All Forum Posts by: James Kerson

It's understandable that this thread has touched a nerve. I’m proposing a radical reworking of how houses get bought and sold in the United States, and asking agents to comment on what would be major changes in how they work, who would compensate them, how, and how much. 

The end result I envision will be many fewer commission dollars paid and agents employed, but those remaining agents would be much more regularly employed, on an hourly and not a commission basis, paid to provide advice and nothing else. SFR transactions are generally fairly simple, and condos are not too much more complicated. Depending on the principal, a lesser or greater degree of professional advice is necessary, but most SFR transactions are similar in their mechanics. My brokerage would employ data-driven pricing guidance (hard to see how this would be materially different from MLS comp sheets; perhaps more accurate). It would hire photographers like traditional agents do, and would advise buyers and sellers, up to a predetermined number of hours, after which the advice would cost extra. This would disincentivize tire-kicking and over-pricing, I hope.

Whether my brokerage would work for sellers alone or for both buyers and sellers is a technical matter, an important one to be sure, but a technical one that can be overcome. Marcus & Millichap, the commercial brokerage, more or less exclusively functions as a listing agent or a dual agent. Are commercial buyers more sophisticated than residential ones? Maybe so, but I doubt that they’re less litigious. 

Likewise, I’d need to work out how prospects would tour properties safely, legally, and at minimal expense. I don’t have an easy answer, but if Uber made private cars taxis for hire, I’m sure this could be overcome, too. My guess is that there are inactive licensees who could be drafted to a new brokerage whose sole function would be to open doors, especially if those licensees are paid per-tour…like Uber drivers.

Fair point. Buyers could work with listing agents unrepresented, or for a modest fee, they could get buyer agent advice through my brokerage.

I foresee an army of work-from-home Zoom agent-advisors. They would do no prospecting, lead generation, etc. Pure client service. 

The distinction between NewCo and traditional brokerages is that agents would be paid hourly, not by commission. They would not market themselves, just offer advice. Assuming 5-10 hours of client-service work per listing, it’s not a bad wage.

Yes. Maybe there would be some minimum, defined as cost-plus, but yes.

Say there’s a way to sidestep the door-opener issue. Not sure how, but let’s assume. I’m making a few assumptions: 1) at least some buyers and sellers will accept much less agent handholding than commonly assumed, 2) the primary value that agents add is a) pricing guidance and b) advising clients on offers and counter-offers, and 3) there’s no truly compelling reason why North America has the highest average commissions in the rich world. If I’m right, why should real estate commissions be higher than, say, Charles Schwab commissions?

Exactly. Generally speaking, I expect that our agents would function as dual agents.

One other idea: scrap the idea of door-openers altogether. Take AirBnB as an example: no one previously thought that a mass market existed for homeowners to let strangers in their homes, or for strangers to rent their space hotel-style. If prospects upload ID, pass a quick background check, and maybe upload a pre-approval letter, I think that answers both the security and tire-kicker concerns. 

Would sellers be comfortable? Initially, maybe not many would be, but for 0.6% commission, maybe a few flippers would take the risk? I doubt that owner-occupiers would be the early users. 

I'm a licensed broker in Ohio, and I've been a multifamily investor and SFR flipper for a decade. Multifamily (5+ units) is a different animal than SFR, but there agents (or brokers, as they uniformly call themselves) clearly add value, in my opinion. In SFR, I've never quite seen the value of a buyer's agent, except to open doors before I got my license. As for listing agents, they have two primary jobs: to advise on listing price and to help sellers review and counter buyer offers.

There are other soft roles that listing agents perform, but those could be done a la carte on an hourly basis beyond the five or 10 hours included in the 0.6% rate.

Fair objections. Regarding licensure, there are a ton of licensed but formally- or informally-inactive agents. I doubt it would be too hard to recruit some to open doors and hand out list sheets for per-tour pay (think of Uber drivers, but with real estate sales agent licenses). 

Regarding tire kicking, yes, that’s a tougher issue. Maybe prospects would pre-qualify in some basic way before touring (e.g., they’d have to upload pre-approval letters and ID to an app).

I’d like to start a new kind of real estate brokerage. It would dually represent buyers and sellers and charge a total commission of no more than 0.6%. Instead of depending on buyer agents to drive prospects from house to house, prospects would tour houses themselves, and unlicensed “door-openers” would admit them. The listing agreement would include within the commission property photos, a set number of “door-opener” tours, some hours of phone/Zoom consultation with a licensed agent to set a listing price and discuss offers, counter-offers, and closing mechanics. Ideally AI could improve the property analytics that shape listing prices, a competitive advantage over other brokers. While this brokerage would start in Ann Arbor, I would want it to expand to all of Southeast Michigan, then statewide, and ultimately nationwide.

Initial target users would be investors/flippers, in other words, more frequent flyers than typical homebuyers. Yes, this brokerage would eliminate buyer-broker commissions, which are under threat, anyway. Agents would be paid hourly, not by commissions: the brokerage and not the licensed agent-advisors would drive all listing leads. Agent-advisors would merely provide advice, coordinate property photos, and review offers with their principals. 

Agents, tell me why this is a bad idea. Be as blunt as you can.