Disrupting the Real Estate Sales? Will RE Agents be extinct?
Orlando, FL · Member since 2017 · 241 posts · 254 votes
Disrupting the Real Estate Sales? Will RE Agents be extinct?
Most Popular Reply
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8y92% of transactions are run through agents. 8% roughly do not involve agents, and half of those are family to family sales.
If no agency would accept your paper work, maybe the problem then was on your end and not on the 100% of people who were in agreement to not take your paper work.
District Invest Group545 Reviews
96 Replies
Originally posted by @Antony Torrres:
My background is in tech, I’m “millennial” 27. Here’s my two cents for you guys, most importantly I’m thankful for the insight and knowledge shared here. There’s a Utah based startup called Homie, basically they act as a discount brokerage.
Discount brokers can work in the market now because it doesn't take much to attract multiple buyers to a home. You haven't seen a seller's market yet, but when the pendulum swings back, many discount brokers will disappear. It happens every cycle.
- Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes8y
Originally posted by @Antony Torrres:
My background is in tech, I’m “millennial” 27. Here’s my two cents for you guys, most importantly I’m thankful for the insight and knowledge shared here. There’s a Utah based startup called Homie, basically they act as a discount brokerage.
I got into a spat with a millenial over Homie in this thread. A lot of the same points covered there that have been talked about in this here.
Over the years we have had something called "limited service listings". This is basically a low flat fee for getting your home onto the MLS with a la carte services like signs, photography, etc--all done by licensed agents. You would think that this inexpensive alternative would have gotten a lot of traction. In reality, this model has never broken 5% market share in Utah. Homie is really the same thing in a slicker package.
Here's a Forbes article and a Redfin Survey clarifying what the NAR's 8% number means. They find that "agent-assisted" includes limited service listings and the number is closer to 10% completely unaided. If you specify "full service", the number of FSBO's rises to around 25% of all listings. Of course this makes no mention of how many of those are paying a commission to a buyer's agent.
I think the take away is that different models of discounted brokerages are (and have been) putting pressure on the real estate agent profession. The internet has made the discount brokerage more viable and there are a bunch of online platforms trying to crack the nut. But there's little evidence that anyone would prefer online model all else being equal. So if we're honest, this is entirely about price and how much service people are willing to sacrifice to save money. There will always be a market for both full service representation and a discount model in every profession/industry.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@William Hochstedler we also have to keep in mind just like discount limited service shops.
commissions are NEGOTIABLE we see that on high end stuff.
and on the low end we see that.. I see it all the time banks selling a 5k asset and paying a 2k fee to do it.
or when I started in the 70s I charged 15 to 20% commissions to sell hard to sell land.. Had to took me a year many times to sell a listing. and sometimes I charged higher.
but when you have a million dollar listing and its a no brainer put it on MLS and it sells I can see a 1% fee no problem my wife does that.. at least for me she does LOL..
- Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes8y
Originally posted by @Jay Hinrichs:
... coming into escrow for one day.. she said in the states Eyes that is not legal either .. because the B person still had to market a property they did not own.. ...
So are they OK with the banks doing that same thing - marketing a property they do not own? Because I see lots of REO listings that say something like "settlement contingent on recording of sheriff's deed" - the bank isn't the owner of the REO in PA until the sheriff's deed is recorded.
And the banks are telling auction.com to promote properties that are not yet REO as well, to get bidders to come to the sheriff sale. Again marketing a property that they do not yet own.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Steve Babiak Steve that's a fantastic questions I am going to ask my regulator that one.
although I might think the fact that they have a loan on the property changes it some what..
not just a contract to purchase like a typical wholesaler.. but again great question.
and of course foreclosures by law have to advertised in the paper so maybe its just an extension of those statutory requirements that they can hang thiere hat on..
Plus the banks are NOT in the business of trying to circumvent the license laws like wholesalers are basically doing.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Steve Babiak you got me thinking about the banks and auction . com advertising foreclosures.
I suspect the state laws are all about the same you MUST publicize in a paper in the county or state were the property is.. A minimum amount of times.. I doubt there is anything about a maximum amount of times.. so as the beneficiary of a property they might have the right to have the trustee agent advertise more than the minimum.. ???? what do you think
- Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes8y
Originally posted by @Jay Hinrichs:
@Steve Babiak you got me thinking about the banks and auction . com advertising foreclosures.
I suspect the state laws are all about the same you MUST publicize in a paper in the county or state were the property is.. A minimum amount of times.. I doubt there is anything about a maximum amount of times.. so as the beneficiary of a property they might have the right to have the trustee agent advertise more than the minimum.. ???? what do you think
Sure, PA state law requires that the sheriff sale be advertised in newspapers that are in circulation in the county of the sale - but the sheriff is the party putting those ads in the newspaper. The sheriff is not dealing with auction.com saying please advertise these certain properties (not all of them BTW) for the upcoming sheriff sale. So essentially it is the bank asking auction.com to promote a property that it is foreclosing upon, and does not yet own.
- Investor · Boston, MA · Member since 2015 · 398 posts · 147 votes8y
After 82 replies I am sure my comment will be lost, but I wanted to chime in after reading a few pages of comments with my opinions.
Yes, real estate agents are going the way of the dinosaur.
Yes Zillow (or potentially other websites) will take over.
As an investor, the VAST majority of people looking at our properties come from Zillow. Its something like 80-90%. Of course Zillow wants to cut out the expensive middleman that gets a commission for "finding" that house for you.
Years ago the MLS was created because different real estate companies kept paper lists of properties for sale, so the MLS unified it all. Zillow has done the same today, they scrape many sites and data sources for properties for sale to show potential buyers. Buyers still think they need a RE agent when in fact its their inspector and closing attorney that actually protects their interests! The real estate agent doesn't really provide much actual value as far as I am concerned. People use them because the entire industry acts like a "good ol boys club", refusing to play with anyone that doesn't abide by their rules. I don't think it is going to last much longer, and as far as I can tell it shouldn't be around anymore.
I saw comments saying Zillow needs to get licensed in each state, which I am sure they will do and isn't really a big concern. Keep in mind that REALTOR is just the "club" that they want you to belong to, but its the STATE license that actually has legality. It won't matter if Zillow joins REALTOR or not, they already have the lions share of traffic and if they suddenly get blocked I don't think it will stop them, it will be a death for REALTOR as their brand is no longer valuable.
- Investor · Boston, MA · Member since 2015 · 398 posts · 147 votes8y
I also wanted to add to my comment, that 8% is too low. I have bought and sold several off-market properties that they do not take into account.
- Los Angeles, CA · Member since 2017 · 33 posts · 11 votes8y
Interesting thread. I'm not exactly sure where the market for RE agents is heading, but technology is disrupting anything and everything, so I certainly wouldn't count it. I know there are a plethora of tech start-ups aiming at disrupting real estate in a variety of ways.
During college, I had interned at a real estate technology start-up that replaced the need for a buyer's agent in a transaction and lets the buyer re-collect that commission, which I thought was an amazing concept. If you're interested, the start-up is called Home Savi.
Note: I am not affiliated in any way with Home Savi any longer.
REOs: If you are the winning bidder at an auction sale you are the equitable owner of the property. Once the deed is recorded, you are also the legal owner. When the bank takes the property back as an REO at the foreclosure sale, they own it. The recording of the deed is a formality.
FORECLOSURES: If a property is subject to a mortgage or deed of trust it was deeded to the bank to be held in trust, subject to the borrower performing its payment obligations. Lenders are also expressly excluded from brokerage laws when they market and sell the properties at foreclosure.
There are several different ways to talk about it but the banks are well within their rights to market these properties.
Gimer Law518 Reviews- Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes8y
Originally posted by @Tom Gimer:
REOs: If you are the winning bidder at an auction sale you are the equitable owner of the property. Once the deed is recorded, you are also the legal owner. When the bank takes the property back as an REO at the foreclosure sale, they own it. The recording of the deed is a formality.
FORECLOSURES: If a property is subject to a mortgage or deed of trust it was deeded to the bank to be held in trust, subject to the borrower performing its payment obligations. Lenders are also expressly excluded from brokerage laws when they market and sell the properties at foreclosure.
There are several different ways to talk about it but the banks are well within their rights to market these properties.
Tom - I won't be disagreeing with you on this - the banks are within their rights IMO when it comes to marketing the properties in advance of the sheriff sale or auction. It was the Oregon DRE statement that a person cannot market properties until they had ownership that led me to pose examples where the banks are doing so - I was just countering what @Jay Hinrichs related from the Oregon DRE.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Steve Babiak banks get a pass.. recent graduate from ABC how to wholesale school not so much..
@Tom Gimer figured the banks would not be breaking the brokerage laws.. the question is I guess does auction.com have a license I suspect if they don't they have an affiliate just like any other auction company I have been around.
- Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes8y
@ Chuck Kramer most people buy one or two homes in thier lifetime. They have no idea what the process is or how many pitfalls they may encounter, which is why a professional Realtor will always have business.
Originally posted by @Jay Hinrichs:
@Steve Babiak banks get a pass.. recent graduate from ABC how to wholesale school not so much..
@Tom Gimer figured the banks would not be breaking the brokerage laws.. the question is I guess does auction.com have a license I suspect if they don't they have an affiliate just like any other auction company I have been around.
Depending on the state, Auction.com or other online auctioneer will either get licensed an an auctioneer, broker or both AND/OR they will affiliate with an auctioneer, broker or both.
Gimer Law518 ReviewsInteresting discussion and viewpoints. I just want to bring it back to @Chuck Kramer’s original questions and add my two cents.
If it’s customary in a certain area to submit offers on standard forms but one chooses to do it on their own forms because that’s what’s convenient for them, then how should a listing agent and seller interpret that? If that same buyer makes many offers and only a small percentage are accepted, presumably because they’re low offers with inferior terms, then how should that be viewed? When I represent sellers and I expect or ask for offers to be presented in a certain way, and they aren’t, then I interpret that as the buyer might not be that serious or doesn’t want to follow instructions, etc. If it’s accompanied by a low offer that looks like it can’t get to a done deal then that only adds to it. In a sellers market or even one in equilibrium, that offer probably isn’t going to get a positive response.
As for the extinction of agents, all of the disrupted industries mentioned: retail, taxi, hotel, etc are all relatively simple transactions. It doesn't matter if my toilet paper gets delivered one-click by drone, it's still a simple transaction. There are many investors here who have closed tons of deals and can do it in their sleep. That's great. In this case, I can easily see how the agent can be viewed as an unnecessary middle-man. But for most, who have never done it before, or did perhaps once decades ago, or will only do it a handful of times in their lifetime, real estate is a very complex transaction. Most of those people are happy to have a middle-man guiding them, holding their hand, doing the things it takes to buy and sell a home that they themselves don't have the time, energy, interest, or skill set to do. For those that don't feel that way and feel the middle-man is making the transaction more expensive, they can go the FSBO route or alternative brokerage route. There's room for everyone. The 38% FSBO stat sounds way way high to me though. In the NYC metro area I regularly follow all closed transactions and anecdotally FSBOs look like a tiny percentage… I'd guess much less than 5%. I'm sure in higher net worth areas at higher price points you'd see fewer DIYers so would expect higher percentage in the burbs but 38%? I can't imagine it.
I know others touched upon it, but Zillow's income comes mainly from agents. Here in NYC where there is no MLS, Zillow is the defecto MLS and so that's not going to bring an end to the agent in the rest of the country if Zillow takes over everywhere. All of Zillow's content comes from agents and their revenue comes from selling that content back to agents. Regardless of where the one-click house buying goes, Zillow is the last to want to see agents disappear. They want more agents, making more money, and spending that money on marketing.
I’m pretty confident good agents who net the most for sellers and find and get great deals for their buyers aren’t going away anytime soon.
- Residential Real Estate Broker · Mount Vernon, WA · Member since 2015 · 28 posts · 47 votes8y
Originally posted by @Chuck Kramer:
@Charlie MacPherson Great answer and information!
Are you familiar with Zillow's coming experiment in allowing buyers to purchase right off of Zillow without their own agent?
Are you referring to Zillow Instant Offers? Because even that still involves real estate agents in the process. Zillow loves agents, it's where all their revenue comes from. They take our listings from the MLS (which we also pay for) and sell them back to us. (And Zillow leads are expensive. I'm talking like $100/lead in my area with an average conversion rate of 3-4%).
I think your question may be true when it comes to investors and other savvy purchasers, that are heavily involved in the real estate world in one way or another. They understand the market, know that risks and pitfalls they may run into, and feel comfortable when it comes to negotiations and real estate specific contracts. I think finding a more streamlined process for them would be great.
However, as others have already mentioned, retail sales is a different animal. What about the seller that receives an offer from an investor? Would it be incumbent on them to have someone on their side to ensure that their interests are protected? My youngest client is currently 21 years old, looking for a first home for his family. I couldn't imagine sending him out on his own without the guidance of a personal adviser to ensure he is getting a fair deal, knows what things to watch out for in inspections, make sure his financing is ready to go, etc, etc. In this market, does a buyer know what they can do to strengthen their offer to compete with other offers? I sure do, because I do this every day. My record is beating out 14 other offers to get my buyer's offer accepted (and no, we were not the highest offer price either).
Another interesting fact: About 80% of For Sale By Owners are ready to list with an agent after about 60 days of trying to market the home themselves. And this stat comes from Fizber, a company that is specifically made for people looking to sell without an agent.
Everything is constantly changing and evolving. If new and better models evolve from the advancement of technologies, I'm all for it. As with any other industry, we need to be adaptable to change. As far a real estate agents being completely cut out of the picture in the future, I don't think so.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes8y
You are ignoring the biggest problem. Most people are financially illiterate, debilitated by major decisions and generally wish washy. It is just impractical to believe that even 50% of the population is capable of selling a home on their own. I could see some kind of assisted selling, but that is just an app based version of Help-U-Sell.
The idea that you can simplify this into an app and click to purchase is unrealistic. Don't you think that Amazon and Ebay have already thought this through? Ebay has tinkered in this, but by their own admission they state the challenge is localized laws. They chose to act as an advertising service similar to Zillow.
https://www.ebay.com/help/policies/prohibited-rest...
The same problem has affected car sales. The dealership model has been a huge challenge to Tesla. There are ways to buy cars online, like eBay motors, but still most cars are purchased at local lots.
High dollar transactions involve financing, legal contracts and lots of buyer risk. An app sounds great until the problems start happening.
Most of us on BP are more sophisticated buyers and sellers. Many of you can and do handle your own transactions, but that is not representative of the general population. Buying a house is a little more complex than hailing a taxi.
Originally posted by @Joe Splitrock:
You are ignoring the biggest problem. Most people are financially illiterate, debilitated by major decisions and generally wish washy. It is just impractical to believe that even 50% of the population is capable of selling a home on their own. I could see some kind of assisted selling, but that is just an app based version of Help-U-Sell.
The idea that you can simplify this into an app and click to purchase is unrealistic. Don't you think that Amazon and Ebay have already thought this through? Ebay has tinkered in this, but by their own admission they state the challenge is localized laws. They chose to act as an advertising service similar to Zillow.
https://www.ebay.com/help/policies/prohibited-rest...
The same problem has affected car sales. The dealership model has been a huge challenge to Tesla. There are ways to buy cars online, like eBay motors, but still most cars are purchased at local lots.
High dollar transactions involve financing, legal contracts and lots of buyer risk. An app sounds great until the problems start happening.
Most of us on BP are more sophisticated buyers and sellers. Many of you can and do handle your own transactions, but that is not representative of the general population. Buying a house is a little more complex than hailing a taxi.
Even Ebay and others have bought local car dealerships in order to sell cars in various states.
Even on the investor side of things, I am sure its the same for almost everyone here, but we make our money on the properties that arent functioning correctly. How many times have you heard the statement, cat pee in a house smells like money. Or walking thru a property that has been taken to the studs. Or a hoarder house.
Those things are often brought to you via a real estate agent that is looking for a buyer but doesnt want to or is unable t list a property.
I dont know that there is any disruptor website that give me a call and says, hey there is a property here that I think is a great deal, but you need to bring 40K in repairs.
Yeah technology can be used to see more properties, to make bids online etc. and maybe that changes the role of an agent. But i dont see agents magically going away, at least not the good ones who bring value.
End of the days the best agents are "connectors" , their ability to put people together is really the differentiator in the market.
Originally posted by @Jay Hinrichs:
Originally posted by @Albert Ng:
If Redfin get big & popular enough, they can replace the mls listings. ... just at Amazon is replacing shopping malls.
still does not replace the agents though.. in resi real estate with people buying their first home or making a real estate transaction that they may do 2 to 3 times in their entire life.. they simply don't know what all the folks on BP know .. that's why we can say hey this is easy why don't we just cut out brokers.. well because 95% of the public its not easy they have no clue and they need guidance.
Attornies could do this.. but attorneys don't show houses.. they don't show up for home inspections they don't work with the appraisers they are transactional coordinators at their desks.. some one has to be in the field at some point.
It doesn't replace the agents, but it reduces the need for agents. Right now, Redfin uses "minimum wage" agents to show houses ... . They also have their agents describe the house & its condition after the showing. This help lesser the need to have a full time agent drive you around just to open the door for you. In San Jose, Redfin's listing fee is 1%, undercut most brokers.
Originally posted by @Russell Brazil:
Originally posted by @Albert Ng:
If Redfin get big & popular enough, they can replace the mls listings. ... just at Amazon is replacing shopping malls.
Redfin is a real estate brokerage. All the information from their website comes from the MLS. Like any other brokerage they are part owners of the mls systems. They have no desire to disrupt the mls.
Their ultimate goal is likely to sell their website to a national brokerage as their business model simply doesnt work. They lose $3,000 per transaction. That is simply not sustainable.
Gotta disagree with you on this. Redfin loses money because they are trying to grow their market share. Once they become the go-to place for a majority of home buyer, they can list the property exclusively on their website without having to go through MLS.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.