Bay Area: Will New Ways of Selling and Buying Take Over the Real Estate Market?
When the market takes a dive, we might expect that realtors would also sink a little; at the very least, they’d need to tread water more vigorously to stay afloat. What’s interesting then is that even as real estate sales weaken, nontraditional real estate companies like Redfin, Zillow, and Trulia are growing. According to today’s San Francisco Chronicle:
Now, although most of the real estate industry wishes it could fast-forward through 2008, these online startups are surviving nicely. Each company recently reported strong sales and increases in Web traffic…..Although these sites are not growing as quickly as they might have during a bullish market, they are at least growing.
People have very strong opinions about companies like these. One SFgate comment writer said “They [real esate start-ups]succeed for the same reason people love to watch car crashes.” Meanwhile, a supporter wrote “I love Redfin and Zillow. Let the Realtors rot wondering why they haven’t sold a house in a year. They charge 6% commission while telling the homeowner that they need to lower their house price. On an average Bay Area home of around $500,000; they’ll make $30,000 for just a couple of hours of work.”
Now, I am not one to opine that selling a home takes just a few hours. I’m not a realtor, but I am sure that it’s not that easy. I would argue though with the idea that “you get what you pay for” when it comes to choosing your agent. Such philosophy came up when CondoDomain posted an article about the possible commission savings with Redfin on an 11.9 million dollar condo. Reader Bill Gasset wrote in response:
When somone that can afford to buy a place for 12 million do you really think they care about saving $239k. If I had that kind of money, I would want the best agent possible representing me. I wouldn’t be concerned about commission savings. I don’t think you are going to find many outstanding agents hanging their hat at Redfin. Just like you wouldn’t see the best doctor or lawyer hanging their hat at Discount Doctors/Lawyers INC.
A few logic problems come up in Gasset’s argument.
1. That rich people don’t care about saving money. Really? How’d they get rich in the first place? How do they stay that way?
2. That quality is synonomous with expense. Say I want a white t-shirt. I can buy one at Armani for $180 or one at H & M for $5. They are both cheap cotton; how, in actuality, would the Armani one be “better”? To return to the topic at hand, we have all seen the multi-million dollar listings whose realtors could not be bothered to offer quality (if any!) photos, or didn’t spellcheck the listing. There is no guarantee that someone works harder for 6% than 2%.
3. That the old way of doing things is the only way. Ask the RIAA who has seen record and CD sales plummet with the advent of the Internet and music downloading. No one really want to pay $20 for a CD that costs about 30 cents to make, and now that we don’t have to, the RIAA has had to (sue us) reinvent the way it sells music– perhaps accepting that there just won’t be as much money to be made anymore.
4. Buyers/sellers in expensive markets need all the help they can get. Enter the real estate start-ups.
5. These internet start-ups include realtors who help with sales negotiation/transactions. To be practicing realtors, they’ve had to pass the same tests any other realtor has. By whose standard then is one “better” or “worth more” than the other?
5. Finally, Gassett is a traditional realtor. I am more interested in the arguments of people not actively benefitted by the demise of competitors.
…So what’s your argument?
Billy Bob said:
Only members of the National Association of Realtors are Realtors. It’s a trademarked term. You repeatedly use the term “REALTOR” without capitalizing the name. “Realtor” is not an interchangable term for “Real Estate Agent”. You may not know the difference, but many people do and continually making that mistake diminishes the power of your claims. Instead of understanding and agreeing with what you say, many people may dismiss your comments. This is not your only mistake. In the first paragraph, you even mispell the name of your employer. If you make common mistakes such as this, what else are you mistaken about?
February 25, 2008 3:13 AM
md said:
Billy Bob your comments are ridiculous.
February 25, 2008 4:28 AM
David said:
Who cares if “Realtor” is trademarked? How is that germane to the topic?
Anyway, Realtors are useful generally only on the buy-side, in my opinion. On the sell-side, they’re pretty useless, unless you really have no clue as to how to sell and stage a house. On the buy-side, they’re potentially much more useful, as they can tell me about just-listed places, REOs (perhaps), and other things that might not be as easy to discover on my own. They can also pre-screen the listings for you if you have a good relationship (why use one who is clueless about your needs?) so you don’t waste time looking at deceptively marketed listings (or ones that conveniently don’t mention the $40,000 in foundation work it needs, but your agent has all the disclosures or can spend his time calling around).
However, I sold my previous house quite easily without one. Spent $750 for a MLS listing, a few ads and a sign, and $550 for a lawyer when the offer came in, on a $600,000 house, saving me $15,000 on the selling agent cost, and since the buyers didn’t use an agent either, I kept the entire commission to myself, less that $1300. Yay. And no, this wasn’t in a hot market.
February 25, 2008 9:04 AM
anna.hibble said:
Billybob:
The part about the typo seems a bit superfluous. I am an English teacher so assure you, I know how to spell; however, I am also human and have been grading papers all weekend, so my eyes and fingers are not at 100%.But the error is fixed (thanks for the defense, md!) so you can now address the argument itself.
Agreed- I state pretty clearly I am not a realtor, so I’m definitely not a Realtor. What though do you think about the possibility that real estate is changing, so (R)ealtors might also have to change? David’s commment seems to indicate that possibility is real. I’m assuming you are a realtor, so your opinion would be an educated one.
February 25, 2008 9:45 AM
Frolic said:
While I think the discount online services are pretty interesting and fill a needed market niche, our agent earned every penny of his commission when we bought last year. Our search took seven months, we viewed maybe 60 homes and our agent previewed about 100.
I don’t know about the others, but Redfin charges its clients an hourly rate to view listings outside of Open House hours. My husband and I both work, and with two kids, we couldn’t always make it to the Open House.
We closed at $500K, so our agent made $15K. That doesn’t seem like a whole lot of money for the time and effort he put in.
I agree with David that if you’re selling, it doesn’t seem worthwhile to pay someone to sell your house for you. Particularly in a hot market, where the listing agent can earn a commission by placing an ad and hanging out for two hours on consecutive Sundays. But for buyers, especially like us, it’s a pretty valuable service.
February 25, 2008 10:19 AM
anna said:
Frolic: this is exactly the kind of insight I was hoping for. Your story might connect with why travel agents are still in business despite internet travel sites: you can’t beat the personal touch. Maybe the internet’s influence just keeps buyers’ agents more honest and on the ball, since buyers can know the comps, the neighborhood crime rates, school information, demographics, and state of the economy as well as a realtor can these days.
February 25, 2008 11:27 AM
Greg said:
Hilarious: the REALTOR more concerned about whteher you’ve capitalized the first letter of his vocation, rather than that you might have a point that his vocation is challenged by the advance of technology.
Classic Realtor logic, that.
February 25, 2008 2:24 PM
Allison the Realtor said:
To whom it may concern;
When a person who is in the Real Estate business uses the word “Realtor” with a capital “R” in a sentence when pertaining to a particular person in a particular career, the word “Realtor” with a cap “R” should only be used if that person has taken the Code of Ethics through the National Association of Realtors. Anyone else that happens to be a licensed Real Estate Agent is not necessarily a “Realtor.” This does seem confusing, however the National Association of Realtors tries to get the point across by magazine ads and television commercials. Apparently they need to spend more money because no one seems to be listening.
February 25, 2008 3:41 PM
Anna said:
Thanks, Allison. I for one know now, and won’t soon forget.
February 25, 2008 5:03 PM
Red said:
I think it no wonder that the alternatives are booming, for many a seller that will make the difference between breaking even on the sale and having to bring $thousands to the closing to pay off the mortgage and HELOC and Realtor%.
For the buyer, there would appear to be less incentive, unless you count the ability to determine your own timing rather than be exhorted with the “NOW is the time to BUY!!!” rhetoric.
The ability of a Realtor to open those lock boxes and get you into a lot of homes in an afternoon can be worth a lot, particularly if you are not sure when or what you want to buy; the buyers agent puts out a lot on spec…
February 25, 2008 5:52 PM
Craig Davidenko said:
I own and have been designing a real estate marketing website “FlatRateRealEstate” I have been trying to post on several blogs about the face of present and future real estate. One paragraph that I have wrote is the following…
Denial, some people think that certain things last forever.however those people eventually learn the plain and simple truth.many many years ago the dinosaurs romed the earth alongside real estate brokers and agents who held the “holy grail”..”the mls book” but then came along came the world wide web.dinosaurs extinct and brokers and agents wondering when people would notice that they in fact did not hold the “mls” anymore. the big listing fee is done and gone..to earn the big commission you’ll have to bring the buyer to the table!
THE FUTURE OF REAL ESTATE IS HERE AND COMING TO A TOWN NEAR YOU!
Please let me know of any joint ventures or expansions…
Craig Davidenko
flatraterealestate.com
912.398.7245
February 25, 2008 7:30 PM
Mark said:
I have to agree with Red; the future is here and Realtors and agents will need to rethink their services to be of real use to sellers. They can help buyers who don’t have a lot of time to comb listings, but that means they better be willing to do that work
February 27, 2008 12:40 PM
julie said:
Realtor/realtor- who cares? What matters to me is that the person is a true advocate, does the work, listens to me, and tells me the truth. I don’t think any “ethics class” or whatever makes that happen. Such qualities are intrinsic,, and unless you Realtors are deaf, you might have heard it’s not what you are famous for. I am not saying all Realtors are graft, of course, but rather that being a Realtor or an agent (lower case/upper case/whatever) is no gaurantee of quality; this is why sites like Redfin’s have become popular alternatives– along with the $$ savings.
March 12, 2008 1:01 PM