Carren Jao reported recently at the Los Angeles Times Online that, “Real estate agents used to be privy to a lot of information that home buyers couldn’t obtain on their own.
“But now property listings, photo galleries, historic sales prices, school ratings and neighborhood crime rates are freely accessible to anyone with just a few clicks. For some assertive buyers, that’s an invitation to bypass an agent and, in the process, cut out the pesky 5% to 6% commission that is traditionally split between the buyer’s agent and the seller’s agent.
“To help buyers go it alone, or close to it, several real estate start-ups have emerged that promise an easier solution to a notoriously stressful and expensive purchase. By eliminating or limiting an agent’s role, customers save money and streamline the process.”
The article stated that, “It’s also leading to tensions with the hundreds of thousands of real estate agents around the country, who say the companies are shortsighted and overlook the skills that a professional agent can offer.”
The L.A. times item noted that, “[One couple] turned to Open Listings, a Y Combinator-backed start-up that replaces most of what agents do with an online platform. The Los Angeles company helps customers find a home on their own by creating a personalized feed of available properties that meet their requirements, and sending them emails of open houses.
“It’s free for customers to use the service. Once a home has been purchased, Open Listings refunds customers half of the commission it receives from a successful transaction.”
Ms. Jao explained that, “Real estate start-up founders say the industry is ripe for change.
“According to the National Assn. of Realtors, 92% of buyers use the Internet during their home search and 68% of first-time home buyers are millennials, used to the conveniences of Airbnb and Uber to simplify routine transactions. The same demographic is similarly moving away from actively managed investments to lower-cost, automated financial advisors that provide a list of suggested portfolios and investment options.”
The article also pointed out that, “Sellers, too, are turning to real estate start-ups to help them save money.
“Dallas-based Door launched last year. Instead of carving out a roughly 6% chunk of the sale price for commissions, it charges sellers a flat fee of $5,000 plus 2% to 3% of the purchase price for the buyer’s agent. Denver-based Trelora has a similar model, although it charges sellers $2,500.
“SideDoor, meanwhile, earns its money from tangential real estate businesses like lenders, real estate lawyers and title companies that use SideDoor to find clients.”
