Tell Me Why My Discount Brokerage Idea Is Bad: Calling All Agents

Member since 2024 · 42 posts · 13 votes

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

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

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

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Steve K.

Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes

This sounds like a great idea if you hate making money and love being sued.

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Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
1y
Quote from @James Kerson:

It's understandable that this thread has touched a nerve. I’m proposing a radical reworking of how houses get bought and sold in the United States, and asking agents to comment on what would be major changes in how they work, who would compensate them, how, and how much.
The end result I envision will be many fewer commission dollars paid and agents employed, but those remaining agents would be much more regularly employed, on an hourly and not a commission basis, paid to provide advice and nothing else. SFR transactions are generally fairly simple, and condos are not too much more complicated. Depending on the principal, a lesser or greater degree of professional advice is necessary, but most SFR transactions are similar in their mechanics. My brokerage would employ data-driven pricing guidance (hard to see how this would be materially different from MLS comp sheets; perhaps more accurate). It would hire photographers like traditional agents do, and would advise buyers and sellers, up to a predetermined number of hours, after which the advice would cost extra. This would disincentivize tire-kicking and over-pricing, I hope.
Whether my brokerage would work for sellers alone or for both buyers and sellers is a technical matter, an important one to be sure, but a technical one that can be overcome. Marcus & Millichap, the commercial brokerage, more or less exclusively functions as a listing agent or a dual agent. Are commercial buyers more sophisticated than residential ones? Maybe so, but I doubt that they’re less litigious.
Likewise, I’d need to work out how prospects would tour properties safely, legally, and at minimal expense. I don’t have an easy answer, but if Uber made private cars taxis for hire, I’m sure this could be overcome, too. My guess is that there are inactive licensees who could be drafted to a new brokerage whose sole function would be to open doors, especially if those licensees are paid per-tour…like Uber drivers.

1. Data-driven pricing does not work. Look at what happened to all of the ibuyers. Look at my street right now: the "zestimates" are off by hundreds of thousands on every single property. It doesn't work. Only local agents/real estate professionals who know the area house by house and can see, touch and smell the property can price a listing well, period. Literally my neighbor's house is off by $300k right now and it should be an easy one to price.
2. If you're paying employees an hourly wage, you need to factor in payroll taxes, benefits, and overhead. Your all-in, total cost of labor is going to be around $75/hr if you are paying $50/hr. You'd probably have to provide a company car, insurance, E&O insurance, cell phone, and laptop/ tablet also. You can't expect quality licensed professionals to be willing to work for only $50/hr., especially if they're driving their own car, paying their own insurance, cell phone, continuing education/licensing costs etc. When I bill by the hour, I charge $350 in order to cover all of my expenses and make it worth my time. You'd need to be charging closer to $450/hr. and paying $350/hr. in order to have a viable business model IMO, which probably isn't much different than charging the typical commission rates. It's going to be impossible to staff this business with competent people if you pay them less than a liveable wage.
3. Dual agency is illegal in my market, and I'm glad it is. Sellers always want to get the most for their property, buyers always want to get the best price. The agents are there to keep seller or buyer from screwing each other. Dual agency residential is the most litigated type of transaction in all of real estate.
M&M actually mostly does single agency transactions actually, although it is probably more common for commercial agents to act as dual agents where allowed by law. But commercial is totally different because it is not someone's personal residence. If there is an undisclosed mold problem in a closet, the buyer probably won't even notice. Their wife won't complain, their kid won't get sick. In resi, somebody is going to sue and everybody involved is getting named in the suit, which is why E&O insurance doesn't like dual agency. Dual agency combined with limited services, combined with bottom-feeder employees, means you will get wiped out by lawsuits.
Hiring and turnover/ staffing issues will make it very difficult to scale and sustain this business, and a nightmare to manage IMO. Every state has their own real estate laws of course, so legal compliance will also be challenging. Yes national brands manage it, but they typically charge 6% not 0.6% lol. You would not be covering overhead charging 0.6%. You'd be operating at a loss and the greater you scale, the more you'd lose.
Like I said, good model if you hate making money and love being sued. Spirit Airlines is an interesting business model for you to reference considering they just filed for Chapter 11 bankruptcy. That's where you'd end up as well, so what's the point? This is a difficult business to be in. I don't see why anyone would do it if they aren't making good money. If you stay in the business a minute, you will see many discount brokerages come and go.
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Lorraine Hadden
Real Estate Broker · CA · Member since 2024 · 60 posts · 42 votes
1y
Where do I start in analyzing this brokerage idea --- I'm diving right in:

I'm assuming with the .6% commission structure you are going to rely on volume because .6% commission - I'm hoping that's a typo? Maybe investors/flippers who may be more seasoned and not need a full service brokerage - in either case - WOW on that .6% commission!

While dual agency is legal in most states, dual agency is controversial and can be risky!

In California, an unlicensed professional cannot independently let a client into a home to show it; only a licensed real estate agent can conduct property showings, although an unlicensed assistant may be present to let someone in under the supervision of a licensed agent for specific purposes like inspections or repairs, but cannot discuss the property details or engage in sales activities

Paying agents hourly would drive your overhead through the roof especially if the brokerage is not closing deals!!!

When you get this up and running I would love to hear about your progress!
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Mary Jo Carruthers
Real Estate Agent · Austin, TX · Member since 2024 · 14 posts · 18 votes
1y
There has been so many models and ideas regarding commissions while some have floundered and some have altered the market place. This will not be the first attempt to reorient the commission structures nor will it be the last. I expect that over time the best buyers agents will be likely be less burdened by the so called "fixed rate" (which was never fixed in the first place) and charge more for their work if they have a history of making their clients money via negotiating, saving on legal fees, smoothness of transactions, market knowledge, etc. The value of that buyers agent is far superior than an agent that is simply a door opener. The same could be said for the sellers agent.
The folks that are masters of their craft will likely get paid more vs folks that just dabble.
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Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
1y
No, it's not touching a nerve! Flat fee brokerages have been around forever, as low as $295. And they are actually slowing losing market share, at least in my market.
People always try to offer a product and service for less, you are not the first one with this idea. People know that what you pay is what you pay is what you get.
BTW - one of my lenders looked at 1100 deals since August 17th and did not find a meaningful change in buyer-side commission. We have actually increased our buyer side commission and we tell people that we cost more.
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James Kerson
OP
Member since 2024 · 42 posts · 13 votes
1y
Let’s redirect the conversation. Assuming you could wave a wand and eliminate or change any existing practice, laws, and regulation pertaining to real estate transactions, what would you change, either for your own benefit as intermediaries or for the benefit of principals?
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James Kerson
OP
Member since 2024 · 42 posts · 13 votes
1y
I’ll add a data point. Earlier in my career, I worked for Avison Young. It was an unusual job for a brokerage firm: I was a non-broker consultant working for one medical-device manufacturer client with space needs on five continents. In that job, I worked with commercial brokers from all over the world. Generally speaking, the foreign brokers demonstrated high levels of professionalism and market expertise. Their commissions: 0.5% to 2%. Only in the U.S. and Canada are real estate commissions so high. Is there a good reason for this?
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Marcus R.
Real Estate Agent · Denver CO · Member since 2019 · 211 posts · 334 votes
1y
@James Kerson - Give this a shot until something breaks or you get consistent "no's". Iterate and try again. Prob worth a shot given the startup capital. And if it doesn't workout you'll learn a lot in the process.
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James Kerson
OP
Member since 2024 · 42 posts · 13 votes
1y
Marcus, that’s the spirit. There are many great agents out there, just like there are many great people in all occupations. But RE brokerage still suffers from a genteel type of price-fixing, when flat fees, a la carte fees, or low-percentage commissions are what the market should have.
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James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
1y
@James Kerson not 1 single thing you've presented here is anything "new", not 1.
There exists services today, nationwide, for getting someone else to host a showing for you. We share this 411 at every new agent orientation, it's rather basic info. Not sure why your clueless to it.
Staffing a brokerage via W2, go for it. It's failed in grand fashion every time, for good reasons but hey feel free.
Directing sellers, in volume, of what pricing to use for selling a property, LMAO, this is a statement so soaked in ignorance that I can't even bring myself to respond to it.
Look James, clearly you have some issues where you come up with an idea than just broadcast it, completely skipping any research phase what so ever. If you stopped to do some research, and I do mean VERY basic research, you'd find an ocean of assorted discount brokerage models both current and past. Everything LITERALLY everything you've presented, tried 100X if not more.
And they've all failed or are failing.
Why?
It's a simple OBVIOUS. Because parties to a transaction care about things OTHER THAN the price of service alone.
This is simply a fact. There is literally TRILLIONS in votes on this, because that's what it is the people are doing with there buy/sell $, there voting for who, what, how they want the service. 0-guess work needed, we have all the data and facts at hand.
WHAT people get for the $, that matters first and foremost to the vast majority. Better known as VALUE.
Second is QUALITY OF SERVICE. How complete, low stress, hands off, experienced, all-inclusive the journey is made via the service provider.
Third is LOCALITY of service, the provider being a "local" provider.
And LASTLY, price........
Think about that James, when we look at the data, what the market is voting on with there $, the LAST consideration is price, the vary last........
So your business plan, who's entire value proposition is price, WILL FAIL. It's not my opinion, it's fact, it's an acknowledgment of the votes the market is making telling us exactly what the market wants a service provider to be and focus on.
The #1 and #2 thing the market is "voting" on wanting is simply stated as: Be as good quality a service as you can be, and make it the most fair a price as can be, so it's a GOOD VALUE / ROI.
Now, does that seem so crazy, that the vast majority of people are perusing a good ROI over everything else?
It's not complicated, so stop trying to complicate it.

1 Reply
Obed Calixte
Real Estate Agent · St Petersburg, FL · Member since 2019 · 321 posts · 182 votes
1y
Since you're a licensed broker, this should be very easy for you to put into action on your own accord to test the viability.
Start marketing your own services at the .6% rate and track all your numbers (deals, time spent, expenses, income etc). Now you have real world numbers and experience to identify what works and doesnt.
You can then back in and see what you can reasonably can pay and compare that to the salaried/hourly pay that Redfin and similar companies pay their agents.
Maybe then there can be true discourse.
As of now, it sounds like any other discount brokerage, but with more headaches.
2 Reply
Corey ConklinPro Member
Investor · Member since 2021 · 129 posts · 209 votes
1y
@James Kerson
You've stirred up a lot of agents haha.
I'm with you on your intent of this post. Things need to change. This current model isn't where we should be in 2024. Unfortunately there are a lot of agents who will fight this issue hard as you are attempting to threaten their livelihood. They'll fight even if it is a detriment of buyers and sellers of real estate.
Good luck and keep fighting the good fight!
3 Reply
James Kerson
OP
Member since 2024 · 42 posts · 13 votes
1y
James, play along with me:
1. Why are U.S. real estate commissions more than 3x higher than in almost any other rich country? What is uniquely complicated about our real estate transactions to justify the higher commissions?
2. Quality of service is important, but why does the service have to be all-inclusive? There are many buyers and sellers of sufficient sophistication not to require at least some of the typical bundle of services. (I’d note that in many industries, even though people value service, they often go for the lowest price as long as service meets an acceptable minimal level - think of airlines or hotels.)
3. A few posters have commented that data-driven pricing doesn’t work. I’ll push back on this. Indeed, the zEstimates are quite imprecise; its algorithm is a mystery. But most pricing is a function of recent comps, adjusted for the subject property by size, condition of systems, and aesthetic qualities. Photo quality is important to drive traffic, and staging can improve photos and prospect appreciation during tours.
My hypothesis is that a Venn diagram of high-sophistication principals and normal properties (however defined) would encompass 20-30% of SFR transactions. These deals don't really require bundled all-inclusive brokerage service, in my view. Maybe I'm wrong, but I doubt it.
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James Kerson
OP
Member since 2024 · 42 posts · 13 votes
1y
To continue, there will be demand for real estate brokers/agents for the foreseeable future. Commercial deals and very-high-end residences, foreclosures, and serious fixer-uppers will always demand special advice and special service. But a 2,000 SF, 3bd/2.5ba Colonial in suburban Generic Big City? I don’t think so.
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James Kerson
OP
Member since 2024 · 42 posts · 13 votes
1y
@Obed Calixte, while I'm a broker, I've never worked as one, except on the buy side on my own fix/flip deals. My primary business is multifamily property management and investment. I don't claim superior experience transacting SFR deals.
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James Kerson
OP
Member since 2024 · 42 posts · 13 votes
1y
@Corey Conklin, clearly so. Many of the objections are good. None is an idea-killer, though. Thanks, Corey!
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James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
1y
Quote from @James Kerson:

James, play along with me:
1. Why are U.S. real estate commissions more than 3x higher than in almost any other rich country? What is uniquely complicated about our real estate transactions to justify the higher commissions?
2. Quality of service is important, but why does the service have to be all-inclusive? There are many buyers and sellers of sufficient sophistication not to require at least some of the typical bundle of services. (I’d note that in many industries, even though people value service, they often go for the lowest price as long as service meets an acceptable minimal level - think of airlines or hotels.)
3. A few posters have commented that data-driven pricing doesn’t work. I’ll push back on this. Indeed, the zEstimates are quite imprecise; its algorithm is a mystery. But most pricing is a function of recent comps, adjusted for the subject property by size, condition of systems, and aesthetic qualities. Photo quality is important to drive traffic, and staging can improve photos and prospect appreciation during tours.
My hypothesis is that a Venn diagram of high-sophistication principals and normal properties (however defined) would encompass 20-30% of SFR transactions. These deals don't really require bundled all-inclusive brokerage service, in my view. Maybe I'm wrong, but I doubt it.

Again, I don't comprehend your ignorance level on some of this stuff as it is not top secret stuff, it's common knowledge for most brokers....
Answers:
(1) The US legal system, that's why. The US legal system is one of assorted lawsuits and expenses of lawsuits and that is why. Other countries have significant controls to this the US does not have. That is why it's also uniquely American that in USA a person who throws hot coffee on there lap can get paid $30million for the coffee being hot.....
(2) Because that's what the market wants. I don't understand how you can ask "but why does it need to be quality of service", because that's what the people are wanting DUH. Your argument is why don't they just accept crap service because it's less $ ????? So when you go out to eat for a wedding anniversary, you go to McDonalds right? You get all your housewares at Goodwill?
(3) My God how big is that rock your living under? So your completely oblivious to the billions in lawsuites lost and in process over issues exactly of this sort????? The DOJ speaking on such????? Seriously, your ignorance is astounding. You having a brokerage model of influencing price is SUICIDE.
Hey, you're so certain of your innate genius, that your better than research, know better than what the market itself is saying, please SERIOUSLY go do it.
And please keep updates here of the train wreck of it all. I know you won't, nobody ever does, they run away from accountability but I will ask anyways, please update the world to the flaming dung-pile it all plays out to be so the next people get spared the journey.
1 Reply
James Kerson
OP
Member since 2024 · 42 posts · 13 votes
1y
@James Hamling:
1. Yes, Americans are litigious. More than most others, I would guess. But purchase-and-sale agreements are boilerplate. Real estate agents can’t offer legal advice, and at least in Ohio, they can’t alter the boilerplate form. I’m not sure why traditional agents offer any special litigation protection.
2. Does the market really want nearly uniform full-service brokerage service (often of varying quality)? I’d argue that a mix of custom and arcane, broker-serving laws sustains current practice, not market demand like for Delta tickets or Colgate toothpaste. But hey, we’ll see.
I’m no genius. I’m just a moderately successful multifamily operator and flipper with an idea. And you’re right: the idea of squeezing commissions isn’t at all new. What’s new is the convergence of tech to facilitate it and the long-overdue legal challenge to the agent cartel. Like I’ve written, agents won’t go away. But there will be fewer of them, they’ll be paid for direct client service instead of self-promotion, and there will be many fewer big earners and low earners. And clients won’t miss the current system.
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Abel CurielBusiness Member
Real Estate Agent · Queens, NY · Member since 2016 · 2k+ posts · 1k+ votes
1y
Quote from @James Kerson:

I’d like to start a new kind of real estate brokerage. It would dually represent buyers and sellers and charge a total commission of no more than 0.6%. Instead of depending on buyer agents to drive prospects from house to house, prospects would tour houses themselves, and unlicensed “door-openers” would admit them. The listing agreement would include within the commission property photos, a set number of “door-opener” tours, some hours of phone/Zoom consultation with a licensed agent to set a listing price and discuss offers, counter-offers, and closing mechanics. Ideally AI could improve the property analytics that shape listing prices, a competitive advantage over other brokers. While this brokerage would start in Ann Arbor, I would want it to expand to all of Southeast Michigan, then statewide, and ultimately nationwide.
Initial target users would be investors/flippers, in other words, more frequent flyers than typical homebuyers. Yes, this brokerage would eliminate buyer-broker commissions, which are under threat, anyway. Agents would be paid hourly, not by commissions: the brokerage and not the licensed agent-advisors would drive all listing leads. Agent-advisors would merely provide advice, coordinate property photos, and review offers with their principals.
Agents, tell me why this is a bad idea. Be as blunt as you can.

Hello James!
There are a ton of responses on here that have good & thorough feedback/criticism and I haven't read them all so disregard if I am being redundant here.
One thing I haven't read in the first 10-20 replies is that your target client-base could be one of the most challenging to deal with.
In my experience, sellers who work with or strongly consider discount brokerages (i.e. 1-2% listing services) are some of the most needy, unrealistic, and overall difficult to deal with. Furthermore, these clients are more likely to cancel agreements or refuse to extend agreements once you begin working with them.
I am all for innovation and exploration but in my opinion, I don't see how this model would be profitable.
You also have to take into account that paying agents a salary to give advice for free is an uphill battle and a money pit. Take showing agents for example... some services begin their showing agents at $30-40 per showing. What if someone views 5-10 properties before deciding they no longer want to buy a home... or want to "hold off" on their search.
Qualified leads by your definition are pre-approved buyers with photo ID. We consult dozens of these buyers for every 1 that ends up closing on a property.
That said, if you are OK with little-no profit and are simply looking to gradually build market share by doing high-volume low-quality deals, this approach could gain some traction.
All the best!
Abel
REbuild Team - eXp Realty5240 Reviews
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James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
1y
Quote from @James Kerson:

@James Hamling:
1. Yes, Americans are litigious. More than most others, I would guess. But purchase-and-sale agreements are boilerplate. Real estate agents can’t offer legal advice, and at least in Ohio, they can’t alter the boilerplate form. I’m not sure why traditional agents offer any special litigation protection.
2. Does the market really want nearly uniform full-service brokerage service (often of varying quality)? I’d argue that a mix of custom and arcane, broker-serving laws sustains current practice, not market demand like for Delta tickets or Colgate toothpaste. But hey, we’ll see.
I’m no genius. I’m just a moderately successful multifamily operator and flipper with an idea. And you’re right: the idea of squeezing commissions isn’t at all new. What’s new is the convergence of tech to facilitate it and the long-overdue legal challenge to the agent cartel. Like I’ve written, agents won’t go away. But there will be fewer of them, they’ll be paid for direct client service instead of self-promotion, and there will be many fewer big earners and low earners. And clients won’t miss the current system.

I think you're engine is fueled on 98% assumption and 2% fact in this regard.

And, i empathize because there was a lot of outlandish assumption marketed and promoted in this regard. Even the entire NAR lawsuit has been an act of assumptive BS.

Your question in (1), my simplest answer is this is why you're not ready to be a Managing Broker, your lack of knowledge, insight and comprehension in this regard.

Your thinking like an agent, and using agent perspective of how a brokerage should run. It's the flight attendant saying she knows how the airline should be run.

As for your questioning the markets wants.... As I pointed out there is no question here, zero guesswork, it's factual, we have factual data to look at. Discount Brokerages are LOOSING market share not gaining. That's a fact there is no getting around.

I personally know the CEO of arguably the #1 discount brokerage in the USA. There marketed value proposition is about FULL-SERVICE at _____ pricing. It's NOT a marketed messaging on pricing alone, it's not on limited or reduced services, because as they know that would kill the business model.

The market does NOT want Less for Less. They want MORE for best-$.

Look James, to put this another way, Short-Term Rental industry destroys you're entire argument! Why would anyone be staying in STR's vs Super-8 ???? Your argument on market motive, to be true, would mean Super-8's would be doing gangbusters, and there not. Do you know who is in that space? Hilton& Radisson. And what is the commonality? Upscale. Modern, nice, and it's NOT cheap.

The market today, more so than ever, is a VALUE economy. Americans are spending there $ toward quality of experience more than ever.

We have sec8 people wearing $200+ airjordans and with 80" plasma tv's...... come on man, your seriously going to argue the the market works on logic of lowest cost options available.

I am a Broker in BOTH Residential AND Commercial, I have been a managing Broker and am still in those action too today. Commercial is a universe apart from Residential and yes, commercial is 10X easier in regards to the things we are speaking on.

Liability, despite the significantly higher dollar amounts, is significantly less in commercial space.

In Residential, just picture that in general most everyone is a vulnerable person, in eyes of law. So there is a 100X weight factor on the licensed professionals for literally everything, everything done and everything not done. All things known and all thing NOT known.

Ignorance IS a defense in residential, and one a party can file a class action lawsuit on because that's much of what just happened nationally. Not only that, they sued and won on a theoretical loss not even a factual one as the plaintiffs sued stating IF they (a) they think the result would have been (b).

Residential is a world of liability now where "but if, maybe" can become a multi-million dollar bill to a brokerage, after the fact.

I close with this; how many Teslas do you see on the road? How many cyber trucks? Just look around on the roadway as you drive. What % of vehicles do you see that are the lowest cost option available for transport? Maybe, MAYBE as much as 5%.

So what does it say a person choosing a cyber truck over a ford ranger? A BMW over a Prius? Experience. People purchase experiences. People VALUE experiences OVER lowest $-option available. People HAPPILY pay MORE, to get more. People WANT more. People, at least 95%+, crave MORE.

What do you live in James? Is it the lowest $-option for housing you could have? What do you drive, wear, shop at, do for free time etc etc etc??????

People almost NEVER want lowest $-option. They want EXPERIENCES and VALUE.

Again, it's not complicated, it's not illusive knowledge, it's the obvious truth all around us.
1 Reply
James Kerson
OP
Member since 2024 · 42 posts · 13 votes
1y
@Abel Curiel - thank you for responding. Two questions: 1) how many hours on average do you spend working on a listing once the seller signs the listing agreement and 2) how does your brokerage pre-qualify buyer prospects?
2 Reply
Abel CurielBusiness Member
Real Estate Agent · Queens, NY · Member since 2016 · 2k+ posts · 1k+ votes
1y
1. about 30 hours assuming we have a lockbox in place. Close to double that if owner wants the listing agent present for showings
2. ask for pre-approval, ID, timeline, duration of home search, reason for buying, and additional pre-screening questions as needed
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James Kerson
OP
Member since 2024 · 42 posts · 13 votes
1y
@James Hamling, I fully agree that price is unequal to value. Sifting through your unsolicited ad hominem remarks and egregious errors of spelling and syntax, that’s your point. I would retort that one can deliver both low price and high quality to real estate brokerage. We just need to figure out how.
I’d urge you to look at the insurance business, which has a great deal in common with real estate. Companies like PolicyGenius do an excellent job selling personal lines coverage (property/casualty and life, mainly) more easily (and maybe more cheaply) than your local State Farm agent. I use a commercial insurance agent for my buildings, but for personal coverage, I buy direct from Progressive or go through PolicyGenius. They might be lower-cost options, but in standardized, commoditized transactions, their UX quality and excellent customer service set them apart from other direct-to-customer carriers and agents.
0 Reply
Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
1y
Quote from @James Kerson:

James, play along with me:
1. Why are U.S. real estate commissions more than 3x higher than in almost any other rich country? What is uniquely complicated about our real estate transactions to justify the higher commissions?
2. Quality of service is important, but why does the service have to be all-inclusive? There are many buyers and sellers of sufficient sophistication not to require at least some of the typical bundle of services. (I’d note that in many industries, even though people value service, they often go for the lowest price as long as service meets an acceptable minimal level - think of airlines or hotels.)
3. A few posters have commented that data-driven pricing doesn’t work. I’ll push back on this. Indeed, the zEstimates are quite imprecise; its algorithm is a mystery. But most pricing is a function of recent comps, adjusted for the subject property by size, condition of systems, and aesthetic qualities. Photo quality is important to drive traffic, and staging can improve photos and prospect appreciation during tours.
My hypothesis is that a Venn diagram of high-sophistication principals and normal properties (however defined) would encompass 20-30% of SFR transactions. These deals don't really require bundled all-inclusive brokerage service, in my view. Maybe I'm wrong, but I doubt it.

1. It is not accurate to say that US real estate commishes are 3x higher than any other rich country. In most other developed countries it is 3-5% total with various splits to buyer/seller (similar to expensive markets here where average is 4-5% total), plus they have 15-20% VAT in these other countries that gets absorbed into the deal. Check this out for reference: https://tranio.com/articles/real_estate_agents_commissions_i... also in a lot of these countries agents are not full service and attorneys (or "solicitors", "barristers" etc. varying names in different places) handle the contracting/paperwork which agents handle here, so those folks also need to be paid. In my experience in foreign countries, there is often less consumer protections/ no central MLS or licensing/ greater risk to the principals, much more red tape, and overall higher transactions costs than here so it's important to look at the whole picture not just the commish %. It's obviously a lot more complicated to compare the different business models, making the blanket statement "Us commishes are 3x higher" extremely flawed logic. I also agree with James about the legal component, our culture is more litigious than others but there's also less risk that a "lawyer" will run off with all the money here which I have experienced in other "rich" countries.
2. There are plenty of discount brokerages in the market now, you are basically copying their business model but adding more complexity and overhead expenses to what these companies are already doing. You won't be able to compete with them on pricing and will be crushed.
3. You have to go inside the comps to understand how they compare to subject property, which is what competent agents and appraisers do. Robots can not go in the comps and compute how they compare to subject property. In addition to failing massively leading to Billion dollar losses for ibuyers, data-driven pricing tools have seriously harmed consumers and should be outlawed in my opinion. I've personally witnessed several intelligent people suffer financial harm because they trusted this info, didn't think they needed buyer representation, and overpaid by 6 figures.
You should try working in the industry for a little while in order to better understand it before trying to recreate it!
2 Reply
James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
1y
Quote from @James Kerson:

@James Hamling, I fully agree that price is unequal to value. Sifting through your unsolicited ad hominem remarks and egregious errors of spelling and syntax, that’s your point. I would retort that one can deliver both low price and high quality to real estate brokerage. We just need to figure out how.
I’d urge you to look at the insurance business, which has a great deal in common with real estate. Companies like PolicyGenius do an excellent job selling personal lines coverage (property/casualty and life, mainly) more easily (and maybe more cheaply) than your local State Farm agent. I use a commercial insurance agent for my buildings, but for personal coverage, I buy direct from Progressive or go through PolicyGenius. They might be lower-cost options, but in standardized, commoditized transactions, their UX quality and excellent customer service set them apart from other direct-to-customer carriers and agents.

It would have been ad hominem had I offered proctologist referrals to assist with dislodging your head from the rectum it resides....
I did not do that, I ignored it's placement.
I simply enlightened you of the reality outside that eco-chamber.

But yes, attacking my deficiency in English absolutely opens a vortex in space and time that magically makes everything you say correct regardless of, ya know, reality.
1 Reply
James Kerson
OP
Member since 2024 · 42 posts · 13 votes
1y
@James Hamling-I gladly would have overlooked your deficiencies in English and other spheres had you not so consistently acted like a dick. There’s nothing more for me to say to you. The last word is yours.
1 Reply

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