Poll - Anyone want to buy without an agent and get a comm refund?

Question

Hi Everyone,

I have been working on a project for some time now and we're finally ready to launch - now we are just trying to figure out which state to go for first.

This project answers the thread posted a couple days ago about weather or not agents days are limited, especially with the advent of the internet. I have been long working on a project that eliminates the buying agent completely, it's in the form of Zillow but goes a step further and actually lets you put an offer in on the site. Through some pretty complex automation, we are able to handle the whole buying process from start to finish, and give a 50% commission refund in cash.

I am trying to gauge interest for this type of service, to see how likely people would be to forgo using an agent for something like this, especially since we can offer a 50% commission refund and all of the same services.

We also built a pretty complex algorithm that asks a ton of questions about you, what you're looking for, sensitivity to crime, noise, walking distance, etc, and spits out the best neighborhoods and even individual houses for you to look at.

We can even schedule and show you property. Pretty neat, huh?

Tl;dr: I built a platform where you can search for and buy property completely without an agent (perfect for remote investment) and you get a 50% commission refund for doing so. Would you be interested?

Any feedback, comments, questions, concerns, would be so much appreciated.

Joel Owens · Answer

I have been in this business for a very long time. I have about seen it all. I have even seen the employee model with  Foxton's that went out.

One thing not mentioned is that rebates are only allowed in some states. So this isn't something to be done on a national scale. If a broker/agents split was say 30% to the brokerage and they rebate 50% to a buyer the agent gets almost nothing.

It is a failed business model.

I am in the commercial space so millions to tens of millions at stake for each client buying a property. This kind of stuff doesn't even enter their mind. They are paying for a specialized skill level so they do not lose hundreds of thousands of even millions buying something incorrectly.

I have heard the sky is falling stuff for years.  Before people spend umpteen hours and money on a platform or a variation of a platform research would show that has been tried many times  and failed.

Researching an idea before getting way down the road with it is generally a good strategy. While markets are hot these models tend to try to pop up and then when markets try to cycle to neutral or down these models drop off. When things get tough people flock to performers.

I am having a record year this year in the top 1%. I do not see brokers or agents going anywhere. The dollars component will never overtake the relationship component a broker/agent provides to completely automate the process etc.

Mac Connolly · Answer

Thank you for the feedback and the kind words, Steve!

To address a couple of your points, you're absolutely right about the commission refund - we would be refunding 1.5% or half of the buyers commission, which does work out to be 1/4 of the total.

We developed an algorithm primarily for remote investors - and this survey is simply to gauge interest (two different things). Our algorithm helps remote investors find the perfect property with little native knowledge of the market. When scheduling showing as a remote investor, our showing specialist can actually visit the property and take our own set of pictures and send them along, as well as their own knowledge and expertise in the area.

Thanks again for the input!

Steve Vaughan · Answer

@Mac Connolly.  Welcome and thank you for attempting to address this important issue!

I viewed the survey but didn't want to skew your results.  My deals last year were off-market and didn't use services or agents of any kind.

I didn't see how the survey would help match me with a good property.  Maybe that wasn't the objective.  A survey to gauge interest in what your doing I suppose?

To be rebated some of the commission is noble, but saving half of half sounds suspiciously like 1/4.  I'd hate to see new folks not receive the benefits of a good buyer's agent to save a few grand, at most.   You can do that yourself by stating you are unrepresented in your offer and set your price to reflect that.

Better clearly state you are not offering a "50% commission refund in cash."  People will assume you are offering 50% of 6%.  At most you must be offering 50% of the buyer's agents half, right?  (Here the buyer's agent is called the 'selling agent' for some reason,)

All that said, I really do like the idea.  So many new folks on here that I wanted to be clear.  I wish you the best with this awesome idea!

Brie Schmidt · Answer

@Mac Connolly - Who would pay the 50% commission?  It can't be what the buyers agent would normally receive as you have to be a licensed agent and a member of that local MLS to be eligible for the commission.  The only way around it would to receive a written commission agreement from each listing agent before the client views the property.  (even licensed agents in the state who are not a member of the local MLS need to have this agreement in place before viewing a property)

So you would need a licensed agent who is a member of each of the 1,400 MLS boards to pull this off.  Since a lot of our scheduling and communication is done through automated services, you would also need access to that, which is illegal for us to share.  So your partner agent in each MLS board would have to do the scheduling for you.  What about houses on lockbox?  Over half the houses are on lockbox and there is no way a listing agent is giving out that code to an unlicensed person.  There is no way this partner agent who is not getting paid is going to this showing on your client's behalf either.

Kellee Dankiewicz · Answer

You get what you pay for.  If I am going to buy a property out of my area, I want an agent that knows the area, local customs and regulations.  There is more to the picture than the property itself.

In CA, it is illegal to give a commission to a non-licensed person.  Even if we could, the 25% in my area would not make it worth the risk.  Average price home is $300,000 with investors wanting to pay much less.  Average commission on a $300,000 home to the buyers agent is 2.5% and sometimes as low as 1%.  You would only be getting between $1,500 and $3,750 back if allowed.

I am more than willing to let my out of area agent keep their entire pay check for a few very good reasons.  1.  They are much more willing to help me find another property if they get paid.  2.  If I am relying on Zillow, which I know to be in-accurate, chances are much greater that I will buy a bad investment.  3.  Agents know of homes that are not on the market yet, and the good ones go fast.

So, no, I would not be interested in this business model.  I am a real estate broker and know the value of a good agent.  I employ them and make sure they are well compensated.  Being an agent is not an easy job if done right.

Steve Vaughan · Answer

Thanks for addressing the commission % issue @Mac Connolly.  25% of commissions is what I thought you meant.

I see two very clear perspectives about this so far.  Licensees so far are  (and these are the BEST I know of) are addressing viability and logistic concerns.  Can it work?  So and so is already doing this.  Valuable for you.  A lot of experience I value chiming in here.

My concern will always be for the buyer and the homeowner.  Thank you for clearing the commission % up!

Mac Connolly · Answer

That's the problem.

Redfin has a model that hemorrhages money. Ours does not because our agent costs are incredibly low as the buyers do all the searching themselves - which is something they do anyway nowadays.

Russell Brazil · Answer

Yeah Redfin already does this on a large scale...and they lose a ton of money doing it.  At some point they are going to hit a tipping point where investors will stop giving them injections of cash just to continue losing money. I imagine their real long term goal is to sell the website platform to a top national brokerage, as I think the website is worth more than their actual valuation.

Brie Schmidt · Answer

Oh - are you looking to offer 50% of the 50%?  Redfin basically does this and their platform is going to cost millions to beat

Poll - Anyone want to buy without an agent and get a comm refund?

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