
Zillow CEO: startups trying to disrupt real estate commissions will fail (2012) - gamechangr
https://www.geekwire.com/2012/zillow-ceo-spencer-rascoff-startups-disrupt-real-estate-commissions-doomed-fail/
======
ryanackley
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.

~~~
clairity
> "That being said, the National Association of Realtors (NAR) and their local
> branches are the definition of a cartel."

NAR was actually investigated by the federal government (FTC i think? __), who
concluded much the same, but lobbying buried the report and nothing came of
it.

MLS's maintain power by strictly controlling access to information. they have
the most up-to-date and the most detailed information about properties,
buyers/sellers and sales transactions, among other things. this allows them to
be the arbitors of deal flow, giving their members the advantage.

and this is the linchpin that props up the 6% commission rate. it's classic
rent-seeking, since marketing costs have been dropping, as you mention. a
truly competitive market would probably put the commission in the 1-2% range.

(i did my MBA thesis on disrupting the real estate industry)

 __edit: here 's one, but i don't think it's the one i was thinking of:
[https://www.justice.gov/atr/competition-real-estate-
brokerag...](https://www.justice.gov/atr/competition-real-estate-brokerage-
industry)

~~~
ams6110
Property transfers, including buyer, seller, and sales price, are public
record. It's all published in the newspaper. How can MLS control access to
that information? Is it just that nobody else bothers to compile it from the
county records?

~~~
iakh
Purchase price is not public in all states

~~~
vonmoltke
It isn't? What states don't put that information in the property tax records?

~~~
thomasjudge
Montana for another. There have been attempts to change that which have all
failed in the face of industry lobbying and (more importantly) a Republican
controlled legislature

------
muhneesh
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
"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).

~~~
tres
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.

~~~
StillBored
I've forgone the home inspection during the most recent transaction. In the
previous few houses, I've found things immediately after the sale, which the
home inspector didn't find. OTOH, they find tons of trivial things that
frequently don't matter (or are just plain wrong).

And of course, while they might be able to tell you if they find termites, or
foundation problems, they aren't actually doing a deep analysis, so they will
themselves tell you to get an engineer or termite inspector if your concerned
about those things. AC/mechanical problems are in the same boat. The inspector
will tell you something like "the AC is 15 years old, but has a 15 degree
drop" (something you can discover yourself in 30 seconds with a picture of the
nameplate) and a thermometer. Actually measuring the subcool/superheat, no
way. The latter will actually give you a good idea about the state of the
machine.

Making the seller pay for a home guarantee for the first year is probably a
far more effective way to spend money. Although again, don't use them until
you know whats going on. Your AC gets warm, they are just as likely to send a
guy that looks the other way, pumps a 1/2 lb in the system and kicks the
problem down the road a few months.

------
iwantedjusttom
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.

~~~
imbusy111
I fail to see how they are overpaid. If someone sells 4 houses per year for 1M
for 1.5% fee, that's only $60k per year. That sounds like a mediocre income in
markets where houses even go for 1M.

I am using numbers for the Bay Area that I have heard of. Maybe other markets
are different.

~~~
whyaduck
An average of 3 months to sell a single $1M house in the Bay Area? $60k sounds
like it would translate to a pretty good hourly rate.

~~~
imbusy111
Better than $15/h minimum in some cities, but definitely not 'extremely
overpaid'. Note the 60k is for a year, not a single house.

~~~
whyaduck
Not my point. How could anyone possibly spend 40 hours a week for 3 months to
sell a single home at that price in that market? It's not a realistic
characterization of the job.

------
ilamont
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-e...](https://www.nar.realtor/research-and-
statistics/quick-real-estate-statistics))

... 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.

~~~
brightball
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
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.

~~~
hash872
Not in any way a defender of the current real estate system, but I've never
understood this mindset. It presupposes completely irrational behavior on the
part of the seller- that they will choose to give you a 3% discount for.... no
reason at all?

Rational agents want to get as much money as they can for their homes, and
begrudgingly pay any fees that they are forced to. If the seller gave you a 3%
discount here for no reason, it would be the same as if they'd hired an agent-
except, they wouldn't be getting anything for it? So why would they discount
you the 3%? It's a zero sum transaction where your gain of 3% (very
significant money in the Bay Area, as you note!) is the seller's loss.

IRL, real sellers will charge as much as they can. They are not giving out 4
or 5 figure discounts randomly or because they're nice. Do you randomly give
strangers 4 figures of money for no reason?

~~~
prepend
In IRL when I bought my house I factored in 3% to the buyer’s agent. I had
offers from normal agents who get 3%, all manner of “kickback” agents who
collect 3% and give some back to the buyer, and one agent less buyer that
included an explicit 3% calculation in their offer.

While, sure, I would love to get more and pay less commission, I don’t care
how that 3% is distributed. It’s fixed part of the transaction and is in the
MLS listing because I was afraid of missing some buyers.

When I bought a house, my contract with my buying agent said that 50% of the
buying commission came back to me at closing as a prepaid closing cost.

------
hcurtiss
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.

~~~
sgc
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
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
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.

------
hkmurakami
"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
> 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
Or a competitor does and they are getting the agents on their side

------
picodguyo
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
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%.

~~~
onlyrealcuzzo
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...

------
AmericanBlarney
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.

------
henryl
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.

------
cletus
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.

~~~
kbos87
This is dead on. The HN crowd that prefers to buy on their own based on
objective measures and data they can find on a property is a tiny minority.
Most people want and need human guidance in a complicated situation like
buying a house.

~~~
notahacker
The flip side of that is many non-US property markets function perfectly fine
without people using buy side agents. Unless you're a large scale property
investor you're not buying a property on objective data or insider
information, you're buying it because you've visited it and several others
within your budget, and this is where you actually want to be. Having someone
with financial incentives as strong as the seller's agent to tell you that
you're not going to find anything better and you don't want to negotiate too
hard on price along for a commission-earning ride isn't that big an advantage,
and you'll be paying separately for the legal advice and surveys anyway.

------
blang
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)

------
btgeekboy
This article is from 2012.

~~~
igolden
+1 - has anyone successfully proved him right/wrong since?

~~~
Joakal
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
neither of them tries to touch commissions though.

------
rossdavidh
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
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.

------
blazespin
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
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?

~~~
Axsuul
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
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.

------
benmorris
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.

------
amatai
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
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
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.

------
toldyouso
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.

------
yroc92
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
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.

------
honopu
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.

------
peterwwillis
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
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..).

------
soheil
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
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.

------
DoubleCribble
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.

------
AtlasBarfed
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.

~~~
Gibbon1
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.

------
shawnee_
_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.

------
DevX101
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
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

------
kbos87
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.

------
Per_Bothner
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.)

------
tomohawk
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.

------
nikanj
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.

------
dzonga
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.

------
sharemywin
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
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
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
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

------
calbear81
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
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.

~~~
paradygm
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
While the inspector recommended by your agent might be fine, there is an
implied incentive/bias for the inspector to help close the sale;

The recommending agent is a marketing arm for the inspector; if the wrong deal
falls apart because of the inspection, the inspector knows the agent isn't
going to get their commission, whether or not that means they'll recommend
them with as much fervor the next time can be largely dependent on how badly
the agent needed the money that time.

But, by hiring without an agent referral; the inspector has no incentive to
approve a house that shouldn't be approved; you're not going to be the new
marketing arm. Indeed, absent a relationship with an agent, the inspector has
an interest in inspecting as many properties for you as possible, and
therefore finding as many deal breakers as possible.

~~~
paradygm
The flaw here is in thinking just because you find an inspector on your own
that makes a difference in incentives. Who do you think the inspector has the
most incentive to impress? The buyer whom they most likely will never see
again or the agent who can potentially provide more and more clients?

~~~
smileysteve
This is my point in the last paragraph; you should ideally never let them
meet.

------
Eire_Banshee
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.

~~~
uberman
Yet, Intuit is one of the largest lobbyists against simplification of the tax
code.

[https://www.propublica.org/article/filing-taxes-could-be-
fre...](https://www.propublica.org/article/filing-taxes-could-be-free-simple-
hr-block-intuit-lobbying-against-it)

~~~
Per_Bothner
Which is why I've chosen cheaper alteratives to TurboTax - plus that I'm a
cheapskate. Last year I used CreditKarma - free for both federal and state
(CA) filing. I will almost certainly do the same this year.

I. pretty sure I can do a better job that some underpaid dude at H&R Block.

------
novaleaf
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.

------
ralusek
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/)

------
stretchwithme
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)

------
rb808
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?

------
tim333
Purplebricks have done quite a good job of disrupting the UK property market.

~~~
cheerlessbog
For those unfamiliar, what do they do?

~~~
bencollier49
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
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)

------
oron
[https://www.reali.com/](https://www.reali.com/) by a friend of mine is a US
startup trying to do just that.

------
Aloha
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.

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

------
guelo
(2012)

------
bleu-ble-bleu22
Homie.com here in Utah seems to be doing well.

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

------
roland35
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!

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

------
gammateam
Inefficient Market Theory:

Compass discovers how lucrative opaque real estate markets are.

------
itslennysfault
...he hopes.

------
no_broker
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...](https://www.wework.com/creator/personal-profiles/real-estate-duo-
selling-millennials-their-first-home/)) 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
Let us know in a few years if everything worked out alright.

