ask the selling agent for such advice). After all, you've hired them for their expertise and advice, and they see and know a lot more home inspectors than you. Of course, look at the recommended inspectors and do your own homework, like anything else. But if you can't trust your agent to recommend an inspection I question why you are working with them in the first place.
    - smileysteve 8y ago
btian 8y ago
Most startups fail, but I feel that's not news.
blang 8y ago
Realtors are the #2[1] lobbying group in the country, so it's a moderately safe bet in the short term at least. [1] https://www.opensecrets.org/orgs/summary.php?id=d000000062 https://www.opensecrets.org/orgs/summary.php?id=d000000062
muhneesh 8y ago
I see at least three counterpoints: 1. Real estate agents aren't often "experts" at real estate valuation, inspection or execution; They have dependencies on appraisers, inspectors, and lawyers. The work an average agent does is more or less cookie-cutter from my anecdotal experience, though I think there is a proportion of rockstar agents that do much more. 2. Not every buyer wants homebuying to be a client-services relationship. I'd rather have a trusted intelligent ratings system based on criteria like location, price and so on. I would hypothesize that there is a divide here with boomers and millenials / gen z. If I sell my house, it will be on a technology platform that takes 1%, not through an agent. 3. The vig an agent takes is insane in urban centers - 3% might make sense in areas where the avg. home costs 200-250K, and is harder to sell. In dramatic sellers markets where homes are in the 600K - $2M range, the take should be much much lower.
- AtlasBarfed 8y ago
  "Good" real estate agents are interested in moving as many houses as quickly as they can, to gain as much vig revenue as possible. "Good" real estate agents from the buyers perspective would be slowing down sales, reducing the overall price they make a percentage on anyway (which is why fixed rate for a "class" of real estate would work better) as a disincentive. Why would a real estate agent dissuade someone from buying something? They can compartmentalize/offload the moral responsibility to the inspector (which are pretty hit or miss too).
  - honopu 8y ago
    They might know the house will not appraise for what they're trying to buy it at, so it'd be a non-starter without additional substantial down payment that they might not have. there's non-permitted additions, construction is suspect, insurance will be crazy due to proximity to ocean bluff, etc.
  - tres 8y ago
    and the inspector is financially responsible for exactly the cost of the inspection. No more. I think you've really hit the nail on the head here. There's a built-in conflict of interest for the agent in every transaction. They are rewarded by moving inventory, not serving their client.
stretchwithme 8y ago
Commissions are much lower in many other countries and have even fallen further since 2002. https://graphics.wsj.com/table/commish_1016 https://graphics.wsj.com/table/commish_1016
blazespin 8y ago
6 years old thread. Low end commodity RE commissions will be chipped at, but higher end you want an expert. Buying a million dollar house without an expert is fool money gone.
- harryh 8y ago
  Weirdly I kinda think it should go the other way. Does it require twice as much work (or expertise) to sell a million dollar house than a 500k house? If not, why do agents get paid twice as much?
  - charlesdm 8y ago
    Because the $200-500k house will often (basically) sell itself.
  - Axsuul 8y ago
    An agent is incentivized to put in twice as much work (i.e. spending more time with the client, making the place much more presentable, etc).
    - surrealize 8y ago
      As more agents enter the business, a lot of their time and effort ends up going into getting clients in the first place. You end up with lots of agents spending more of their time trying to get business, with actual home-sales work taking up a smaller proportion of their time. But the increase in home prices is enough to make up for the decrease in the number of homes sold per agent. Point being, an increase in home prices, and the resulting increase in commissions (in dollar terms) doesn't necessarily result in any benefit to clients.
- smsm42 8y ago
  In SV, million dollar house is a low end now...
- no_broker 8y ago
  Maybe. I personally had a very different experience [1] [1] https://news.ycombinator.com/item?id=18927393 https://news.ycombinator.com/item?id=18927393
guelo 8y ago
(2012)
roland35 8y ago
Looking back, I do think we could have avoided using an agent on selling our home. No doubt real estate transactions are large and complex, but I feel like at the end of the day a good checklist would work pretty well, plus a service to manage the actual contract and paperwork. I certainly could have gotten that for the 6% commission we ended up paying!
sharemywin 8y ago
I bought a domain name a while ago bid2show.com The idea was let sales people offer a discount on their fee in exchange for limiting the number of houses you look at. So, if you make an offer on this house your shown you get 1-2 % discount. And since the system would know how many houses you've looked at it the realtors may decide to offer less and less of a discount. You would only need to work with one real estate broker per state and 2-3 agents per local area. So, that there's enough volume for each agent to show 2-3 house per day and 2-5 closing's week. Not sure if it would have worked just don't have time to pursue it.
- notahacker 8y ago
  If I'm understanding correctly, the basic principle doesn't work for an online service - any sensible buyer registers to look at houses in someone else's name, then takes the 2% discount on the "first" house they look at in their own name. Even if you stopped this on your own platform, other means of looking at houses exist. Plus I hate to think what would be wrong with a house or its starting price for vendors to offer a 2% discount (that's ~2% of their net worth for a lot of homeowners) for people not to consider any alternatives.
  - sharemywin 8y ago
    buy reps get usually get 3% so the money is coming out of the reps commission not what the seller is paying. With a showing, you physically show up to a house to look at a house. I'm not talking about virtual or anything.
    - notahacker 8y ago
      OK, that's clearer and I can see what the buy reps get out of it (less commission for less work). But frankly as a consumer wanting to shave percentage points off I'd rather look at a lot of properties without a buy agent than one property with a buy agent
Aloha 8y ago
I'd really like to see a startup that can turn buying a house into something more like buying a car - buying a house is really more complex than it has to be.
AtlasBarfed 8y ago
Realtors currently have a virtual monopoly on accessing properties in real life. That is their current cartel/guild barrier. Even a 4k tour video won't let you get a feel for a place or check out the places they didn't put on video to look for damage. Granted this service could be performed by a real estate website and they simply employ a cheaper access work force, but again you run into pro-guild red tape at the state and local levels.
- deleted 8y ago
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- Gibbon1 8y ago
  If you wanted to disrupt realtors. Disrupt the corrupt and fraudulent bidding process. It's not the MLS that's the guild/barrier it's that only the brokers know what the actual bids were.
ryanackley 8y ago
Over the last two years I've bought a couple of properties and I see the value of realtors as professional negotiators and experts on real estate laws and contracts. That being said, the National Association of Realtors (NAR) and their local branches are the definition of a cartel. My parents owned a real estate agency when I was growing up in the 80s and 90s. Back then, the cost of selling and marketing real estate was much higher. Most real estate advertising was done in print which the broker paid for out of pocket. Cameras used film back then which meant multiple trips to the property to take nice pictures. Someone had to always be manning the telephone because there were no mobile phones. The listing broker would have to arrange a showing with interested buyers and their broker. MLS was a huge printed catalog you would flip through to look for houses your clients may be interested in. Nowadays, the cost of listing a house is nominal for a brokerage. Advertising is free because all of the real estate sites that consumers visit (realtor.com, zillow) pull directly from MLS. All cameras are digital so you can take that perfect picture the first time. There are now phone apps that automate broker access to houses to show their clients. There are all of these productivity improvements for real estate agents on both sides of the negotiating table but the commission structure is almost identical to what it was 30 years ago. I believe the standard commission structure has gone from 7% to 6% in thirty years.
- aj24 8y ago
  Fee rebates have become really common as well in my experience.
  - mrfusion 8y ago
    How do you find that?
    - bronson 8y ago
      Just ask. Or use Redfin.
  - pixelpp 8y ago
    Yeah, what are you taking about?
soheil 8y ago
Interesting when you read this and have just started a real estate startup [1]. There are many segments in real estate that are ripe for disruption, Zillow is not the end all be all of real estate. Take cap rate calculation for instance, this is something very important to real estate investors, but Zillow hardly has a product that addresses it and tries to predict it accurately. Their strategy seems to be let's go after mom-and-pop buyers who just learnt how the internet works. If Zillow could bring in a fraction of tech you see in a product like Facebook or Github for instance to the broken industry of real estate instead of just showing pictures of properties with a few other metrics next them then the industry could be disrupted. [1] https://caproi.com https://caproi.com
- WRONgG 8y ago
  Your company as an idea is a really interesting foil to that of Robinhood and the like, but as an aside, having the text on your landing page being unselectable is a strange design choice along with the ominous graph at the bottom of the page that is very nondescript for users outside of the market.
- airstrike 8y ago
  Can't open website
DevX101 8y ago
Startup idea: Create OpenDoor for the National Association of Realtors with the NAR as a significant owner in the venture. You'd probably need to be an insider to pull this off. With their data advantage, they could kill or hobble OpenDoor the way AMC killed MoviePass. I don't feel excited about suggesting this, as I love the OpenDoor model and hope they win.
- jdross 8y ago
  A couple of points of clarification: - All legal brokerages (including online only brokerages like redfin) get equal access to MLS data and systems. - NAR is hyper-conscious of antitrust issues. Data access is the crux of this, which is a major reason why Zillow and others get access to MLS data. NAR now promotes open data access - NAR, a trade group, is a 110 year old non-profit, with 501c6 status. IANAL but I don't think it can have an ownership stake in a for-profit venture Opendoor operates a brokerage in every market it is live in, so they're not competing with NAR in any real sense. They're a part of the RE community, with same rights as any other agents
cletus 8y ago
People love to complain about realtors. Companies like Redfin have been trying to disrupt this market for years. People on HN and other places like to complain that realtors are pointless and that the only reason they exist is they are entrenched. I posit a different theory, which may well be controversial here, and that is that realtors continue to exist--and charge large commissions doing so--because they provide a service that most people want. I think of it like advertising. "I never watch ads" is a common catchphrase when decrying ads but again, ads exist because they work. The job of a realtor, and what they are incentivized to do, is to facilitate a transaction. People might point out that a selling realtor isn't incentivized directly to get the best sales price. They are correct. Why show a house 100 times in the hopes of getting $550k when you can flip it tomorrow for $520k and your work is done? Thing is: that's what most sellers actually want, even though they might say they want the best price. Most of them are selling for a reason and they just need to sell it and move on with their lives. Likewise, when it comes to buyers, they too are buying for a reason, typically because they need somewhere to live or they want to establish (more) permanent roots in a given community. The best thing for most of them is to pull the trigger, move in and get on with their lives. It's not to get the best deal. It's not to wait 2 years for the perfect property. Realtors facilitate both sides of this equation. Have you ever deal with a For Sale By Owner? I have. I refuse. I won't even go and look at a listing FSBO. It's a nightmare. Those owners tend to be cheap (hence not paying commission), have unrealistic expectations of their property's value, overvalue whatever "improvements" they've done and, worst of all, are emotionally invested so they re more likely to take a lower offer personally rather than as a negotiating tactic. It's worth noting too that with negotiating in general, it's often better to have someone else do it for you. If you're the guy who can say yes or no you have no fallback. If you represent that guy you now have the position of "my client won't accept that". Think about the psychological difference of rejecting someone personally or just being the messenger. So add fixed-fee home sales to the other startup traps like dating sites, travel sites and anything to do with "fixing recruitment" (you'd be surprised how many cold call emails I get about this one in particular). Hell, let's add blockchain to that list too, but I digress.
- sokoloff 8y ago
  FSBOs are a dream compared to REOs (bank-owned properties).
tim333 8y ago
Purplebricks have done quite a good job of disrupting the UK property market.
- cheerlessbog 8y ago
  For those unfamiliar, what do they do?
  - bencollier49 8y ago
    Online estate agent (real estate broker in US terms, I think). You list your house on their website and stick their sign outside your house, and then pay a fixed fee (£900 apparently).
    - tim333 8y ago
      They also have agents so they are kind of a hybrid online offline model. Founded 2014. >Purplebricks has already become the number one Real Estate Brokerage in the UK in only three years, and is the fastest growing brand in Australia since launching there in 2016. They've now launched in the US. Not sure how that'll go. They've got good trustpilot feedback https://www.trustpilot.com/review/www.purplebricks.com https://www.trustpilot.com/review/www.purplebricks.com The model seems slightly different in the US. In LA it seems to be a fixed $3,600 fee https://www.purplebricks.com/sell?lreeZipcode=90210 https://www.purplebricks.com/sell?lreeZipcode=90210
honopu 8y ago
This entirely depends on the real estate agent. For the company I work for, a decent amount of purchases are made from afar, where an agent really helps with finding and buying a property. Some of our purchases come through with "pocket listings", where an agent knows of a house or piece of land that someone would sell, and approaches the seller with a buyer already. How would you do this with tech? There's also the agent's access to their rolodex, which new agents will not necessarily have, they'll depend on leads from zillow, trulia, knocking on doors, etc. It's also "free" to buy with an agent. For most higher end listings, it is expected that you do participate in the monthly mailer real estate magazines, that's just the cost of doing business. Brokerages do buy these in bulk, and can offer the discounts to an agent to participate in this sort of marketing. All of this is pretty tough to do, you can't just wrap the MLS in a skin, make some signs and be in business. Real estate isn't just a tech problem, though there are some things you can do with tech to make the buying, researching and selling process easier. You have to have distinctions for your specific market, some of these don't make sense nationwide, but are very important locally. For example, a "deep water canal for sailboat" is a term that comes up pretty often in Florida, an Ohana Suite is something that is often requested in Hawaii. Local knowledge matters unless you're in suburbia where literally every house fits into a formula consisting of: ++school - commute time + square footage - age of house +++in monthly payment. The formula would be different for every buyer. Disclaimer: these opinions are my own, not of the company i work for.
picodguyo 8y ago
I've bought and sold on separate occasions through Redfin and saw no difference between their service for 1% and my previous transactions with a traditional realtor for 5%. They both took me around to see properties, provided neighborhood and property insights, acted as my negotiating proxy, and guided the closing process. I don't understand how Redfin can charge so little, but as it stands today I wouldn't dream of paying 5% again.
- mediaman 8y ago
  Redfin charges 1% for selling the house. They still pay 3% to the buyer's broker. The total fee is therefore 4%, versus the normal 6%, where both sides get 3%.
  - smolsky 8y ago
    Also, Redfin gave me 1.5% back when I bought a house. Ka-ching!
  - Eridrus 8y ago
    If you use a broker that returns 2% when purchasing the property, this basically drives it down to 2%. Which is far more reasonable than 6%.
  - onlyrealcuzzo 8y ago
    Why doesn't Redfin force you to use their buyer's agent? Buyer's agents are regarded as the ones at the bottom of the totem poll. Hardly anyone signs a contract with a buyer's agent. You almost always do with a seller's agent. It sounds like they've taken on the harder piece first...
- deleted 8y ago
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- asdf333 8y ago
  redfin worked great for us as well. we were very happy with them
dzonga 8y ago
when I buy a property, I would preferably buy land directly from a third party or state government. Never really understood the use of realtors. Specially in rental heavy markets. In New York Realtors or Brokers are straight leeches.
gamechangr 8y ago
Good real estate agents are worth their weight in gold, but there are plenty of bad ones.
amatai 8y ago
IMO, agents are not almost always not acting in buyer's interest. The percentage based commission is twisted in getting the buyer to bid for as much as they can pull. So, realtors at least for buyers, not such a great value, other than getting you access to lock box to view a property.
- jessaustin 8y ago
  That may be true for simple home purchases, but I know some active real estate investors and they really value the services of buyer's agents. These guys don't buy something in the hopes that it will appreciate in future. They buy something only when they know they're stealing it. ("Victims" vary: could be an out-of-touch heir, an overextended builder, a bank that's held onto a repo for 11.5 months...) On the day of the closing, they've already made their money. The right buyer's agent knows the business, the locale, the seller, everything he needs to know. When asked, however, he doesn't know his employer's name. That's valuable.
  - amatai 8y ago
    Agreed, but that's not the market Zillow/Redfin are serving. In fact, I think, the right term for those kind of agents is whole-sellers, who scout around for kind of deals you mention.
deleted 8y ago
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hcurtiss 8y ago
Real estate agents have three things they offer that until recently you could not get on your own. The first is listing on the MLS. The second is the MLS lockbox so other realtors can easily show the listed house. The third is access to the negotiated forms. All of these you can now get from a startup called Savvy Lane for a flat fee. We listed our house in Portland, paid Savvy Lane $495, and it sold 11 days later. I paid a full 3% to the buyer's agent (the buyer's agent actually plays a bigger role in selling your house than your agent), and still saved like $18k. I'm a big fan of Savvy Lane and hope they do well. Realtors are paid way too much for what they do, particularly on the seller's side.
- dpcan 8y ago
  When we sold our house, we found an agent who was also his own broker. We paid him $500 and he did exactly this. Gave us the forms, put the house in the MLS showing a buyer-side 3% commission, and then made a note that we were representing ourselves and we listed our phone number to call if you wanted to show it. I think we signed something saying he wasn't representing us too. We had our house listed with a REALTOR for about 2 years prior to that (keep in mind this is during the market crash). But within about 2 months on our own, the house sold.
- sgc 8y ago
  The catch is you don't know whether you under priced your house for that or well more than that unless you paid an appraiser or broker to help you set the price. Most FSBOs sell for under market.
  - cheerlessbog 8y ago
    You don't need an agent or broker to get an appraisal. In fact an agent arguably has a conflict of interest because a lower priced house will sell faster with little effect on their payout.
    - sgc 8y ago
      I did mention that option. It is funny how some people are upset that agents might want to force the price up, and others that they might want to force the price down. Agents have a fiduciary relationship. They must look out for their client's best interests by law. Some are not great, some are not honest. But that is the same for any field. In my experience most are honest and hard working, but the few with less scruples tend to be the highest volume agents. If someone were looking for an agent, if I knew nothing about anyone involved, I would recommend to start looking with agents with a number of years of experience but just average sales. A large reason for their average sales might just be integrity. Newer agents can be great as well because they will work three times as hard, but they are newer for better and for worse.
iwantedjusttom 8y ago
As a realtor for the past 6 years I can say a couple of quick things as to why I don't see the real estate industry going anywhere, even though I think that real estate brokers are extremely overpaid. - selling your house, at the end of the day, is quite the undertaking. A lot goes into it, it can get emotional, messy, and sometimes quite complicated. Having someone that does it on a daily basis can be nice and really smooth things out. - people are too attached to their homes emotionally. More often than not, when trying to sell on their home without a realtor they will not have it in a saleable condition and price it too high for the marketplace. It will sit and not sell, or they will get an offer that is appropriate and be offended and not sell it. A GOOD broker will bring facts, data, and logic to the table so that a person that is actually committed to selling their home will get the job done. If people saw their homes for what they were when they decided to sell them, a product or a piece of property and nothing more, the real estate industry would die in no time at all. Then again, there are a lot of swindlers out there too, so it's nice to have someone as back-up to watch out for those types of things as well.
- germinalphrase 8y ago
  Do realtors have any advantage when it comes to seeing the listing for properties before they are visible on the common real estate website (zillow et al)? I always assumed it was so, but I’d love to hear one way or another.
  - aidenn0 8y ago
    Usually they do; specifically the MLS has a listing type for before the house is on the market that only agents can see.
  - SteveGerencser 8y ago
    Every property we have ever purchased, except the first one, was not on the open market and the result of an agent/broker "knowing someone" that had what we wanted and managing to work out a deal for us.
- imbusy111 8y ago
DoubleCribble 8y ago
A good realtor cultivates relationships and deal flow. I suspect that a decent percentage of transactions in a competitive market never even hit the MLS as the houses are sold before they even get listed.
kbos87 8y ago
Having just gone through a grueling year long search for a home, I absolutely see the value in having a realtor as a buyer, and I have to say I’d be happy to pay for one if I were on the sellers side. Yes, some of a realtors transactions are probably cookie cutter, simple, and mundane work that a buyer or seller could have carried out themselves. The challenge is you don’t know when that isn’t going to be the case. We ended up in more than a few situations where having someone in our corner who had “seen some s#+?” was hugely valuable. The argument that “hey, we live in this society where people like to do stuff online and therefore real estate agents are on the chopping block!” just doesn’t hold true. In some cases a human being is the most effective way to deliver the kind of tailored, personal, convenient service that people seem to also want more of.
rossdavidh 8y ago
As a back-of-the-envelope approximation, if the commission is 6%, and there's at least a 6% chance that having a real estate agent keeps me from doing something stupid on the largest financial transaction I will do in my life, it's worth it. Probably, they do nothing for me I couldn't have done myself, but there is that chance that I would have (for example) bought a house in an area where it could flood, and then not be able to sell it because of that fact. There may be real estate agents that are not good enough to be doing the job, but a competent one is absolutely worth it for a person who does maybe 1 or 2 house transactions in their lifetime, just for the chance that they might make a really bad decision if they don't have someone experienced to help them think through it.
- raquo 8y ago
  It can be both "worth it" and "horribly overpriced" at the same time. That's just how cartels and monopolies work. They charge you vastly more than their cost, and use the profit to legalize measures that inflate the "market" price to their desired level.
no_broker 8y ago
Just to add another perspective: I recently bought an apartment in NYC without using a broker. One common argument for buyer's brokers is that they don't cost the buyer anything: the seller pays for their commission. If I were buying a $1M apartment, the seller would pay $30,000 (3%) of that to my broker. Alternatively, I could not use a broker and instead negotiate the price I pay to $970k (basically what I ended up doing, though it's hard to definitively say what I would've paid had I used a broker). One could argue that a broker's experience could more than pay for the fee, but I have a hard time believing this is true 90%+ of the time (which is how often buyers hire brokers). It was pretty easy (and enjoyable, at least for me) to research what was on the market thanks to aggregators like StreetEasy and major brokers' own websites (I'll also concede that I may have missed out on some off-market listings, but was able to find a place I love in spite of that; this may be somewhat different in a seller's market, but I don't know). I arranged showings directly with the listing broker, researched what to look for in an apartment and what questions to ask, and often brought experienced friends and family to these apartments. My particular experience was perhaps unique because I ended up buying a condo in a new development with an experienced developer (but I don't think it would've been particularly costly or hard to hire a home inspector myself), but I was still able to provide comps, write a persuasive offer letter, research the developer, and negotiate closing costs. I ended up paying 7% under ask and paying no transfer taxes, and I really doubt I'd have gotten more than 4.5% under ask had I used a broker. My strategy may be too risky for many others -- this was my first home purchase, after all -- but I did a bunch of research, reached out to friends and family for advice, and consulted an attorney before submitting any offers. I ended up spending a bunch of my own time doing work that someone more experienced could have done for me, but it was a great learning experience and seems to have had a huge return on investment. If you're not willing to try this strategy, I recommend looking for brokers who will agree to some sort of commission rebate. In NYC in particular, a company called [Prevu](https://www.wework.com/creator/personal-profiles/real-estate-duo-selling-millennials-their-first-home/ https://www.wework.com/creator/personal-profiles/real-estate...) offers a two-thirds rebate (note: I have no affiliation with this company and never used their service, but some of their [blog posts](https://www.prevu.com/blog https://www.prevu.com/blog) were quite helpful to me).
- gamechangr 8y ago
yroc92 8y ago
Homie is a VC backed startup replacing real estate agents in Utah and Arizona and they seem to be doing very well. Massive adoption over the last year. I feel pretty confident that agents will eventually be a thing of the past.
- freedomben 8y ago
  I hope you're right, but I bought my current house with Homie and it was a nightmare. Their website is a pile of crap that is so riddled with bugs. I was a buyer but got several emails regarding the "sale" of my house (I wasn't selling a house). Their website was so broken that I couldn't even fill the forms out, and ended up making phone calls. Then they face a basic blackout from the entrenched real estate mafia. No selling agents want to work with buyers from Homie because the buyers agents are supposed to show the house. But when you have no agent, it falls on the seller, and they flat out told me no several times unless I agreed to buy it through them. I can sympathize with this, but it sucks as the consumer. This is a problem they will need to overcome. I love the idea of Homie, but if you're going to push the software/automation angle, you better have software that works. You also gotta figure out how to twist the arm of that cartel. I believe in their mission enough that I actually looked into applying there so I could fix those bugs, but I get the impression that they don't hire in-house engineers and possibly use contractors. I'm a senior engineer who worked as a real estate agent for a couple years, so I think I would have been pretty valuable hire for them. I'm also super passionate about disrupting that industry because I feel they've taken advantage of me in the past much. But, alas, what can you do.
- gamechangr 8y ago
  One of the ironic parts of "Homie" is that they're value proposition depends on existing real estate agents. They claim to charge sellers $1,500 to list and no more. Sounds good so far. How do they get buyers? They claim to give buyers $5,000 back at closing. Cool, but where does that money come from you might ask? The FAQ's imply by only buying listings currently available with a traditional real estate agent. Exact wording from their FAQ's: "If a non-Homie seller has listed their home on the MLS, they’ve agreed to pay a buyer agent commission (BAC), usually around 3% of the price of the home." The more sellers choose them, the less successful they will be at attracting buyers. That's why so many of these "Billion dollar disrupters" go under. They need the existing system to succeed.
henryl 8y ago
I'm the founder of a real estate tech startup that caters to realtors. This article was written before Opendoor and before a record breaking $10B was pumped into proptech in 2018. The consensus now is that this industry is undergoing rapid change. At the bottom end of the market (maybe 10%), iBuyers like Opendoor will likely completely disrupt the traditional brokerage model. Next, you will see discount brokerages (Redfin, Purplebricks, et al) take more and more of the market. Full commission brokerages will still be the mainstream for the foreseeable future, but commissions will come down modestly, even for them. As purchasing or selling a home is one of the most expensive, most emotional, and most intimidating transactions you will ever do, seeking the help of a real estate agent is generally a good idea. Increasing competition will create more options and more value for consumers than we've ever seen before and that's a good thing.
bleu-ble-bleu22 8y ago
Homie.com here in Utah seems to be doing well.
benmorris 8y ago
Having bought and sold quite a few houses now I can say I won't go down the FSBO route anymore. I successfully bought my first house this way, but selling it was a train wreck. Not fun dealing with selling your own home at all. I eventually listed it with a realtor and sold it a few weeks later. Later in life though spending larger amounts of money on a home I would always recommend finding a good realtor. Someone friends/family can recommend. There are just hundreds(if not thousands) of pitfalls to buying or selling a home. On a different note I did have the opportunity to build several data driven local realtor sites a few years ago. They were deceptively simple looking on the surface, I mean all you do is sort and filter house results right? The process of syncing to the RETS system proved to be really clunky and complex. Imagine building a site on top of a database you have to query to discover the tables, fields, and datatypes, and oh by the way it could CHANGE SCHEMA at any time. If your broker was part of multiple MLS (Multiple Listing Services) then you could have to deal with completely different structured DBs. I handled these issues by building a normalized table for listings I could map the data into. MLS data was pulled into a 1:1 mapping table of the same name upon querying the schema. I had to build a Sql Script generator to create the tables. It was very frustrating dealing with schema updates. The whole process was interesting to me though as to how your listing data is handled when you list a house for sale and how others can gain access to it. Long story short you have to pay to play. Zillow for example is paying (or should be) to access your for sale listing data once entered in the a regional MLS. This is likely several thousand a year conservatively (per MLS). This gains them the right to access the data, however, many times these agreements are 20-30 page legal documents. My first time seeing one of these was extremely uneasy (I nearly didn't sign it). Again fascinating in the case of Zillow I know for a fact they are violating this agreement in our particular region when they hold onto listing data and images past the duration of a listing (sold or removed). They simply just keep it indefinitely it appears. On the other hand keeping up with 100+ MLS agreements across the US would be impossible as well.
AmericanBlarney 8y ago
I used what was termed a "transactional broker" when selling my previous home - I paid a flat fee of a few hundred bucks to them as the seller's agent, plus 3% to the buyer's agent. As the article mentioned, there's not much value driven by the selling agent - I managed all the showings via an app and we sold it in a week. The only real value to me as a seller is someone who can bring me a buyer (hence keeping that 3% commission). Buyer's agents also spend time taking clients to see houses and provide some assurance that people aren't arranging viewings just to steal your stuff, so I see a continued role there. Honestly, I've rarely been impressed by the real estate knowledge of either type of agent. Their general incentive is to make a deal happen - "seller's" agents will often try to talk up a below market offer if it gets them a commission faster. Likewise, I've only met one realtor who I felt was really trying to get me the best deal as a buyer.
gammateam 8y ago
Inefficient Market Theory: Compass discovers how lucrative opaque real estate markets are.
rb808 8y ago
What are buyers agents for? I've lived lots of places around the world and nowhere else has buyers agents. Its just an American thing. What do they do that's useful and costs so much? Search online for you?
ralusek 8y ago
Since nobody has mentioned it, YCombinator's own Open Listings is a reduced commission alternative to Zillow which has been quite successful. https://www.openlistings.com/ https://www.openlistings.com/
peterwwillis 8y ago
Weird/unrelated anecdote: Nobody in Greece uses realtors. I can't remember the exact historical reasoning, but it starts with the Ottomans. The Ottomans controlled the Greeks since about 1453, and when they were finally overthrown after the Greek War of Independence, there began about 120 years of political turmoil until the end of the Greek Civil War. So, post-civil war time. Tons of people are in exile, the country is torn by rival factions, and everything is in an even worse state than when the Germans occupied it. After hundreds of years of being occupied by foreign powers, there isn't really a clear indication of who owns what piece of property. Most of what you went by was "Well, somebody in my family used to own it." Cool. When it comes time to buying or selling property, there aren't really well defined "properties" per-se, or even a market for them. Somebody might just come up to you and tell you somebody else wants to buy your land, and if you just give them some cash up front, they'll get you a really good deal. So you give them some cash, and either they never return, or they come back with a really horrible deal. If they claim they're going to help you with the legal paperwork, they'll almost definitely sabotage it. Today, if somebody tries to help buy or sell a home in Greece, the average Greek will think they're a grifter trying to make a quick buck. To make matters more difficult, apparently there's been multiple confusing ways of legally registering and searching properties, and the red tape involved with completing the title transfer is crazy. So there's very few registered realtors in Greece, and basically nobody uses or trusts them. Meanwhile, the country is fucking stunning and there's abandoned property all over the place that nobody can shift. An ocean front property in the Peloponnese can go for a hundred grand. But good luck finding it or having any help in acquiring it, because they're all FSBOs that pin an advertisement on a telephone pole in the nearest city.
- gamechangr 8y ago
  Maybe they should start...: https://www.theguardian.com/world/2014/feb/28/home-ownership-greece-property-market https://www.theguardian.com/world/2014/feb/28/home-ownership...
- gamechangr 8y ago
  I don't know much about the subject, but one google search and it looks like that's not accurate. They call their real estate agents just "estate agents". There are many... https://www.justlanded.com/english/Greece/Greece-Guide/Prope.. https://www.justlanded.com/english/Greece/Greece-Guide/Prope....
Per_Bothner 8y ago
We ended up paying a total commission of 1.5% selling our house in Cupertino, CA, but that was a special situation. The listing agent agreed to accept a 1.5% commission, as the house sold itself - more easily than we expected. (We got 21 offers at or above asking, in a week.) The buyer was also an agent, so she offered to buy without a commission (which effectively added 3% to her bid). I did a lot of work on the selling side: taking pictures, writing the description for the MLS, helping to show the house, including two very busy open houses, negotiating. The house was an as-is tear-down, so there was no staging, just a little bit of tidying up. (Some of the interested buyers wanted to live there, though I warned they they would need to budget for repairs.)
nikanj 8y ago
I do not know what the fizz buzz test for a RE agent would look like, but I've met so many agents who would fail one. This is Canada, so the rules are slightly different. However, I do not find it unreasonable to expect an agent to know that you can't get a CMHC backed mortgage for 1) homes with a fixed-term renter tenant in them 2) homes with age restrictions 3) homes on leased land. Our agent repeatedly found us "perfect homes", just to learn after writing the offer that no bank is willing to fund the transaction. I think the general public refuses to admit that good agents exist, and the RE industry refuses to admit that absolutely garbage agents also exist.
ybalkind 8y ago
In South Africa the traditional real estate commission is getting disrupted www.leadhome.co.za propertyfox.co.z
tmplvietduc 8y ago
thank you for watching http://1805080.site123.me http://1805080.site123.me
oron 8y ago
https://www.reali.com/ https://www.reali.com/ by a friend of mine is a US startup trying to do just that.
shawnee_ 8y ago
Rascoff explained that Zillow really has “no skin in the commission game” when it comes to what real estate professionals get paid, comparing Zillow to information provider WebMD. Not accurate at all. For one, Zillow could do about 1000 things to promote competition among realtors, but it doesn't do that. It could remind people that in 1950, the Supreme Court ruled that putting a hard-coded "6 %" on a real estate contract is, in fact, illegal price fixing. It could remind people that "6 percent" of a sales price often equates to a much larger number when it comes to equity lost (e.g. if you have 250K equity in a house worth 750K, the commission amounts to ~ 21.3333 % of your equity. It could remind Realtors that attempting to get people to sign contracts that they refuse to negotiate on is coercion, and it could help people sue Realtors who participate in cartel-like practices. But it doesn't do that. For those interested: The Supreme Court case from 1950: UNITED STATES v. REAL ESTATE BOARDS https://caselaw.findlaw.com/us-supreme-court/339/485.html https://caselaw.findlaw.com/us-supreme-court/339/485.html Factual findings of the Court Enough has been said to show that under our decisions an illegal price-fixing scheme has been proved, unless the [339 U.S. 485, 489] fixing of real estate commissions is not included in the prohibitions of 3 of the Act. Price-fixing is per se an unreasonable restraint of trade. It is not for the courts to determine whether in particular settings price-fixing serves an honorable or worthy end. An agreement, shown either by adherence to a price schedule or by proof of consensual action fixing the uniform or minimum price, is itself illegal under the Sherman Act, no matter what end it was designed to serve.
tomohawk 8y ago
If you're selling, and the realtors in your state haven't outlawed it, going with a fee for service broker can save you a lot of money. A fee for service broker will charge fixed fees for each service they provide, for example, a listing on MLS. In our market, this worked great last time we sold. Being able to write up the MLS listing ourselves we realized how lazy/incompetent most realtors are. We touted a commission for the buyer broker (they typically get half of the standard 5%) in the listing and the house sold quickly. I don't mind paying a commission to the buyer broker - they are the ones that do most of the work in most markets.
novaleaf 8y ago
i used Redfin to buy my latest house. They saved me 1.5%. That said, I had to do all the leg work myself: visiting every potential house meeting my data criteria, compiling all the potentials and eventually narrowing it down to bid candidates. Assuming that physical inspection leg work+analysis is part of a full 3% commission realtor's responsibilities, I can see that full 3% being valuable to certain time constrained buyers. However given how rare a house purchase is, I would bet that a large number of full commission buyers arn't aware nor getting the full attention of their realtor. On the sell side, I really don't see the benefit of a full commission realtor. I did a FSBO before, which is on the opposite extreme. Again I think a discount listing agent like Redfin makes a lot of sense. I actually wonder why Redfin isn't as popular. I assume due to the aggressive social marketing realators do, and the hand-holding they do during the the high stakes process.
toldyouso 8y ago
The SF bay area is ripe for disruption and is being disrupted. Buyer's agents here don't have to really put any work together - I know from experience having worked with a couple realtors. Most homes sell here completely free of contingencies (loan, inspection, appraisal), thus once you as the buyer commit, you commit. Sellers here don't tend to be sentimental. Just because you attach a nicely written letter with a photo of your family and your dog doesn't mean the seller will turn down an extra $20k. Thus, a buyers agent really won't be able to negotiate a better deal for you than you can get for yourself. It's highest bid wins, and buyers' agents will always tell you to bid more so you have a better chance to win the house (something obviously self-evident). Also in the bay area, especially the south bay, housing prices are at the $1.5 - 2.5m range. Tell me how whatever service for the buyer can possibly worth $45k - $75k for putting together an offer for maximum amount with no contingencies. Realtors are entrenched but there's a reason why these real estate startups are proliferating.

177 points by gamechangr 8y ago

That's a bold statement. Still, the NAR has data that suggests realtors are more likely to be involved in transactions than 18 years ago: 87% of buyers purchased their home through a real estate agent or broker—a share that has steadily increased from 69 percent in 2001. Source: National Association of Realtors (https://www.nar.realtor/research-and-statistics/quick-real-estate-statistics https://www.nar.realtor/research-and-statistics/quick-real-e...) ... But I'm curious if the definition of "broker" includes online marketplaces or other digital services. It's true that realtors (and other players, including real estate lawyers) do have expertise that can help buyers and sellers deal with the unique issues that come up with each home, not to mention the mandated paperwork. Streamlining those requirements may be extremely difficult. However, I think realtors have a demographic tidal wave about to hit them, consisting of first-time young home buyers and some slightly older home sellers who are used to doing things online and want nothing to do with realtor-mediated transactions ... or will scoff at the ridiculously high fees charged by brokers.

hkmurakami 8y ago
Both redfin and Opendoor go through licensed brokers in each state so is agree with what you posit.
- whitepoplar 8y ago
  I thought Opendoor are themselves agents/brokers, no?
  - mox1 8y ago
    They are, I just opened some junkmail from opendoor and there was something about OpenDoor Brokerage <MYSTATE> LLC.
  - hkmurakami 8y ago
    oops, I realize now that with the way I wrote that post, it reads (inaccurately and unintentionally) to mean that they go through a 3rd party, rather than my intent that one way or another a broker licence is involved.
- kingnothing 8y ago
  Redfin itself has a licensed brokerage sub company in many states.
shdh 8y ago
>I also think realtors have a demographic tidal wave about to hit them, consisting of first-time young home buyers and some slightly older home sellers who are used to online transactions and want nothing to do with realtor-mediated transactions. What platform will facilitate these transactions?
- deleted 8y ago
  [deleted]
brightball 8y ago
It’s a essentially a giant network effect. Practically, the #1 reason to use a realtor is that if there is an issue with the home that should have been known ahead of time, there is a chain of insured entities that provides legal recourse. The shop and decide part is secondary to their value, but that is how they are so entrenched. The local MLS in any given area has the ability to cut off access to anyone. Some are even privately owned. In order to disrupt an area, you have to get a slice of listing larger than what’s available in the local MLS and then get more people’s eyeballs on those listings than the combined circulation that the existing MLS feeds were getting...and then still have some means of showing the houses in person. And you have to do that for EVERY single market you enter. A young buyer is welcome to shop for a home without using a buying realtor...but there are still very high odds that the seller used a realtor on their end. The only difference in that situation is that the selling realtor doesn’t have to split the commission and pockets more of it. This is ironic too, because realtors are more valuable to a buyer in most cases and there is more work involved for buyer representative realtors with no guarantee of a payoff. The entrenchment remains because realtors will often avoid FSBO showings and sellers aren’t interested in experimenting...they just want their house to sell.
- megaman8 8y ago
  Not having a realtor as a buyer really helps, because you can add that 3% to the purchase price of the house saving you 3% which can be a huge amount in expensive markets like the bay area.
  - jpollock 8y ago
    Frankly, if you're worried about 3% on the purchase price of the house, you can't afford that house, regardless of the amount of money. Particularly in expensive markets in the Bay Area, the real estate agent is there to tell you when you're being stupid - unrealistic with your demands (under or _over_ paying) and keeping you from stomping away in a huff during the stressful negotiations. This is buying and selling the most expensive asset most people will ever own. People hire in help to buy and sell their business, this is equivalent.
general8bitso 8y ago
Well, until they coordinate to change laws at the state and federal laws, facilitating real estate transactions as a non-realtor will expose such individuals to legal action. Kinda like Tesla trying to sell in states that require a franchise dealership. Also, the term commission is ambiguous in the context of the headline. Do we mean a percentage of sales or an officiating body that controls an MLS or something at the state level, etc?
- iwantedjusttom 8y ago
  this is not completely true because a seller can negotiate on behalf of themselves for their own home and a buyer can negotiate for themselves as well. Which I suppose is obvious. You can also have an attorney negotiate for you, at least in my state, and attorneys only charge a flat fee for handling a transaction in my area. A small percentage of what it costs to use an actual realtor.
  - general8bitso 8y ago
    That is still a two-party transaction. It is when a third party is involved, that gets you in trouble.
Spooky23 8y ago
> However, I think realtors have a demographic tidal wave about to hit them, consisting of first-time young home buyers and some slightly older home sellers who are used to doing things online and want nothing to do with realtor-mediated transactions ... or will scoff at the ridiculously high fees charged by brokers. No way. Find me the mythical millennial who wants to deal with a first-party negotiation. In some fantasy land where you ride your unicorn to work and shop for pre-fabricated houses on Amazon.com, sure. The reality is that your bank demands due diligence, houses are always in some state of disrepair, and nobody wants to deal with that.
- ilamont 8y ago
  I get the due diligence part, which is where lawyers and inspectors come in. Not convinced realtors have to be the middleman facilitating those necessary transactions, let alone showing a home, making sure offers get to the seller, generating a list of comps from a database, etc., and charging huge fees to do it.
- secabeen 8y ago
  The buyer doesn't see the cost, although 3% goes to the buyer's agent, it all comes out of the seller's proceeds. As such, there's a lot less incentive for a buyer to go without an agent.
crysin 8y ago
I'm a millennial, just bought my first home this past August. It never even crossed my mind not to use a realtor. Sure I did a lot of communication with my realtor over text and e-mail but I never even considered not using one. I had done a lot of research and looking around before going to our realtor but I trusted our realtor more than I trusted myself to make sure everything was covered. It was more of an ease of mind deal and our realtor wasn't pushy and let us choose homes we were interested in for the most part, only occasionally making suggestions.

itslennysfault 8y ago

...he hopes.

hkmurakami 8y ago

"Agents are entrenched, and they will put up a damn good fight to protect their margins" is how I read this. Also this is a PR move for Zillow to tell agents that they're on their side.

nkozyra 8y ago
> Also this is a PR move for Zillow to tell agents that they're on their side. And more likely that they have something in the pipeline intended to do that exact type of disruption.
- matart 8y ago
  Or a competitor does and they are getting the agents on their side
deleted 8y ago
[deleted]
linsomniac 8y ago
Note that this is a 6 year old article. So we really should be discussing how that PR move worked for them. :-) Also note that a lot of agents, at least in our area, HATE Zillow. I guess I haven't been to a Realtor conference in a couple years, but there were well-attended talks about "how to keep your property out of Zillow". Some Realtors wanted to work with Zillow, but quite a few were trying to keep Zillow out.

btgeekboy 8y ago

This article is from 2012.

igolden 8y ago
+1 - has anyone successfully proved him right/wrong since?
- Joakal 8y ago
  I'm not familiar with landscape in Australia but there's two most popular websites not owned by real estate companies: realestate.com.au and domain.com.au (both owned by competing media companies!)
  - erklik 8y ago
    neither of them tries to touch commissions though.
- seltzered_ 8y ago
  Not quite answering your question, but a16z had a recent video talking about startups trying to disrupt commissions: https://youtu.be/IRPH3K1GXj0 https://youtu.be/IRPH3K1GXj0
- harryh 8y ago
  opendoor.com appears to be doing quite well

Eire_Banshee 8y ago

Yeah and startups that tried to disrupt filing taxes failed... Turbotax has kept me from paying an accountant a commission to do my taxes for years. Someone will figure out how to streamline the process online.

RobLach 8y ago
Don’t you pay TurboTax? A virtual tax accountant is still a tax accountant. If someone makes a virtual real estate agent to replace real ones, I don’t doubt they’ll still charge a fee.
- bspn 8y ago
  > Don’t you pay TurboTax? Yes, but the cost is significantly less. When I first moved to the US I used a tax accountant because I didn't know any better and it cost me ~$500 a year (this was in New York). I now file using either TurboTax or TaxAct and my costs are typically in the $60-70 range depending on which tier of service I select. Is it more work? Arguably yes, but I enjoy the freedom of being able to do it all from the comfort of my sofa and the tools have improved to such an extent that it rarely takes me more than half an hour start-to-finish. Real estate is obviously a very different proposition to tax filing, but if disruptors can cut out some of the fat/overhead to bring the costs down I think it would be appealing to a wide range of people.
  - FireBeyond 8y ago
    Or you can get the worst of both worlds (looking at you H+R Block), where you pay accountant prices for someone to walk through what is essentially a customized version of something like Turbo Tax. When I moved to the US I used them, once. I had just arrived, was working from home, had bought a hybrid vehicle, my spouse was a student. I/we literally sat there with someone entirely clueless as she read questions off a screen. "Okay, for Item X, how much do you want to claim?" "What can I claim?" "What do you mean?" "As in, what is claimable, what isn't?" "I'm not sure." "So why am I paying you to prepare my taxes?"

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calbear81 8y ago

I've used buyers agents (1 traditional, 1 Redfin) when I've bought homes since they are being paid from the Seller's Fees and in most states I believe they are legally bound to act in your best interest. I've had a new construction seller try to convince me to not get an agent and would give a discount instead but felt that the risk wasn't worth it especially since most buyers agents I've engaged with have been open to refunding some of the fee if you're doing most of the legwork to find homes, tour them, etc.

walrus01 8y ago
The other thing you should absolutely never do, as a buyer, is use a home inspector recommended by either the seller's agent, the seller themselves, or even your own buyers agent. Choose one yourself. Anything else and they have too much of an incentive to produce an inspection report that will result in a quickly closed sale.
- jermaustin1 8y ago
  Seems like they would open themselves up to some sort of liability if that happens.
  - deleted 8y ago
    [deleted]
- paradygm 8y ago
  Disclosure: my spouse is a home inspector It's a bit extreme outright dismiss an inspector just because they are recommended by your own agent (there is no reason whatsoever to even ask the selling agent for such advice). After all, you've hired them for their expertise and advice, and they see and know a lot more home inspectors than you. Of course, look at the recommended inspectors and do your own homework, like anything else. But if you can't trust your agent to recommend an inspection I question why you are working with them in the first place.
  - smileysteve 8y ago

btian 8y ago

Most startups fail, but I feel that's not news.

blang 8y ago

Realtors are the #2[1] lobbying group in the country, so it's a moderately safe bet in the short term at least. [1] https://www.opensecrets.org/orgs/summary.php?id=d000000062 https://www.opensecrets.org/orgs/summary.php?id=d000000062

muhneesh 8y ago

I see at least three counterpoints: 1. Real estate agents aren't often "experts" at real estate valuation, inspection or execution; They have dependencies on appraisers, inspectors, and lawyers. The work an average agent does is more or less cookie-cutter from my anecdotal experience, though I think there is a proportion of rockstar agents that do much more. 2. Not every buyer wants homebuying to be a client-services relationship. I'd rather have a trusted intelligent ratings system based on criteria like location, price and so on. I would hypothesize that there is a divide here with boomers and millenials / gen z. If I sell my house, it will be on a technology platform that takes 1%, not through an agent. 3. The vig an agent takes is insane in urban centers - 3% might make sense in areas where the avg. home costs 200-250K, and is harder to sell. In dramatic sellers markets where homes are in the 600K - $2M range, the take should be much much lower.

AtlasBarfed 8y ago
"Good" real estate agents are interested in moving as many houses as quickly as they can, to gain as much vig revenue as possible. "Good" real estate agents from the buyers perspective would be slowing down sales, reducing the overall price they make a percentage on anyway (which is why fixed rate for a "class" of real estate would work better) as a disincentive. Why would a real estate agent dissuade someone from buying something? They can compartmentalize/offload the moral responsibility to the inspector (which are pretty hit or miss too).
- honopu 8y ago
  They might know the house will not appraise for what they're trying to buy it at, so it'd be a non-starter without additional substantial down payment that they might not have. there's non-permitted additions, construction is suspect, insurance will be crazy due to proximity to ocean bluff, etc.
- tres 8y ago
  and the inspector is financially responsible for exactly the cost of the inspection. No more. I think you've really hit the nail on the head here. There's a built-in conflict of interest for the agent in every transaction. They are rewarded by moving inventory, not serving their client.

stretchwithme 8y ago

Commissions are much lower in many other countries and have even fallen further since 2002. https://graphics.wsj.com/table/commish_1016 https://graphics.wsj.com/table/commish_1016

blazespin 8y ago

6 years old thread. Low end commodity RE commissions will be chipped at, but higher end you want an expert. Buying a million dollar house without an expert is fool money gone.

harryh 8y ago
Weirdly I kinda think it should go the other way. Does it require twice as much work (or expertise) to sell a million dollar house than a 500k house? If not, why do agents get paid twice as much?
- charlesdm 8y ago
  Because the $200-500k house will often (basically) sell itself.
- Axsuul 8y ago
  An agent is incentivized to put in twice as much work (i.e. spending more time with the client, making the place much more presentable, etc).
  - surrealize 8y ago
    As more agents enter the business, a lot of their time and effort ends up going into getting clients in the first place. You end up with lots of agents spending more of their time trying to get business, with actual home-sales work taking up a smaller proportion of their time. But the increase in home prices is enough to make up for the decrease in the number of homes sold per agent. Point being, an increase in home prices, and the resulting increase in commissions (in dollar terms) doesn't necessarily result in any benefit to clients.
smsm42 8y ago
In SV, million dollar house is a low end now...
no_broker 8y ago
Maybe. I personally had a very different experience [1] [1] https://news.ycombinator.com/item?id=18927393 https://news.ycombinator.com/item?id=18927393

guelo 8y ago

(2012)

roland35 8y ago

Looking back, I do think we could have avoided using an agent on selling our home. No doubt real estate transactions are large and complex, but I feel like at the end of the day a good checklist would work pretty well, plus a service to manage the actual contract and paperwork. I certainly could have gotten that for the 6% commission we ended up paying!

sharemywin 8y ago

I bought a domain name a while ago bid2show.com The idea was let sales people offer a discount on their fee in exchange for limiting the number of houses you look at. So, if you make an offer on this house your shown you get 1-2 % discount. And since the system would know how many houses you've looked at it the realtors may decide to offer less and less of a discount. You would only need to work with one real estate broker per state and 2-3 agents per local area. So, that there's enough volume for each agent to show 2-3 house per day and 2-5 closing's week. Not sure if it would have worked just don't have time to pursue it.

notahacker 8y ago
If I'm understanding correctly, the basic principle doesn't work for an online service - any sensible buyer registers to look at houses in someone else's name, then takes the 2% discount on the "first" house they look at in their own name. Even if you stopped this on your own platform, other means of looking at houses exist. Plus I hate to think what would be wrong with a house or its starting price for vendors to offer a 2% discount (that's ~2% of their net worth for a lot of homeowners) for people not to consider any alternatives.
- sharemywin 8y ago
  buy reps get usually get 3% so the money is coming out of the reps commission not what the seller is paying. With a showing, you physically show up to a house to look at a house. I'm not talking about virtual or anything.
  - notahacker 8y ago
    OK, that's clearer and I can see what the buy reps get out of it (less commission for less work). But frankly as a consumer wanting to shave percentage points off I'd rather look at a lot of properties without a buy agent than one property with a buy agent

Aloha 8y ago

I'd really like to see a startup that can turn buying a house into something more like buying a car - buying a house is really more complex than it has to be.

AtlasBarfed 8y ago

Realtors currently have a virtual monopoly on accessing properties in real life. That is their current cartel/guild barrier. Even a 4k tour video won't let you get a feel for a place or check out the places they didn't put on video to look for damage. Granted this service could be performed by a real estate website and they simply employ a cheaper access work force, but again you run into pro-guild red tape at the state and local levels.

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Gibbon1 8y ago
If you wanted to disrupt realtors. Disrupt the corrupt and fraudulent bidding process. It's not the MLS that's the guild/barrier it's that only the brokers know what the actual bids were.

ryanackley 8y ago

Over the last two years I've bought a couple of properties and I see the value of realtors as professional negotiators and experts on real estate laws and contracts. That being said, the National Association of Realtors (NAR) and their local branches are the definition of a cartel. My parents owned a real estate agency when I was growing up in the 80s and 90s. Back then, the cost of selling and marketing real estate was much higher. Most real estate advertising was done in print which the broker paid for out of pocket. Cameras used film back then which meant multiple trips to the property to take nice pictures. Someone had to always be manning the telephone because there were no mobile phones. The listing broker would have to arrange a showing with interested buyers and their broker. MLS was a huge printed catalog you would flip through to look for houses your clients may be interested in. Nowadays, the cost of listing a house is nominal for a brokerage. Advertising is free because all of the real estate sites that consumers visit (realtor.com, zillow) pull directly from MLS. All cameras are digital so you can take that perfect picture the first time. There are now phone apps that automate broker access to houses to show their clients. There are all of these productivity improvements for real estate agents on both sides of the negotiating table but the commission structure is almost identical to what it was 30 years ago. I believe the standard commission structure has gone from 7% to 6% in thirty years.

aj24 8y ago
Fee rebates have become really common as well in my experience.
- mrfusion 8y ago
  How do you find that?
  - bronson 8y ago
    Just ask. Or use Redfin.
- pixelpp 8y ago
  Yeah, what are you taking about?

soheil 8y ago

Interesting when you read this and have just started a real estate startup [1]. There are many segments in real estate that are ripe for disruption, Zillow is not the end all be all of real estate. Take cap rate calculation for instance, this is something very important to real estate investors, but Zillow hardly has a product that addresses it and tries to predict it accurately. Their strategy seems to be let's go after mom-and-pop buyers who just learnt how the internet works. If Zillow could bring in a fraction of tech you see in a product like Facebook or Github for instance to the broken industry of real estate instead of just showing pictures of properties with a few other metrics next them then the industry could be disrupted. [1] https://caproi.com https://caproi.com

WRONgG 8y ago
Your company as an idea is a really interesting foil to that of Robinhood and the like, but as an aside, having the text on your landing page being unselectable is a strange design choice along with the ominous graph at the bottom of the page that is very nondescript for users outside of the market.
airstrike 8y ago
Can't open website

DevX101 8y ago

Startup idea: Create OpenDoor for the National Association of Realtors with the NAR as a significant owner in the venture. You'd probably need to be an insider to pull this off. With their data advantage, they could kill or hobble OpenDoor the way AMC killed MoviePass. I don't feel excited about suggesting this, as I love the OpenDoor model and hope they win.

jdross 8y ago
A couple of points of clarification: - All legal brokerages (including online only brokerages like redfin) get equal access to MLS data and systems. - NAR is hyper-conscious of antitrust issues. Data access is the crux of this, which is a major reason why Zillow and others get access to MLS data. NAR now promotes open data access - NAR, a trade group, is a 110 year old non-profit, with 501c6 status. IANAL but I don't think it can have an ownership stake in a for-profit venture Opendoor operates a brokerage in every market it is live in, so they're not competing with NAR in any real sense. They're a part of the RE community, with same rights as any other agents

cletus 8y ago

People love to complain about realtors. Companies like Redfin have been trying to disrupt this market for years. People on HN and other places like to complain that realtors are pointless and that the only reason they exist is they are entrenched. I posit a different theory, which may well be controversial here, and that is that realtors continue to exist--and charge large commissions doing so--because they provide a service that most people want. I think of it like advertising. "I never watch ads" is a common catchphrase when decrying ads but again, ads exist because they work. The job of a realtor, and what they are incentivized to do, is to facilitate a transaction. People might point out that a selling realtor isn't incentivized directly to get the best sales price. They are correct. Why show a house 100 times in the hopes of getting $550k when you can flip it tomorrow for $520k and your work is done? Thing is: that's what most sellers actually want, even though they might say they want the best price. Most of them are selling for a reason and they just need to sell it and move on with their lives. Likewise, when it comes to buyers, they too are buying for a reason, typically because they need somewhere to live or they want to establish (more) permanent roots in a given community. The best thing for most of them is to pull the trigger, move in and get on with their lives. It's not to get the best deal. It's not to wait 2 years for the perfect property. Realtors facilitate both sides of this equation. Have you ever deal with a For Sale By Owner? I have. I refuse. I won't even go and look at a listing FSBO. It's a nightmare. Those owners tend to be cheap (hence not paying commission), have unrealistic expectations of their property's value, overvalue whatever "improvements" they've done and, worst of all, are emotionally invested so they re more likely to take a lower offer personally rather than as a negotiating tactic. It's worth noting too that with negotiating in general, it's often better to have someone else do it for you. If you're the guy who can say yes or no you have no fallback. If you represent that guy you now have the position of "my client won't accept that". Think about the psychological difference of rejecting someone personally or just being the messenger. So add fixed-fee home sales to the other startup traps like dating sites, travel sites and anything to do with "fixing recruitment" (you'd be surprised how many cold call emails I get about this one in particular). Hell, let's add blockchain to that list too, but I digress.

sokoloff 8y ago
FSBOs are a dream compared to REOs (bank-owned properties).

tim333 8y ago

Purplebricks have done quite a good job of disrupting the UK property market.

cheerlessbog 8y ago
For those unfamiliar, what do they do?
- bencollier49 8y ago
  Online estate agent (real estate broker in US terms, I think). You list your house on their website and stick their sign outside your house, and then pay a fixed fee (£900 apparently).
  - tim333 8y ago
    They also have agents so they are kind of a hybrid online offline model. Founded 2014. >Purplebricks has already become the number one Real Estate Brokerage in the UK in only three years, and is the fastest growing brand in Australia since launching there in 2016. They've now launched in the US. Not sure how that'll go. They've got good trustpilot feedback https://www.trustpilot.com/review/www.purplebricks.com https://www.trustpilot.com/review/www.purplebricks.com The model seems slightly different in the US. In LA it seems to be a fixed $3,600 fee https://www.purplebricks.com/sell?lreeZipcode=90210 https://www.purplebricks.com/sell?lreeZipcode=90210

honopu 8y ago

This entirely depends on the real estate agent. For the company I work for, a decent amount of purchases are made from afar, where an agent really helps with finding and buying a property. Some of our purchases come through with "pocket listings", where an agent knows of a house or piece of land that someone would sell, and approaches the seller with a buyer already. How would you do this with tech? There's also the agent's access to their rolodex, which new agents will not necessarily have, they'll depend on leads from zillow, trulia, knocking on doors, etc. It's also "free" to buy with an agent. For most higher end listings, it is expected that you do participate in the monthly mailer real estate magazines, that's just the cost of doing business. Brokerages do buy these in bulk, and can offer the discounts to an agent to participate in this sort of marketing. All of this is pretty tough to do, you can't just wrap the MLS in a skin, make some signs and be in business. Real estate isn't just a tech problem, though there are some things you can do with tech to make the buying, researching and selling process easier. You have to have distinctions for your specific market, some of these don't make sense nationwide, but are very important locally. For example, a "deep water canal for sailboat" is a term that comes up pretty often in Florida, an Ohana Suite is something that is often requested in Hawaii. Local knowledge matters unless you're in suburbia where literally every house fits into a formula consisting of: ++school - commute time + square footage - age of house +++in monthly payment. The formula would be different for every buyer. Disclaimer: these opinions are my own, not of the company i work for.

picodguyo 8y ago

I've bought and sold on separate occasions through Redfin and saw no difference between their service for 1% and my previous transactions with a traditional realtor for 5%. They both took me around to see properties, provided neighborhood and property insights, acted as my negotiating proxy, and guided the closing process. I don't understand how Redfin can charge so little, but as it stands today I wouldn't dream of paying 5% again.

mediaman 8y ago
Redfin charges 1% for selling the house. They still pay 3% to the buyer's broker. The total fee is therefore 4%, versus the normal 6%, where both sides get 3%.
- smolsky 8y ago
  Also, Redfin gave me 1.5% back when I bought a house. Ka-ching!
- Eridrus 8y ago
  If you use a broker that returns 2% when purchasing the property, this basically drives it down to 2%. Which is far more reasonable than 6%.
- onlyrealcuzzo 8y ago
  Why doesn't Redfin force you to use their buyer's agent? Buyer's agents are regarded as the ones at the bottom of the totem poll. Hardly anyone signs a contract with a buyer's agent. You almost always do with a seller's agent. It sounds like they've taken on the harder piece first...
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asdf333 8y ago
redfin worked great for us as well. we were very happy with them

dzonga 8y ago

when I buy a property, I would preferably buy land directly from a third party or state government. Never really understood the use of realtors. Specially in rental heavy markets. In New York Realtors or Brokers are straight leeches.

gamechangr 8y ago

Good real estate agents are worth their weight in gold, but there are plenty of bad ones.

amatai 8y ago

IMO, agents are not almost always not acting in buyer's interest. The percentage based commission is twisted in getting the buyer to bid for as much as they can pull. So, realtors at least for buyers, not such a great value, other than getting you access to lock box to view a property.

jessaustin 8y ago
That may be true for simple home purchases, but I know some active real estate investors and they really value the services of buyer's agents. These guys don't buy something in the hopes that it will appreciate in future. They buy something only when they know they're stealing it. ("Victims" vary: could be an out-of-touch heir, an overextended builder, a bank that's held onto a repo for 11.5 months...) On the day of the closing, they've already made their money. The right buyer's agent knows the business, the locale, the seller, everything he needs to know. When asked, however, he doesn't know his employer's name. That's valuable.
- amatai 8y ago
  Agreed, but that's not the market Zillow/Redfin are serving. In fact, I think, the right term for those kind of agents is whole-sellers, who scout around for kind of deals you mention.

deleted 8y ago

[deleted]

hcurtiss 8y ago

Real estate agents have three things they offer that until recently you could not get on your own. The first is listing on the MLS. The second is the MLS lockbox so other realtors can easily show the listed house. The third is access to the negotiated forms. All of these you can now get from a startup called Savvy Lane for a flat fee. We listed our house in Portland, paid Savvy Lane $495, and it sold 11 days later. I paid a full 3% to the buyer's agent (the buyer's agent actually plays a bigger role in selling your house than your agent), and still saved like $18k. I'm a big fan of Savvy Lane and hope they do well. Realtors are paid way too much for what they do, particularly on the seller's side.

dpcan 8y ago
When we sold our house, we found an agent who was also his own broker. We paid him $500 and he did exactly this. Gave us the forms, put the house in the MLS showing a buyer-side 3% commission, and then made a note that we were representing ourselves and we listed our phone number to call if you wanted to show it. I think we signed something saying he wasn't representing us too. We had our house listed with a REALTOR for about 2 years prior to that (keep in mind this is during the market crash). But within about 2 months on our own, the house sold.
sgc 8y ago
The catch is you don't know whether you under priced your house for that or well more than that unless you paid an appraiser or broker to help you set the price. Most FSBOs sell for under market.
- cheerlessbog 8y ago
  You don't need an agent or broker to get an appraisal. In fact an agent arguably has a conflict of interest because a lower priced house will sell faster with little effect on their payout.
  - sgc 8y ago
    I did mention that option. It is funny how some people are upset that agents might want to force the price up, and others that they might want to force the price down. Agents have a fiduciary relationship. They must look out for their client's best interests by law. Some are not great, some are not honest. But that is the same for any field. In my experience most are honest and hard working, but the few with less scruples tend to be the highest volume agents. If someone were looking for an agent, if I knew nothing about anyone involved, I would recommend to start looking with agents with a number of years of experience but just average sales. A large reason for their average sales might just be integrity. Newer agents can be great as well because they will work three times as hard, but they are newer for better and for worse.

iwantedjusttom 8y ago

As a realtor for the past 6 years I can say a couple of quick things as to why I don't see the real estate industry going anywhere, even though I think that real estate brokers are extremely overpaid. - selling your house, at the end of the day, is quite the undertaking. A lot goes into it, it can get emotional, messy, and sometimes quite complicated. Having someone that does it on a daily basis can be nice and really smooth things out. - people are too attached to their homes emotionally. More often than not, when trying to sell on their home without a realtor they will not have it in a saleable condition and price it too high for the marketplace. It will sit and not sell, or they will get an offer that is appropriate and be offended and not sell it. A GOOD broker will bring facts, data, and logic to the table so that a person that is actually committed to selling their home will get the job done. If people saw their homes for what they were when they decided to sell them, a product or a piece of property and nothing more, the real estate industry would die in no time at all. Then again, there are a lot of swindlers out there too, so it's nice to have someone as back-up to watch out for those types of things as well.

germinalphrase 8y ago
Do realtors have any advantage when it comes to seeing the listing for properties before they are visible on the common real estate website (zillow et al)? I always assumed it was so, but I’d love to hear one way or another.
- aidenn0 8y ago
  Usually they do; specifically the MLS has a listing type for before the house is on the market that only agents can see.
- SteveGerencser 8y ago
  Every property we have ever purchased, except the first one, was not on the open market and the result of an agent/broker "knowing someone" that had what we wanted and managing to work out a deal for us.
imbusy111 8y ago

DoubleCribble 8y ago

A good realtor cultivates relationships and deal flow. I suspect that a decent percentage of transactions in a competitive market never even hit the MLS as the houses are sold before they even get listed.

kbos87 8y ago

Having just gone through a grueling year long search for a home, I absolutely see the value in having a realtor as a buyer, and I have to say I’d be happy to pay for one if I were on the sellers side. Yes, some of a realtors transactions are probably cookie cutter, simple, and mundane work that a buyer or seller could have carried out themselves. The challenge is you don’t know when that isn’t going to be the case. We ended up in more than a few situations where having someone in our corner who had “seen some s#+?” was hugely valuable. The argument that “hey, we live in this society where people like to do stuff online and therefore real estate agents are on the chopping block!” just doesn’t hold true. In some cases a human being is the most effective way to deliver the kind of tailored, personal, convenient service that people seem to also want more of.

rossdavidh 8y ago

As a back-of-the-envelope approximation, if the commission is 6%, and there's at least a 6% chance that having a real estate agent keeps me from doing something stupid on the largest financial transaction I will do in my life, it's worth it. Probably, they do nothing for me I couldn't have done myself, but there is that chance that I would have (for example) bought a house in an area where it could flood, and then not be able to sell it because of that fact. There may be real estate agents that are not good enough to be doing the job, but a competent one is absolutely worth it for a person who does maybe 1 or 2 house transactions in their lifetime, just for the chance that they might make a really bad decision if they don't have someone experienced to help them think through it.

raquo 8y ago
It can be both "worth it" and "horribly overpriced" at the same time. That's just how cartels and monopolies work. They charge you vastly more than their cost, and use the profit to legalize measures that inflate the "market" price to their desired level.

no_broker 8y ago

Just to add another perspective: I recently bought an apartment in NYC without using a broker. One common argument for buyer's brokers is that they don't cost the buyer anything: the seller pays for their commission. If I were buying a $1M apartment, the seller would pay $30,000 (3%) of that to my broker. Alternatively, I could not use a broker and instead negotiate the price I pay to $970k (basically what I ended up doing, though it's hard to definitively say what I would've paid had I used a broker). One could argue that a broker's experience could more than pay for the fee, but I have a hard time believing this is true 90%+ of the time (which is how often buyers hire brokers). It was pretty easy (and enjoyable, at least for me) to research what was on the market thanks to aggregators like StreetEasy and major brokers' own websites (I'll also concede that I may have missed out on some off-market listings, but was able to find a place I love in spite of that; this may be somewhat different in a seller's market, but I don't know). I arranged showings directly with the listing broker, researched what to look for in an apartment and what questions to ask, and often brought experienced friends and family to these apartments. My particular experience was perhaps unique because I ended up buying a condo in a new development with an experienced developer (but I don't think it would've been particularly costly or hard to hire a home inspector myself), but I was still able to provide comps, write a persuasive offer letter, research the developer, and negotiate closing costs. I ended up paying 7% under ask and paying no transfer taxes, and I really doubt I'd have gotten more than 4.5% under ask had I used a broker. My strategy may be too risky for many others -- this was my first home purchase, after all -- but I did a bunch of research, reached out to friends and family for advice, and consulted an attorney before submitting any offers. I ended up spending a bunch of my own time doing work that someone more experienced could have done for me, but it was a great learning experience and seems to have had a huge return on investment. If you're not willing to try this strategy, I recommend looking for brokers who will agree to some sort of commission rebate. In NYC in particular, a company called [Prevu](https://www.wework.com/creator/personal-profiles/real-estate-duo-selling-millennials-their-first-home/ https://www.wework.com/creator/personal-profiles/real-estate...) offers a two-thirds rebate (note: I have no affiliation with this company and never used their service, but some of their [blog posts](https://www.prevu.com/blog https://www.prevu.com/blog) were quite helpful to me).

gamechangr 8y ago

yroc92 8y ago

Homie is a VC backed startup replacing real estate agents in Utah and Arizona and they seem to be doing very well. Massive adoption over the last year. I feel pretty confident that agents will eventually be a thing of the past.

freedomben 8y ago
I hope you're right, but I bought my current house with Homie and it was a nightmare. Their website is a pile of crap that is so riddled with bugs. I was a buyer but got several emails regarding the "sale" of my house (I wasn't selling a house). Their website was so broken that I couldn't even fill the forms out, and ended up making phone calls. Then they face a basic blackout from the entrenched real estate mafia. No selling agents want to work with buyers from Homie because the buyers agents are supposed to show the house. But when you have no agent, it falls on the seller, and they flat out told me no several times unless I agreed to buy it through them. I can sympathize with this, but it sucks as the consumer. This is a problem they will need to overcome. I love the idea of Homie, but if you're going to push the software/automation angle, you better have software that works. You also gotta figure out how to twist the arm of that cartel. I believe in their mission enough that I actually looked into applying there so I could fix those bugs, but I get the impression that they don't hire in-house engineers and possibly use contractors. I'm a senior engineer who worked as a real estate agent for a couple years, so I think I would have been pretty valuable hire for them. I'm also super passionate about disrupting that industry because I feel they've taken advantage of me in the past much. But, alas, what can you do.
gamechangr 8y ago
One of the ironic parts of "Homie" is that they're value proposition depends on existing real estate agents. They claim to charge sellers $1,500 to list and no more. Sounds good so far. How do they get buyers? They claim to give buyers $5,000 back at closing. Cool, but where does that money come from you might ask? The FAQ's imply by only buying listings currently available with a traditional real estate agent. Exact wording from their FAQ's: "If a non-Homie seller has listed their home on the MLS, they’ve agreed to pay a buyer agent commission (BAC), usually around 3% of the price of the home." The more sellers choose them, the less successful they will be at attracting buyers. That's why so many of these "Billion dollar disrupters" go under. They need the existing system to succeed.

henryl 8y ago

I'm the founder of a real estate tech startup that caters to realtors. This article was written before Opendoor and before a record breaking $10B was pumped into proptech in 2018. The consensus now is that this industry is undergoing rapid change. At the bottom end of the market (maybe 10%), iBuyers like Opendoor will likely completely disrupt the traditional brokerage model. Next, you will see discount brokerages (Redfin, Purplebricks, et al) take more and more of the market. Full commission brokerages will still be the mainstream for the foreseeable future, but commissions will come down modestly, even for them. As purchasing or selling a home is one of the most expensive, most emotional, and most intimidating transactions you will ever do, seeking the help of a real estate agent is generally a good idea. Increasing competition will create more options and more value for consumers than we've ever seen before and that's a good thing.

bleu-ble-bleu22 8y ago

Homie.com here in Utah seems to be doing well.

benmorris 8y ago

Having bought and sold quite a few houses now I can say I won't go down the FSBO route anymore. I successfully bought my first house this way, but selling it was a train wreck. Not fun dealing with selling your own home at all. I eventually listed it with a realtor and sold it a few weeks later. Later in life though spending larger amounts of money on a home I would always recommend finding a good realtor. Someone friends/family can recommend. There are just hundreds(if not thousands) of pitfalls to buying or selling a home. On a different note I did have the opportunity to build several data driven local realtor sites a few years ago. They were deceptively simple looking on the surface, I mean all you do is sort and filter house results right? The process of syncing to the RETS system proved to be really clunky and complex. Imagine building a site on top of a database you have to query to discover the tables, fields, and datatypes, and oh by the way it could CHANGE SCHEMA at any time. If your broker was part of multiple MLS (Multiple Listing Services) then you could have to deal with completely different structured DBs. I handled these issues by building a normalized table for listings I could map the data into. MLS data was pulled into a 1:1 mapping table of the same name upon querying the schema. I had to build a Sql Script generator to create the tables. It was very frustrating dealing with schema updates. The whole process was interesting to me though as to how your listing data is handled when you list a house for sale and how others can gain access to it. Long story short you have to pay to play. Zillow for example is paying (or should be) to access your for sale listing data once entered in the a regional MLS. This is likely several thousand a year conservatively (per MLS). This gains them the right to access the data, however, many times these agreements are 20-30 page legal documents. My first time seeing one of these was extremely uneasy (I nearly didn't sign it). Again fascinating in the case of Zillow I know for a fact they are violating this agreement in our particular region when they hold onto listing data and images past the duration of a listing (sold or removed). They simply just keep it indefinitely it appears. On the other hand keeping up with 100+ MLS agreements across the US would be impossible as well.

AmericanBlarney 8y ago

I used what was termed a "transactional broker" when selling my previous home - I paid a flat fee of a few hundred bucks to them as the seller's agent, plus 3% to the buyer's agent. As the article mentioned, there's not much value driven by the selling agent - I managed all the showings via an app and we sold it in a week. The only real value to me as a seller is someone who can bring me a buyer (hence keeping that 3% commission). Buyer's agents also spend time taking clients to see houses and provide some assurance that people aren't arranging viewings just to steal your stuff, so I see a continued role there. Honestly, I've rarely been impressed by the real estate knowledge of either type of agent. Their general incentive is to make a deal happen - "seller's" agents will often try to talk up a below market offer if it gets them a commission faster. Likewise, I've only met one realtor who I felt was really trying to get me the best deal as a buyer.

gammateam 8y ago

Inefficient Market Theory: Compass discovers how lucrative opaque real estate markets are.

rb808 8y ago

What are buyers agents for? I've lived lots of places around the world and nowhere else has buyers agents. Its just an American thing. What do they do that's useful and costs so much? Search online for you?

ralusek 8y ago

Since nobody has mentioned it, YCombinator's own Open Listings is a reduced commission alternative to Zillow which has been quite successful. https://www.openlistings.com/ https://www.openlistings.com/

peterwwillis 8y ago

Weird/unrelated anecdote: Nobody in Greece uses realtors. I can't remember the exact historical reasoning, but it starts with the Ottomans. The Ottomans controlled the Greeks since about 1453, and when they were finally overthrown after the Greek War of Independence, there began about 120 years of political turmoil until the end of the Greek Civil War. So, post-civil war time. Tons of people are in exile, the country is torn by rival factions, and everything is in an even worse state than when the Germans occupied it. After hundreds of years of being occupied by foreign powers, there isn't really a clear indication of who owns what piece of property. Most of what you went by was "Well, somebody in my family used to own it." Cool. When it comes time to buying or selling property, there aren't really well defined "properties" per-se, or even a market for them. Somebody might just come up to you and tell you somebody else wants to buy your land, and if you just give them some cash up front, they'll get you a really good deal. So you give them some cash, and either they never return, or they come back with a really horrible deal. If they claim they're going to help you with the legal paperwork, they'll almost definitely sabotage it. Today, if somebody tries to help buy or sell a home in Greece, the average Greek will think they're a grifter trying to make a quick buck. To make matters more difficult, apparently there's been multiple confusing ways of legally registering and searching properties, and the red tape involved with completing the title transfer is crazy. So there's very few registered realtors in Greece, and basically nobody uses or trusts them. Meanwhile, the country is fucking stunning and there's abandoned property all over the place that nobody can shift. An ocean front property in the Peloponnese can go for a hundred grand. But good luck finding it or having any help in acquiring it, because they're all FSBOs that pin an advertisement on a telephone pole in the nearest city.

gamechangr 8y ago
Maybe they should start...: https://www.theguardian.com/world/2014/feb/28/home-ownership-greece-property-market https://www.theguardian.com/world/2014/feb/28/home-ownership...
gamechangr 8y ago
I don't know much about the subject, but one google search and it looks like that's not accurate. They call their real estate agents just "estate agents". There are many... https://www.justlanded.com/english/Greece/Greece-Guide/Prope.. https://www.justlanded.com/english/Greece/Greece-Guide/Prope....

Per_Bothner 8y ago

We ended up paying a total commission of 1.5% selling our house in Cupertino, CA, but that was a special situation. The listing agent agreed to accept a 1.5% commission, as the house sold itself - more easily than we expected. (We got 21 offers at or above asking, in a week.) The buyer was also an agent, so she offered to buy without a commission (which effectively added 3% to her bid). I did a lot of work on the selling side: taking pictures, writing the description for the MLS, helping to show the house, including two very busy open houses, negotiating. The house was an as-is tear-down, so there was no staging, just a little bit of tidying up. (Some of the interested buyers wanted to live there, though I warned they they would need to budget for repairs.)

nikanj 8y ago

I do not know what the fizz buzz test for a RE agent would look like, but I've met so many agents who would fail one. This is Canada, so the rules are slightly different. However, I do not find it unreasonable to expect an agent to know that you can't get a CMHC backed mortgage for 1) homes with a fixed-term renter tenant in them 2) homes with age restrictions 3) homes on leased land. Our agent repeatedly found us "perfect homes", just to learn after writing the offer that no bank is willing to fund the transaction. I think the general public refuses to admit that good agents exist, and the RE industry refuses to admit that absolutely garbage agents also exist.

ybalkind 8y ago

In South Africa the traditional real estate commission is getting disrupted www.leadhome.co.za propertyfox.co.z

tmplvietduc 8y ago

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oron 8y ago

https://www.reali.com/ https://www.reali.com/ by a friend of mine is a US startup trying to do just that.

shawnee_ 8y ago

Rascoff explained that Zillow really has “no skin in the commission game” when it comes to what real estate professionals get paid, comparing Zillow to information provider WebMD. Not accurate at all. For one, Zillow could do about 1000 things to promote competition among realtors, but it doesn't do that. It could remind people that in 1950, the Supreme Court ruled that putting a hard-coded "6 %" on a real estate contract is, in fact, illegal price fixing. It could remind people that "6 percent" of a sales price often equates to a much larger number when it comes to equity lost (e.g. if you have 250K equity in a house worth 750K, the commission amounts to ~ 21.3333 % of your equity. It could remind Realtors that attempting to get people to sign contracts that they refuse to negotiate on is coercion, and it could help people sue Realtors who participate in cartel-like practices. But it doesn't do that. For those interested: The Supreme Court case from 1950: UNITED STATES v. REAL ESTATE BOARDS https://caselaw.findlaw.com/us-supreme-court/339/485.html https://caselaw.findlaw.com/us-supreme-court/339/485.html Factual findings of the Court Enough has been said to show that under our decisions an illegal price-fixing scheme has been proved, unless the [339 U.S. 485, 489] fixing of real estate commissions is not included in the prohibitions of 3 of the Act. Price-fixing is per se an unreasonable restraint of trade. It is not for the courts to determine whether in particular settings price-fixing serves an honorable or worthy end. An agreement, shown either by adherence to a price schedule or by proof of consensual action fixing the uniform or minimum price, is itself illegal under the Sherman Act, no matter what end it was designed to serve.

tomohawk 8y ago

If you're selling, and the realtors in your state haven't outlawed it, going with a fee for service broker can save you a lot of money. A fee for service broker will charge fixed fees for each service they provide, for example, a listing on MLS. In our market, this worked great last time we sold. Being able to write up the MLS listing ourselves we realized how lazy/incompetent most realtors are. We touted a commission for the buyer broker (they typically get half of the standard 5%) in the listing and the house sold quickly. I don't mind paying a commission to the buyer broker - they are the ones that do most of the work in most markets.

novaleaf 8y ago

i used Redfin to buy my latest house. They saved me 1.5%. That said, I had to do all the leg work myself: visiting every potential house meeting my data criteria, compiling all the potentials and eventually narrowing it down to bid candidates. Assuming that physical inspection leg work+analysis is part of a full 3% commission realtor's responsibilities, I can see that full 3% being valuable to certain time constrained buyers. However given how rare a house purchase is, I would bet that a large number of full commission buyers arn't aware nor getting the full attention of their realtor. On the sell side, I really don't see the benefit of a full commission realtor. I did a FSBO before, which is on the opposite extreme. Again I think a discount listing agent like Redfin makes a lot of sense. I actually wonder why Redfin isn't as popular. I assume due to the aggressive social marketing realators do, and the hand-holding they do during the the high stakes process.

toldyouso 8y ago

The SF bay area is ripe for disruption and is being disrupted. Buyer's agents here don't have to really put any work together - I know from experience having worked with a couple realtors. Most homes sell here completely free of contingencies (loan, inspection, appraisal), thus once you as the buyer commit, you commit. Sellers here don't tend to be sentimental. Just because you attach a nicely written letter with a photo of your family and your dog doesn't mean the seller will turn down an extra $20k. Thus, a buyers agent really won't be able to negotiate a better deal for you than you can get for yourself. It's highest bid wins, and buyers' agents will always tell you to bid more so you have a better chance to win the house (something obviously self-evident). Also in the bay area, especially the south bay, housing prices are at the $1.5 - 2.5m range. Tell me how whatever service for the buyer can possibly worth $45k - $75k for putting together an offer for maximum amount with no contingencies. Realtors are entrenched but there's a reason why these real estate startups are proliferating.