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I invested and helped with something very similar to this in New Zealand. We found the model is difficult to make work for several reasons. Firstly for most pe
by lancewiggs 3y ago
I invested and helped with something very similar to this in New Zealand. We found the model is difficult to make work for several reasons.
Firstly for most people buying and selling a house it is the biggest transaction that they ever do, and they are simply not used to negotiating that large of a contract. They actually need a Real Estate agent to help drive the transaction to a close. So in our model we had a licensed agent as the founder and he spent considerable time negotiating deals to close, and sold a lot of homes.
Secondly when it comes to selling your home you want to advertise it to the biggest market possible, which in our terms meant being on the major real estate platforms, one of which required you to be a licensed agent. Your buyers are not really incentivised to find your site and will use the big sites.
Thirdly, and most importantly, the Real Estate game as you probably know is all about finding listings. That takes money and time, and $1000 per listing simply doesn’t make economic sense, well it didn’t for us.
Our business failed, gracefully
Suggestions (without reviewing the site):
Sell packs of home sale supplies such as yard signs, advertisements on platforms where you get discounts or access.
Try to get relationships with large sellers, in particular we found sellers of new apartment complexes /multifamily dwellings which were in demand were very keen on lowering their transaction fees.
Consider offering a Real Estate agent service for very low cost will you conduct all of your business on the phone and not in person. That may meet the regulations and dramatically undercut the market.
Consider a higher price, especially consider a transaction fee as that’s where sellers don’t mind paying.
The Real Estate industry, and our part of the world and I suspect and yours, had a wide array of inefficient practices that were begging for automation. That’s where the real value has been created, though I would say the real money is of course in selling houses.
Good luck with the endeavour.
- propboxsocials 3y agoThanks for sharing this, in 2020 in US there was about 500k real estate transactions done by FSBOs. We will try to get share of this market.
- kanwisher 3y agoWhat percentage of those were just unadvertised listings. For example I sold my condo to a tenant that was renting from me. Blindly ignoring his advice is why there have been a dozen startups fail in this category
- montgomster 3y agoAccording to NAR they were FSBOs. More than a dozen, I paid attention to all of them I could find. probably missed some -its a big country. thanks for weighing in.
- djbusby 3y agoOn the first house the Agent is critical. On the fourth not so much. iME, YMMV
- montgomster 3y agoGenerally speaking yes, but lots of exceptions. Thanks for commenting
- Rapzid 3y agoIt seemed not so long ago most homes in NZ were going to auction too.
- montgomster 3y agoNot too familiar with NZ real estate but it makes me wonder why?
- xupybd 3y agoWe've hit something similar with kitchens. It turns out most people need a designer or they won't buy a kitchen. When mitre 10 offers design for free it's hard to compete.
- montgomster 3y agoEvery industry has cut rate companies. and every industry has high quality companies. It is battle. Sometimes the cut-rate companies are competing with other cut rate companies and it is a race to the bottom. Not sure where you are located but in my market it is just the opposite. Never give up. There is a way.Thanks for your comment.
- moneywoes 3y agoBy cut rate companies do you mean brokers? Brokers who take a lot of excess transaction cost
- OJFord 3y agoNot GP but no - cheap companies, with an implication of low quality, serving the most price sensitive end of the market.
- montgomster 3y agoOJFord. GP? not sure what that stands for. It sounds like you think we should charge more. If you looked at the platform, curious what would you pay for the ad as a seller?
- montgomster 3y agoBrokers and agents both. From the customers perspective the agent is the company. Some companies forbid the agent from cutting their fee. Some agents are offended if you ask. It's the wild west out there. Very fragmented industry which is part of their problem. Thanks for your question.
- montgomster 3y ago
- paulddraper 3y agoHomie has seen good success. I bought my last house through that. First time buyers may need some help, but you learn a lot and quickly
- montgomster 3y agoThere are many cut rate brokers, some more successful than others. We believe first time buyer will like PropBox. We even make them aware of the 5 year rule. Thanks for your comments.
- deleted 3y ago[deleted]
- lolinder 3y agoHomie's flat fee for sellers is dramatically higher than OP's, and the seller still pays a regular commission for the buyer agent (even if the buyer is using Homie as their buyer agent): Sellers Pricing: https://homie.com/pricing#buy-sell-tabs-first https://homie.com/pricing#buy-sell-tabs-first Buyers Pricing: https://homie.com/pricing#buy-sell-tabs-second https://homie.com/pricing#buy-sell-tabs-second The higher fee means they can actually pay for all the costs they incur and still remain profitable. Including the buyer agent fee means that they're in a position to attract non-Homie buyer agents to the platform, so they're not trying to bootstrap a market from scratch. It also means they can give half of that portion of the fee back to the buyer as an incentive to choose Homie, whereas in OP's model there's no reason for buyers to choose them.
- OJFord 3y agoI thought 'buyer's agent' was a weird Canadian thing, ypu do it in the US too? Seems such a con. And your links imply it's built in to the system, there's always a 6% charge for that (otherwise why would they charge and give back half). Short of multi-millionaires looking for an interesting fifth home without caring where it is, I don't see why you'd want to try to explain your requirements to someone else, have them sort of get it, show you things that aren't right for reasons you forgot to give or can't quite explain, and pay for the privilege. In the UK we just find somewhere we like the look of, arrange viewing with the (sellers') estate agent, and potentially make an offer. What would a buyer's agent do for me except increase the price/decrease what I can afford?
- montgomster 3y agoThanks for your feedback. A lot of your comments line up with the US. We suspect our market is the FSBO. According to NAR, about 10% of the market was for sale by owner(FSBO). If that number is correct, the FSBO market is twice the size of the largest real estate company. So about ten percent of the market here apparently doesn't need an agent. That's about 500k houses. We believe we have a lot to offer a "bare" FSBO. Only time will tell. Thanks for your feedback. It is appreciated.
- dclowd9901 3y agoTwice the size of the largest RE doesn’t mean much when 90% of the market is RE. People pick realtors, not companies, and companies have done pretty well to spread themselves evenly over the great US landscape. And you’re not primed to capture a market that is focused on spending $0 to list. That’s the reason they’re avoiding the real estate pipeline in the first place.
- montgomster 3y agoI see your point, but it is not universal. There are a number of reasons sellers choose FSBO. I have spoken with thousands of FSBO as an agent and as DearMonty on my website. Here are a few other reasons: 1. significant inside real estate knowledge who know how the system works. Examples are contractors, attorneys, title company workers, and there are more. 2. Poor experiences with agents. 3.A need to be in control. 4. They recognize the significant asymmetry and conflict of interest of the agent. Yes, there are bottom feeders and they need us more, but they may be harder to convince. Time will tell. I appreciate your feedback/
- oefrha 3y agoPricing says $1 per listing for the first 100, then $995. If you’re targeting the FSBO market, doesn’t that mean you won’t be making any money most of the time? Am I missing something? Maybe the $1 per listing is temporary to kickstart it?
- markdown 3y ago
- moneywoes 3y agoHow did your business fail?
- starik36 3y agoI also worked on something nearly identical in US. It also failed with a bang. The site had a similar value proposition as the OP. $995 and off you go (we also tried other price points). At the end of the day we just couldn't get enough customers. That is despite spending some serious bucks on advertising with Facebook and others. I suspect you are right - home purchase/sale is too complicated for a regular consumer from a legal and practical standpoint and cost of failure is high. It's better to hand it off to a professional.
- flarg 3y agoI'm in the UK and we bought our house direct. We needed a solicitor but not an estate agent. Saved a packet. Most people I speak to are too scared to go out alone in this way. If it became more of a regular thing it would take off.
- lozenge 3y agoBuyers' agents barely exist in the UK but sellers' agents are very common.
- montgomster 3y agoI don't know a lot about other countries but my understanding is the fee is much lower, which may explain why you do see many buyer agents. Good comment. Thank you.
- xur17 3y agoI think fear is the main deterrent as well. I wonder if it can just be framed as "presale" - you list on this much cheaper platform, and if it doesn't sell, you can still go the normal route. Homeshake [0] is a local company that does something similar to this, which at least appears to be having success. [0] https://www.homeshake.com https://www.homeshake.com
- montgomster 3y agoI am familiar with Home shake. I wish them well.