

Open Listings (YC W15) Is Helping Homebuyers Hack Real Estate - rgbrgb
http://techcrunch.com/2015/02/26/openlistings/#c542VX:BaQ

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ottocoder
Great idea, I hope you do well!

One observation from a novice homebuyer (only bought once, never sold) is that
I thought commissions only came out of seller's proceeds (of course price is
marked up accordingly). The website says "buy a home commission free" but to
me I would pay more notice if it said "sell a home commission free".

Of course if I'm wrong please take this as a data point that users need
education :)

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harmmonica
You're totally right that the commission does come from the seller's proceeds,
but since openlistings acts as a buyer's agent, they, traditionally, get half
the commission once the deal closes. 500k sale price (yes, they exist outside
the coasts!), 5% commission = 25,000. 25,000 split between the seller and
buying agent = 12,500 per agent. Openlistings (I think) keeps 5,000 of the
12,500 and kicks the other 7,500 back to the buyer... and if you had to
include that additional 7,500 as part of a 30-year mortgage they're saving you
much more than 7,500 over the life of a traditionally-financed purchase. That
said, you're also right that people need education on these things! The agents
win (and consumers lose) if the transaction seems complex. Somehow need to
make people realize the process is pretty straightforward.

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aorloff
There is a decent amount of information that the agent-to-agent communication
around offer presentation delivers. Are the sellers more keen on price or on
terms ? If its a fixer, is the buyer aware of that and is that reflected in
their offer (because the sellers probably wouldn't want to waste time on a
buyer who was going to be shocked to find out that its a fixer after getting
in contract). Usually the buyer's agent helps to gather this information in
order to present the best possible offer, and then gets a sense of how that
offer sits with the seller upon presentation ("oh this is way too low" or "the
sellers need a shorter contingency period"). How will you handle gathering and
passing along this information to prospective buyers in order to allow them to
make the best offer possible ?

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jschoenholtz
Great point - We deliver each offer personally and gather the exact
information that you are talking about before finalizing each offer.

One of our main goals is to reduce the opacity in the process for our buyers.
You've provided examples where the buyer benefits, but we also see private
agent-to-agent communication used to drive up offer prices.

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aorloff
Very interesting. Yes I agree these private communications can drive up
prices.

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stevecalifornia
I have observed real estate agents acting as a cartel. As an example, if you
use a real estate agent from outside the area, when they go to negotiate a
sale with the selling agent the selling agent won't give him the time of day.
Once you get an agent who is in the same circle with the local agents, all of
the sudden you get responded to.

I am worried that this service, which I want to see succeed, will be nullified
by the incumbent agents.

Thoughts?

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rgbrgb
From what we've seen, money talks. That is, in every case we've seen, the
highest offer got accepted. Seller agents are legally required to present
every offer to the seller. It's kind of a prisoners dilemma thing -- as an
industry it makes sense to block out agents who are disrupting the normal
commission structure but as an individual agent who is actually getting paid a
cut of the sale price, you just want your client to take the highest price.

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ralusek
It sounds like the main benefit offered by your product is the ability to
forego the agent fees.

Have you considered attempting to make an API available for clients with a
more established user-base (think Zillow or Trulia) to hook into, essentially
giving you your fee and allowing their customers to buy directly through their
clients?

The creation of your own client relies heavily on you getting a user-base
large enough that people are going to be willing to trust it, and when they're
spending a large portion of their wealth on a home, that's unlikely to happen
(at least immediately). If your service has the face of an established client
on it, the customer doesn't even have to know that you exist, and won't even
get the opportunity to not trust you :)

Is this something you've considered? Is it a service that would even interest
something like Zillow or Trulia?

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rgbrgb
Yes! If you want an API to put in an offer via HTTP request (curl a house!)
please let me know at peter@openlistings.co. This is definitely on our list,
but not super high yet but if you want it, we'll move it higher.

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danielnaab
It seems the value of this is highly dependent on the local market. A 2%
commission on a $300k home is comparably priced at $6000 (and commission rates
are negotiable), but a local agent will provide a lot of service difficult for
a web app to compete with.

I can see the value in a market where seven figure homes are the norm, though.
Most buyers don't want to negotiate a good flat rate with an agent. On the
other hand, I bought without an agent and didn't feel too out of sorts during
the process.

As a suggestion for the site: talk up the value the service provides over and
above sending the offer letter. To me, that's where the value would lie.

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rgbrgb
Point taken, thank you!

We recognize that our pricing makes less sense outside of California but we're
hoping to operationalize it here and make it really efficient before scaling
to other markets where the fee will be lower.

One misconception is that people think when they directly negotiate with a
seller's agent that they aren't paying the full commission. In fact, when the
house is priced, 5-6% commission is set aside for the agents. If you go in
without a buyer agent, the seller agent takes the full commission (this is
called dual agency and it's financially ideal for them).

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danielnaab
Is 100% dual agency the norm? The industry definitely seems pretty opaque in
regards to these issues. In my circumstance, the seller agent's contract
stipulated that the agent earned 50% the buyer agent's commission for buyers
lacking an agent. That worked well for me, as the seller had lower commissions
and her agent's interests were also aligned with me. But I admit that going
into the transaction, I had assumed there would be no commission for my half
of the transaction.

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brw12
in nyc, i know that dual agency is the norm. you see sellers' brokers mildly
sabotaging offers from buyers' brokers sometimes for this reason. agencies
like Corcoran have built very tidy businesses by being sellers' brokers and
buyers' brokers at the same time, and act that way whether there is any actual
buyer's broker relationship at all.

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pharkle
Buying an apartment in New York is actually one of the things that spurred us
to start the company. My wife and I wanted to buy an apartment in New York,
but by the time we had made our decision, the seller's agent we had been
working with was replaced with a new agent by the buyer. The new seller's
agent did not want to share the commission and made it very difficult for us
to complete the transaction (even though this is illegal). More transparency
and fewer big personalities is what we want to bring to the market with our
service.

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joezydeco
So about 8 years ago I bought a home using BuySide Realty. Similar idea: they
represented you in the purchase transaction, then rebated 75% of the
negotiated purchase commission back to you.

It worked really great. I saved almost 2% on my home. BuySide apparently
became some company called Iggy's House ( _worst name for a company, EVER_ ),
then they disappeared.

So a) how do you differ from BuySide and b) how will you not disappear like
they did?

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rgbrgb
I'm not super familiar with BuySide but it sounds like they were a traditional
brokerage that worked on a discount.

Our service costs less because we do less manually and more with technology. A
typical agent spends 80% of their time looking for leads and trying to find
properties for their clients. Most of the effort in submitting an offer is
filling out a bunch of forms (computers are good at this). We let clients find
homes by themselves and are working to automate as much of the offer
submission and close process as possible. In this way, we have the margins of
a scalable technology company, rather than a traditional human-powered real
estate brokerage.

In terms of not disappearing, I can't guarantee anything but we're working our
hardest to build a sustainable business!

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joezydeco
BuySide was pretty much the same thing. Here's the MLS, visit all the open
houses you want _on your own_ and drop our name as the buying agent, and come
to us when you are ready to drop an offer letter.

So when you prepare and transmit an offer on behalf of your client and the
selling agent responds with a counteroffer, who receives that? Who gets it
back in the hands of the buyer?

Who advises the client on preparing the counter-counteroffer? Or are your
offers more of a "buyer proposes $X take it or leave it" exploding deal?

~~~
rgbrgb
From the time you want to put in an offer to the time you close, we assign a
licensed agent to help you through the process. That includes calling the
seller to find out more about the listings, pricing expertise on your offer,
dealing with counteroffers, and making sure all paperwork is in order.

Currently, to the selling agent we look just like a normal brokerage. In the
future we hope to put more of the negotiation process online so that process
becomes even more transparent.

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chatmasta
How are you different from redfin? Are you aiming for an acquisition by redfin
or zillow?

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rgbrgb
RedFin is a great step towards making buying less expensive but they haven't
innovated on the experience of buying at all. They give you a traditional
agent experience for half the price. We let you submit an offer online and
we're rifle focused on improving the offer/buy process. On a typical
California home you'll save a lot more going with us. We charge a flat-fee
rather than a percentage because it's just as much work to put an offer in and
close on a $5M home as a $500k home.

And no, we are not aiming to get acquired any time soon! We're building a
sustainable business with a very concrete revenue source. Hopefully it'll be
the other way around ;).

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joezydeco
How do you support the buyer other than handling the offer and contract? Do
you provide escrow, referrals for home inspectors, surveyors, or title
services? Do you shop those out?

First time buyers need a _ton_ of assistance navigating all of that and making
sure they don't get screwed by the sell side of the deal (e.g. seller
recommending their own inspector, for one).

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rgbrgb
Yes, we provide full service from offer to close. Right now that's largely
done manually by in-house real estate agents. We're currently building out
software to handle more of the process online (starting with the negotiation)
but we'll always have expert agents on deck to help or provide the type of
advice first time buyers need. What we won't do is drive you around in a
Mercedes to hold your hand at an open house.

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up_and_up
What DB are you pulling from? Is this self curated?

I tried add locations for `Santa Cruz`, `Santa Barbara` and `Mendicino County`
and got "No listings in this area yet."

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rgbrgb
As a participating California brokerage, we're pulling directly from regional
MLS servers. We don't have those areas yet but we're rolling out full CA
coverage in the next month or so.

Currently we have 100% MLS coverage in SF and the greater LA area.

Next on our list is Silicon Valley, East Bay (Oakland), and San Diego. I'm
super excited for Mendocino too!

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Axsuul
Congrats on the launch! What's the tech stack?

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brw12
the tech lead is a friend of mine who applied to YC with me way back in 2006
-- great programmer, excited to see him in YC!

~~~
pharkle
thanks Ben!

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rgbrgb
Founders are on deck to answer any questions you guys have. We're really
excited to be in YC!

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CoreSet
Hi guys. Cool site. Quick question - and I completely understand if you can't
answer - any more details on your plans for expanding MLS coverage, or
particulars on your current data arrangements?

Just curious because I know some realtors and it seems like the barrier to a
national MLS equivalent has been opposition by industry organizations wanting
to protect their data. Any thoughts?

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rgbrgb
Getting MLS data is hard. We had to become a registered California brokerage
and join individual MLS organizations as participating agents. Each MLS runs
on different servers with slightly different SOAP/XML APIs and slightly
different data formats. We're ingesting from 3 right now in real-time. We're
planning to get full CA coverage this way in the next month or so (CA is 15%
of the national real estate market).

We might have a different approach when we scale nationally but so far this is
working pretty well. There are a few third party companies that offer the data
but it's not as fast or complete as a brokerage feed from the MLS (and speed
matters in hot CA markets).

That said, we don't need the property in our system to put an offer on it so
you can shop on Redfin or Zillow and come back to our site when you want to
put a bid in. We will happily put an offer in on any home in California.

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SoCool
Doesn't the MLS feed follow the RET specification ?

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rgbrgb
So there's not one MLS feed, it's a separate feed for each of the 950 national
MLS organizations. In theory they follow the RET specification but in practice
there are different versions of the spec and they don't all follow it exactly.

