
Oliver, a New Apartment-Finding App, Cuts Out the Middlemen - user_235711
http://techcrunch.com/2015/07/28/oliver-a-new-apartment-finding-app-cuts-out-the-middlemen/
======
dblock
As an almost accidental New York landlord with two apartments rented and one
that we are renting ourselves I think this is going to fail. It's not a
technology or a middle man problem. It's just that as a landlord I _want_ to
use an exclusive broker in a market that is always hot and expensive (New
York).

I can call my broker, leave the keys with the doorman (or the broker) and
worry about nothing. I never have to be there to show the place (the broker is
paid to do that) and I get a more qualified renter because the broker will
spend time selecting them (which I otherwise have to do). The broker has shown
so many crappy places that they will help the renter see that this is a fair,
market value, deal. The best part, the renter pays for everything! And because
they are able to shell out two months worth of rent for the broker's fee and
deposit I get someone financially more sound and likely less crazy.

Oh and one of our places is a Coop, good luck filling out a 80 page form and
going through the coop board interview without a broker! That's a full time
job, all the same paperwork as if you're buying a place. My current couple of
renters had to supply 12 (twelve) letters of personal reference, 6 each!

Another problem is that the renters "know" about the broker's fee but don't
really consider it as part of the rental "price". Psychologically they don't
add up those numbers, divide by 12 and say this is my rent. Apartment prices
don't vary at all whether you are using a broker or not, at least not in my
experience.

~~~
pavel_lishin
> _The broker has shown so many crappy places that they will help the renter
> see that this is a fair, market value, deal._

Huh, I guess that's why the value-adding broker decided to show my wife and I
an apartment that was well over $1k over our budget, in a five-floor walk-up
when we told him that due to my wife's knee injury, a walkup of more than 2
floors was a completely and total deal-breaker for us.

Not to sound combative, but I wonder how many potential tenants abandoned your
broker by yelling at him on the 4th floor, from the 2nd floor, that we're
literally physically incapable of seeing the out-of-budget apartment he was
trying to show us, and then walking away.

~~~
dblock
Well that sounds like a bad broker. Why did you go see that apartment anyway?
I would just ask "what are we going to see" before going there.

~~~
pavel_lishin
It was a bad broker. But I've only met a single good one, compared to a dozen
bad ones.

We bothered trying to go up the stairs because we'd already spent 30 minutes
getting to Harlem, and apparently it had a terrace. Classic sunken cost
fallacy, compared with greed. Who doesn't want a terrace?

------
gatsby
There is a nice opportunity if you can cut out rental brokers and apartment
locators, but you really only see these types of brokers in a few markets:
Boston, Chicago, Miami, NY, and some locators throughout the southern US.

People who live in these cities feel like the problem of rental brokers is
worse than it actually is.

The big opportunity is to disrupt buy/sell-side brokers. Many, many companies
have tried, and yet in 2004 when Zillow, Trulia, Redfin, etc. were getting off
the ground, about 90% of people in the US used a broker to sell their home. In
2014, it was still 90%.

The internet has unchanged the position and power of brokers in the US for a
variety of reasons - but a big one that all startups miss is the pain of
getting accurate data.

In the last decade, the startups that have become ~$1b companies in real
estate all support or augment brokers (Zillow, Trulia, Redfin, Costar,
Loopnet, etc.) and companies that aim for massive disruption go out of
business in a couple years.

Sometimes during a gold rush, you are better off selling pick axes to miners.

~~~
z3ugma
This is what openhomes.co is doing, starting with Madison, WI

------
briandear
I can't stand brokers, especially in NYC. I hope this app wins, however this
article reads like a press release.

Also, founders, please please please stop using the Uber for X nonsense. This
app doesn't deliver an apartment to your door and collect payment in a
frictionless process. Find new metaphors. If the VCs can't understand your
product without calling it the <unicorn_name> for <your_vertical>, then find
some VCs that are smarter or figure out what you are actually selling and how
to explain it clearly. This product could simply be: "an app that eliminates
the real estate broker." Uber for rentals is just dumb. Did the founders
graduate from TechStars yesterday and that was how they were coached to talk
to the media? Über didn't call themselves the Y for X and Facebook didn't call
themselves MySpace for X. That use of other companies to explain your business
is just lazy. Still PR rant aside, I hope this app succeeds. I'd love for the
majority of residential broker-bottom-feeders to join the buggy whip makers in
the unemployment line.

------
spolsky
I don't know why people keep doing this startup every two months. Every two
months somebody tries it and then discovers why it doesn't work.

For almost all the smaller buildings in New York (non-professionally managed),
which is where you see these middlemen brokers:

* The brokers are given an exclusive by the landlords because the landlords are not professionals and often not in New York City. They don't want to do any work, they want the brokers to do the work of listing the apartment, showing the apartment, and checking the qualifications of the tenant.

* The landlord has to give the broker an exclusive otherwise the broker won't do the work, because the broker needs to get paid.

* Although the broker fee (normally 15% of first year rent) seems expensive and even extortionate to the typical fresh college grad renting their first apartment, the brokers as a whole are not making very much money, because they have to do an awful lot of work to get the exclusives (marketing themselves to landlords, so to speak) and an awful lot of work to coordinate keys, show apartments, etc. It is easy to see this because there is massive turnover in the broker business and almost all of the rental brokers you see in New York charging "extortionate" fees are, for the most part, broke.

* Which is why they seem so slimy: they're kinda desperate.

* A ton of apartments in New York are still under some form of rent control, especially the cheap ones in small buildings that kids want. That means that the maximum rent is set by law. So even if a tenant MIGHT be willing to pay a higher rent if they didn't have to pay the brokerage fee, they can't. The landlord of a $1800 rent stabilized apartment is going to get $1800/month whether they use a broker or not. So for this landlord, the broker is paid for by the tenant, and might as well be free. Considering how much work they do, and how much they charge, zero, it's a great deal for the landlord.

So every time one of these fresh-eyed college grads shows up in New York,
decides that the rental brokers are making bank and need to be
disintermediated, and writes an App that will Connect the Landlord Directly to
the Tenant, no landlords sign up for it. The bottom line is that the brokerage
function is not ripe for disruption because, slimy as it seems, there's just
not that much money being made.

~~~
leelin
Great points -- once upon a time my co-founder came up with an interesting
theory that the rental brokerage industry is a NET LOSS for the brokers, and
the only reason it works is attrition.

More formally, if you assign a reasonable hourly wage for a real estate agent,
say $25 an hour, then the sum of all agents working each year plus their
business expenses exceeds the sum of all commissions collected each year! The
lost time is wasted on unqualified tenants, competing over the few qualified
tenants, negative ROI marketing (featuring on NYTimes.com or posting bad
photos), etc.

If you believe in the net loss theory, then all the startups that always pitch
"broker services a la carte" are doomed to fail. That is, brokers offer some
bundle of services and a startup tries to unbundle and charge a fair price per
line item. That thinking treats brokers as commodities when we can see clearly
that great brokers earn 10x a mediocre broker, suggesting there is probably
some skill.

------
martingordon
You see apartment-finding startups all the time here in NYC. The problem to
finding a good apartment isn't that there isn't a good interface, it's that a
lot of the listings are given exclusively to brokers, and even if you find the
apartment yourself, your still paying the broker fee.

I'm just one example, but I sublet from an individual owner in a co-op (in the
Village). For giving the unit to a broker (for free, since the broker usually
collects on the renter, not the landlord), he didn't have to fly up here from
Miami and show the unit, figure out how to run a credit check, schedule my
interview with the co-op, have me fill out a pile of forms, etc. Instead, he
simply received a copy of the contract, signed and returned.

Point being: NYC has a ~1% vacancy rate, so there's little incentive for
things to change on the sell side. Anything that requires a landlord to change
their behavior is a tough sell.

~~~
berberous
It's not free. A would be tenant will compare prices inclusive of broker's
fees, so he could probably charge a slightly higher rent without a broker.

~~~
ForHackernews
It's New York, they can charge basically whatever they want and somebody will
still rent it. If they can't afford the rent, they'll turn it into an Air BnB.

~~~
potatolicious
This... really isn't true. Very expensive markets are still markets - you are,
for example, very unlikely to find a taker for a studio 5th-floor walkup on
the Lower East Side for $5k.

NYC rents are pretty nutty, but it is still a market, and pricing pressure is
still very aggressive in this market. The volume that exists in the market,
and the similarities and substitutability of apartments (one walkup is largely
like another) all serve to apply more pricing pressure.

------
leelin
I'm one of the guys who started RentHop and was pleasantly surprised to get a
mention in the OP article, hehe.

When we started RentHop over 6 years ago, we had the same idea. Open table
style scheduling for showings, and that brokers were worthless middlemen that
should have gone extinct at least a decade ago.

One of the best pieces advice we got during Y Combinator was Paul Graham
telling us to go out to NYC and be brokers for a few weeks, if only to confirm
a broker adds no value and figure out the easiest parts to automate away.
After personally showing apartments nonstop for a month (and losing a lot of
weight), we quickly discovered the great brokers are adding lots of value and
we completely pivoted the model (the short answer is great rental brokers earn
10x a mediocre broker, so there must be SOME skill involved... in sales the
dispersion is 100x or higher).

Of course, that was 7 years back and maybe enough has changed: landlords do
more of their own marketing now, smart phones and on-demand apps are even more
pervasive, brokerage firms are in more turmoil than before, agents are more
tech savvy, etc. Urban Compass tried to pull it off 2 years ago, but they
decided to go for the bigger sales market.

I wish Oliver luck, they are technically competitors, but I've always wanted
to see online scheduling work for real estate and to date no one has cracked
it sufficiently well.

------
ceejayoz
So what's their revenue model, if it's not being the new middleman?

~~~
robrenaud
The old middlemen make incredible amounts of money for approximately nothing,
as far as I can tell as someone who has rented in/around NYC for 10 years, but
never actually paid a broker.

I'd love having new middlemen that do about that same nothing for 20% of the
price.

~~~
colinbartlett
I have used brokers here in Manhattan and find their services well worth the
15% cost. The occupancy rate is around 99%. Apartments come on the market and
leave the market very, very quickly. I am very happy to pay someone to keep
their eyes out for me and weed out the ones that sound good but aren't. I also
had someone to go before the condo board on my behalf and explain why I would
be a great tenant.

Do people who use a broker ever regret it? Or do the objections stem from
other less competitive markets where such a thing would not be as beneficial?

~~~
dcosson
I used a broker for my last 3 NYC apartments (luckily the first two were new
developments so only the most recent one did I pay myself).

I can't exactly say I regret it because the alternative was settling for a
much worse apartment, but I absolutely despise brokers and the current system.

My biggest problem is that whether you take your time and have a broker show
you 30 apartments over the course of a month, or whether you find the place on
Craigslist and the broker literally opens the door and does nothing else, you
pay the same fee of 10 - 15% the annual rent. I've been in the latter category
and it's infuriating, you're paying literally thousands of dollars per hour.
Why can't you pay this person a reasonable hourly rate for their time?

Another problem though, even if they did charge hourly rates I'm sure those
would be unnecessarily high anyway, just because for whatever reason these
people need certifications and a certain number of hours training so it takes
an investment to become a broker. That's also insane to me, for renting in NYC
to someone who's lived in the city for a while, a broker's "knowledge" has
absolutely zero value (buying/selling a house might be a little different, but
even then I'm skeptical). The only advice a broker has ever given me is trying
to convince me that a terrible apartment, which they had obviously been trying
and failing to rent for a while, was worth considering.

I'm glad you had a good experience. But the system is completely insane!

------
cletus
As much as anti-broker vitriol is popular here on HN, whether you agree with
it or not, brokers _do_ provide a service. Whether or not that service is
valuable to you is entirely another question.

When I moved to NYC I ended up using a broker. We saw like 12 apartments in 2
afternoons. I liked one and had it by the end of the week. As it happened,
before it was generally advertised and while it was still being renovated.

This was a HUGE time saving. And this right here is the key thing. How much is
your time worth?

I've lived in other cities where apartment hunting is typically direct (either
to the owner or, more commonly, to the owner's management company). In certain
areas and at certain times an apartment showing might have 50 people show up,
20 of whom put in an application.

This is an incredible waste of everybody's time. Companies need to vet more
applications (or just arbitrarily pick some to scrutinize, discarding the
rest). Apartment hunters need to go to more viewings and fill out more
applications.

A good broker should be able to find you an apartment relatively quickly and,
as it happens in NYC at least, for a good price. If not, they're not doing
their job.

There are also buildings in NYC that are all rental and fit the model of
complexes in other cities where there is a management company that manages all
of them. You can simply inquire as to availability (or even find it on a
website).

The problem in NYC at least is that there's a lot of pokey apartments that
don't fit this model (mine was in a walkup of ~15 apartments over 5 floors).

I got a good deal on my apartment and amortized over the time I was there, had
I paid for the broker (I didn't), it would've been a good deal.

Many services exist that allow you to trade your money for your time. Brokers
are one of them.

~~~
copsarebastards
When I moved to NYC I ended up using a broker. We saw like 10 apartments in an
afternoon. I ended up liking one and had it by the end of the week. As it
happened, before it was generally advertised and while it was still being
renovated.

It turned out, the broker was working for the apartment owner, not for me.
Once I had signed paperwork, I discovered that the renovations were done: the
apartment was going to be as I had seen it, not as it was promised to me by
the broker. No stainless steel appliances, no reflooring in the kitchen. I had
read the lease carefully and thought of this possibility, but I thought, like
you, that the broker was working for me.

As is, the incentives don't encourage brokers to work for renters: their only
incentive is to place as many people in as little time as possible. Next time
I shop for an apartment I'll do so with a real estate lawyer on call. If you
have to have a lawyer to make sure someone provides service properly, maybe
they aren't really providing you a service.

------
bonesinger
I've moved 5 times in Chicago in the last 5 years, and each time I tried a
broker but it was a miserable experience. I ended up finding a place on
craigslist each time.

I'm looking to move to NYC soon and I all I see are $1500 broker fees the
tenant has to pay. Its pretty insane.

~~~
billpaetzke
With 1-bedrooms averaging above 3k/mo, you're looking at a broker's fee of
$4500. Even if you get a cheap studio at 2k/mo, the fee is 3k.

~~~
bonesinger
Yeah, actually I was looking in Jersey City and they were $1500, $4500 is
insane to me. I'm from the NY tri-state area but I never bothered trying to
live in NYC.

------
madeofpalk
Perhaps it could be helpful for the international audience to explain what a
'broker' is.

Here in Aus at least, we deal with Real Estate Agents, who act as a middleman
between the owner of the property and the tenant. They handle pretty much
everything (inspections, repairs, collecting rent, marketing etc) so the owner
just receives money (for a commission of course).

Is this the same in the US? Where would a broker fit into all of this.

~~~
Andrenid
Yeah another Aussie struggling to understand what a broker is in this context.

I think they literally just look through rental listings for you then tell you
which one you should look at, then you go to the Real Estate Agent as usual to
rent it? Seems a bit ridiculous if so.

~~~
colinbartlett
My wife is a rental agent at a very large Manhattan brokerage. It's quite a
bit more complex here in New York than you imply.

Yes, there are databases, and yes she looks through them. But good units get
snatched up so fast that by the time someone has taken photos and written it
up in the database and syndicated it out to all the firms, it's already gone.

The people who benefit most are those working with very difficult constraints.
Imagine you are searching for a Studio apartment and can only afford $1,500 a
month but the average rent in the area you are seeking is $2,200. Somewhere,
there might be a $1,500 listing but it's going to go fast. If you have a
broker you might have a shred of chance of 1.) even knowing about it 2.)
getting access to the apartment the minute it's vacant 3.) getting a cash
deposit submitted and 4.) passing all the landlord's test -- multitudinous
because for every one person who barely has the credit to afford $1,500,
there's 5 who can afford twice that standing in line behind them.

Landlords are also king here because of how skewed the market is and therefore
will do little to no work as part of the process. Getting photos, getting keys
and access, it's an absurd runaround, hugely time consuming and barely worth
the 15% (of annual rent), only half of which the agent receives.

------
mtalantikite
Everyone has tried an iteration of this idea in NYC -- I even tried one back
in 2008 that was very similar. It's an extremely difficult market to crack
since landlords have very little incentive with vacancy rates so low and a
working relationship with brokers that at times goes back decades.

When Urban Compass launched in 2013 I thought they'd have the best chances not
because the idea was any different, but because they were able to raise an $8
million seed and the founder had already sold businesses to Google and Twitter
(they've raised $73 million so far). I just took a look at them now and it
seems they're focusing more heavily on home sales as I'd guess the data
platform can make more money in that market. They still do rentals, but
definitely not exclusively.

------
kjs3
Pet peeve: replacing a flesh and blood broker with a web site is not "cutting
out the middleman". It may be a cheaper middle man; it _may_ even be a better
middle man, but it's still taking a cut off the top.

------
bernardlunn
@gatsby great data Many, many companies have tried, and yet in 2004 when
Zillow, Trulia, Redfin, etc. Were getting off the ground, about 90% of people
in the US used a broker to sell their home. In 2014, it was still 90%. I
assume problem is it is such a big ticket so sellers don't want take the risk
- same reason we still use ibankers for M&A and IPO?

~~~
gatsby
Right. This is part of it. Real estate is still the largest purchase most
people make in their lifetime, and there are tons of things to deal with:
inspections, title companies, escrow accounts, taxes, etc.

I'm overgeneralizing, but if you're selling a home and you're not wealthy, you
are terrified to make a mistake that could wipe out a big chunk of your net
worth if you screw up the sale, so you use a broker. If you're wealthy, you
don't care about the 6% fee, and luxury brokers have already sold you on the
value proposition of extra marketing and hand-holding from the days when you
weren't as well off and buying your first home.

------
rquantz
Well, I guess this is inevitable, and it will be good for renters. It will be
bad for people who have long used brokerage to support themselves while they
do other activities that are important to them. Women who are the primary
caregiver of a child. Artists and musicians. Entrepreneurs.

------
bernardom
Tough industry to stand out in: [https://angel.co/rental-
housing](https://angel.co/rental-housing)

~~~
GigabyteCoin
So is track and field, but records are still broken every year.

------
pavel_lishin
A brief aside from the discussion on NYC the rental market: I'm kind of
surprised that it's only available as an app, and only on iOS.

------
gwbas1c
I used craigslist for years in Silicon Valley. It either put me in contact
directly with the landlord, or the on-site property management.

------
yuvadam
Meet the new middleman, same as the old middleman?

(Assuming, of course, that they're not planning on publishing their data for
the public good.)

------
mephi5t0
Trulia and Zillow both have Looking for Rent options. I wonder why would
landlords go and try the other thing? Cheaper fees?

------
kstenerud
What's a broker? I've rented two places in SF so far and never heard of such a
thing.

~~~
ericd
Yeah, there aren't many brokers in SF, it's much more of a NYC/Boston
phenomenon.

------
elf25
Is it this broker usually the property mgr. to begin with?

