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Real Estate The business that will change the real estate world (for the better) and obsolete realtors.

Discussion in 'Business Models, Niches, Industries' started by passion518, Jul 25, 2018.

  1. passion518
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    DISCLAIMER - I am no real estate agent basher – but I’m sure I’m gonna piss some people off here. I want to hear from you guys too! The thread title was just to grab attention...glad it worked ;)



    In the past 3 months or so, while ramping up the number of flips we have actively going at the same time, I’ve had to raise some extra money (which I’ve gotten pretty good at, as a side note). I met with a bunch of different private investors and explained my business and how I operate. Each one of them asked me about my selling process – “Who do you use to list your properties on the MLS when you are done?”. I don’t use anyone. I do it myself using a flat rate listing service. I hire my own photographer and use a service through usrealty.com and pay around $400 to list my property and it gets on the MLS and all other major sites, exactly as if I were listing with a standard commissioned broker. I still pay the buyers agent 2-3% (I vary based on sale price). I have yet to have a property (knock on wood dammit) be on the market for more than 3 weeks, and most of my deals sell for 10% more than the highest comps. Now, obviously being in the industry, I know the ins and outs much more than your average Joe would – but let’s break that down in a minute.


    When one or two of these private investors asked me about my listing realtor, I didn’t think much of it. Basically, anyone I have ever talked to about my business in detail asks me this. But, when EVERY one of the private investors asked me, something clicked. PEOPLE THINK YOU NEED TO LIST WITH A COMMISSIONED BROKER TO DO A REAL ESTATE TRANSACTION.


    I found the flat rate listing service I use because I needed to be cost conscious and be able to only spend my money where it makes sense spending. I didn’t see the value in hiring a realtor to come into my rehab, take some pictures, list it online and call it a day – and pay them $9k (3%, avg sale of $300k), and another $9k to the buyers agent. It’s a digital era, and I can do the same tasks as the buyers agent for $400 in cost, and about 2 hours of time. Additionally – most listing agents (in my area anyway) don’t even market their listings outside of getting them on the MLS. I constantly do new things to get as much exposure as I can on my listings.


    I believe that in today’s digital world, there is a better way to conduct the selling and buying of homes than with traditional real estate agents.


    I’m not developing something new here. There already are services that do the basic function. The problem is – the current available services do not address most of the key “pain points” above. I admit, some of the pain points will be very difficult to overcome. Nothing impossible about it though. And to be honest – I don’t doubt for one second that 5-10 years from now – this will be the norm and realtors will be obsolete…whether I take part in the “shift” or not. Plain and simple – there are better, more controllable ways to offer greater and more consistent value in conducting real estate transactions than what we are currently used to. The good realtors are great, unfortunately - most suck and aren't even committed to what they are doing. Take a 60 hour class and BAM you're certified to handle the largest transaction most people will ever make. (I know because my wife did it - I'm no hater - I just realize the lack of quality control, potential value loss and inconsistencies for the consumers here).


    Anyway, that's enough pussy footing....let’s dive into some of the reasons ( and potential solutions ) why your average Joe WOULDN’T use a flat rate listing service to sell their home:


    · Doesn’t know this service even exists

    · Doesn’t know they have the ability to sell without a broker

    · Doesn’t know what their home is worth

    · Doesn’t know the selling process

    · Doesn’t know what repairs may need to be made

    · Doesn’t know how to negotiate with buyers

    · Doesn’t feel confident their home will sell as fast or for as much as with a commissioned broker

    · (Please comment with more if you have ideas on why someone wouldn’t use this service)


    I believe every point above can be overcome with a system.


    I don’t have all my ideas organized yet…if I did, I’d be working on it ;)


    But what I have thought about in the big picture is this:

    A real estate transaction conductor that handles the operational side of the buying and selling side of real estate transactions.

    For Sellers –

    Make the process simple, slightly educational, and more affordable, all while still achieving fair market sell prices for the consumer.

    For Buyers –

    Coordinate the pre-approval and authorization of buyers. Once authorized, buyers can search our listing database and go and schedule their own viewings of homes, go themselves, submit feedback and/or an offer simply and efficiently.

    In Between –

    Compile all standard state and county level forms and documents that need to be completed for a real estate transaction to occur, arrange and send for signatures. Organize and keep all items in place for a smooth and timely closing.


    There’s a whole lot to think about and talk about here. I’d love to hear your thoughts guys and gals!
     
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  2. WJK
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    WJK Gold Contributor Speedway Pass

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    I understand what you are saying. I was a broker for 30 years. I mainly represented sellers. I worked my a$$ off. Yes, in some hot markets, the MLS works well. Other times, it doesn't.

    Yes, I agree that agents are less important with the current technology. BUT, I have also seen a lot of buyers and sellers cheated without the protection of a good agent. There are more than 2 sides to the question.
     
  3. passion518
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    passion518 Contributor Read Millionaire Fastlane Speedway Pass Summit Attendee

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    Thanks for the feedback WJK. In your experience, when a buyer or seller got cheated - how did this happen?

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  4. WJK
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    Here's an example that happened last week. One of my independent contractors came to me. He wanted to buy a piece of land from a private party. He wanted me to help him with putting together the down payment. I looked at the contract, and it was a "land contract" rather than a trust deed situation, and the seller was an out-of-state person. There was no title insurance offered or any other protection. The chance of my guy ending up with clear title to the property was about zip. The deal didn't happen.

    This week I have a tenant who is moving to "buy" a house by taking over the payments. I don't know IF they are getting title insurance or proper title for that house. I do know that if they take over the payments, the lender will probably exercise their due-on-sale clause, which is standard in most TDs. I know they had problems paying their rent here. They think the monthly costs will be about the same because the payment is similar. Wrong. They are getting in over their heads, and it's not even winter. I include utilities in my rents -- they'll have to face those huge Alaska utility bills this winter on their own. They have no idea what they are doing.

    No, I didn't tell them all this. It's not my job to tell them, and they didn't ask. They are young and full of themselves right now. They have righeous indignation that they have paid rent for the last few years to me. Experience will be a good teacher for them. Yes, they cussed me out in unison when I demanded that they pay the rent for this month. I now have a signed IOU for the rent due. I know where they are going to live. So, taking them to Small Claims Court will be a slam dunk.

    I buy TDs on the side from private parties. I run into a lot of situations where people are totally screwed in transactions where they didn't have an agent to guide them through it. If they didn't cross all their Ts and dot all of their Is, I cannot buy the TD, no matter how much they discount it.

    You are a very knowledgeable seller. I am too. But, you are heads and shoulders above Joe Blow out there. A house transaction is the biggest one that most people have in their lifetimes. If they screw it up, it can change the direction of their lives for years to come. In some cases, forever.
     
  5. MTEE1985
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    Joe Blow a la HGTV which made everybody think they were an expert.

    Not being anywhere near an expert myself, it’s interesing to see where RE is headed with the growth of companies like OpenDoor and like what is mentioned above. My understanding is that the NAR is spending a LOT of money trying to keep the current system in place.

    Also interesting will be at what price point does a buyer/seller want that personal service? $500,000? $1,000,000?

    Just my two cents as an interested real estate party by not even close to an expert.
     
  6. CROJosh
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    Here's the problem with disruption: sometimes the better outcome is if the current solution improves instead of breaks.

    People love great agents but they're outnumbered by crap agents 10 to 1. So if agents got better and made it easier for buyers and sellers, people would choose them over technology.

    I think where the process has broken down is that the industry digs it's heels in and repeats relationship-building mantras instead of getting savvy with owning the data they need to compete with the zillows, trulias and redfins.
     
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  7. JScott
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    JScott Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    The biggest reason why we would never use a flat fee listing service (and prefer to be licensed instead) is that there are a lot of buyer's agents who will do their best to avoid showing their clients a house listed by a flat fee broker.

    The biggest reason for this is that buyers agents know that if the seller isn't represented by a vested listing agent, the buyer's agent is going to have to do a LOT more work. Without having someone on the seller's side who understands real estate contracts, who understands the negotiating process, who understands the due diligence process, who can coordinate with the inspector, appraiser and closing agent, etc., all of this falls on the shoulders of the buyer's agent. The buyer's agent spends many extra hours educating and hand-holding the seller who doesn't want to pay the additional cost to flat fee broker to get these services.

    Maybe it's just the areas where I've worked, but it's pretty well known that if you list through a flat fee broker, you'll get fewer showings than if your broker is full-service.
     
  8. WJK
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    In my mind, the problem is that everyone thinks they are an expert when they don't have a clue. Yes, old the NAR system doesn't make sense anymore with the information age. But, making sure that the T's are crossed and the I's are dotted on these RE deals does make sense. I've seen a lot of people cheated over my years in the business. Ending up with clear title is critical.
     
  9. passion518
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    passion518 Contributor Read Millionaire Fastlane Speedway Pass Summit Attendee

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    Thanks for the feedback WJK ! I understand completely that there are MANY complex situations and scenarios that do need to be gone through with a fine tooth comb and walked from start to finish. In these cases, of course an experienced full service broker should be utilized.

    But would you agree that that is the exception rather than the rule?

    Just because there are people with intense food allergies, who's food needs to be prepped and presented in a certain way with extra special care and attention - that doesn't mean McDonald's shouldn't exist.

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  10. passion518
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    passion518 Contributor Read Millionaire Fastlane Speedway Pass Summit Attendee

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    I'm sure they are!

    However - spending money doesn't always equate to creating value for the consumer ‍♂️

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  11. passion518
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    passion518 Contributor Read Millionaire Fastlane Speedway Pass Summit Attendee

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    I have heard that concern before... question for you-

    How could someone determine from the surface if you are using a flat rate service though? In my experience, the service I used went through some broker, who's name showed up on the MLS. The agents who did end up submitting offers on my deals ask who my broker is because "his name isn't familiar" , then I explain to them.

    Maybe I help my case because I DO market on social media platforms for all my listings. I figure anyone that sees my pictures and tells their agent they want to come see it - their agent will not say no. However, in the feedback I have received, it seems only about 25% of my leads come from social media.



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  12. passion518
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    Do you feel that there could not be a "systemized" solution to make sure t's are crossed and i's dotted?

    In my mind, title work would still be done at local title companies - either selected by the buyer or assigned based on a rating system as well as location.

    It would, however be a function of my service to send requests, follow ups, and organize all documents accordingly and distribute to necessary parties.

    I have no idea how yet lol. This discussion is certainly helping me dive a little deeper.

    I DO know it will cost a lot to develop and take a LOT of time. And of course...competition with the NAR will not be a good time...or will it?

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  13. JScott
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    In a couple of the markets where I work, there are some well-known flat fee brokers whose name are synonymous with flat fee listings.
     
  14. IGP
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    IGP Gold Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    Duffy Realty for sure. My neighbor just sold his house with them in about 3 weeks.

    They don't do anything other than take pics, list it on MLS and put a sign in the yard. All for $500.

    If your house doesn't sell, they then turn around and sell you as a lead to a real agent company.
     
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  15. JScott
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    Unless it's changed in the past couple years, they actually have a lot of a la carte services as well. I was talking to Rhonda Duffy (the owner) several years ago, and she was basically bragging that the average seller would spend between 6-7% of the sales price on listing services.

    In other words, sellers were spending MORE on flat fee listing than they would have on a full service broker.

    Crazy.
     
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  16. WJK
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    I don't see it as an exception when it comes to most transactions. I think that full-service brokers have to change with the times. But they do and will have some place in the food chain. I wouldn't use a full-service broker today. I don't need one. I know that you don't need a listing broker either. You're not giving yourself enough credit for your knowledge and experience.
    BUT, for the layman on either side of a transaction, having someone to watch your back is really important. The place that I generally see it is in my TD business. Some of the deals that happen without an agent are pretty scary!
     
  17. TheCj
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    Yes, they do have a la carte services, I think this is just their base line offer.

    Wow, that's crazy, but not surprising I suppose. Upsells works in every business. lol
     
  19. gClaw
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  20. gClaw
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    20% of the realtors out there do 80% of the business & know what they're doing. Out of that 20% MAYBE 3% have any clue about creative financing or working with investors.
    The 80% stick a sign in the yard, take some lame pics & slap it up on the MLS & wait for the phone to ring. That's the extent of their marketing in my experience.
    I do all my own marketing (assuming I don't already have a buyer, preferably a ca$h buyer), take lots of really good photos, build a website, run ads to the website w/ a tracking # on the site so i know what ads are generating the most interest from different platforms, if necessary.
    If my buyer needs financing I can steer him/her to several options to help them out who do all the leg work giving the buyer peace of mind.

    Ive learned my lessons working with realtors in the past. Trying to find a good, open minded one who returns phone calls, shows up to the party is as hard as finding a good, reliable contractor who does the same. It's pretty slim pickens so I've learned to do alot of the stuff myself (with some initial help & with experience) that a realtor charges 6% for damn near doing nothing but show up at a closing to collect their check.
    Been burned more times than I can count by useless, lazy realtors who don't do a damn thing but stick a sign in the yard & show up at closing after I did all the marketing & leg work and sold the property myself.
    Have zero use for most realtors so any flat fee service listing company suits me just fine.
     
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  21. passion518
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    This has been a large part of my experience and the experience of people I talk about it with. Not always though.

    On the buyers side for example, my last friend that bought a house says..."I sent 7 properties that i researched and found myself to my realtor. We saw all of them in about a 4 hour period. I offered what I wanted to on the one I liked most. I had my own lender lined up. We closed. Agents got 6% on my $400k purchase.

    It's a similar story from most.

    While I do believe there is more time consuming work to be done on the buyers agent side with showings, etc...I don't feel that it NEEDS to be that way.

    There are better ways to provide equal (or greater) value in a more controllable way - in a much more cost effective manner.



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  22. Mr. Wick
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    @gClaw Could I see an example of one of your websites for a potential listing?

    I'm currently exploring the option of designing websites for real estate agencies but I believe if I sold templates that agents could buy to showcase the house that they are selling (productized service) it could be better.

    On top, do you think there is there a market for a service where a professional real estate photographer comes in, takes pictures of your listing, lists it on Zillow / Realtor / etc (through an MLS agent), and markets for you through adwords / fb ads all for a fixed fee (rather than paying the traditional %)? Is this what those fixed fee agencies are doing currently?

    If businesses like this exist, can someone provide me links?

    Thank you!
     
  23. DustinH
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    I am in real estate and wanted to thrown in my two cents. I am licensed and it is my main income vertical.

    I have thought a lot about what you are stating and understand what you are thinking. I believe in 20 years the industry will move into a different direction on commissions once all the dinosaurs get out of the industry and the millenials become the main demographic of agents.

    Back when the nationwide average home price was $150,000 then 3% ($4,500) to each side seemed fair. That $4,500 went to the brokerage for services, to business and marketing costs, to taxes, and the remainder (~1/3) went to the agent's pocket. Nowadays, the national median price has risen to ~$225,000 (3%=$6,750 to both sides), but most metro areas (where 80% of the people live) have a median price closer to $400,000 (3%=$12,000 to both sides). So, with that being said, more people will start to stand up and say, "that's a lot of freaking money to pay out for these services."

    With the improvement of technology the cost of actually doing business has gone down.... but ...the cost of marketing has gone WAY up. Marketing costs are higher and more competitive than ever with more agents competing for the same ad space (i.e. Zillow). So, for an agent to be positioned where they get a lot of eyeballs on the homes they are selling they need to spend more marketing than in the past (or "do nothing" and rely on the MLS to send a buyer). If you are selling a home then you want your agent to have expert knowledge on marketing and be able to give your property the exposure it needs to sell in a reasonable timeframe. Also, there are probably a few other new companies I can't think of at the moment that have popped up (who weren't around 10-20 years ago) whose goal is to eat into the agent's business costs.

    So, there are two sides to the coin.

    Now, is the 6% total cost to the seller to high. Maybe. Maybe not. Depends on the average sales price and possibly other factors. Some coastal markets already have decreased commissions to around 4%-5% (Boston, San Diego, etc.) with Manhattan down around 3% total I believe. Those markets, though, have much higher prices and a lower commission is more than fair.

    Now, the flat fee vendors who "charge" $500-$1,500 (but usually there are tacked on fees) are too low to create a sustainable business. They only thrive in hot sellers markets and die out during balanced markets and buyers markets. Even in my hot market with seller inventory so low it is hard for them to make decent margins. If you charge $1,500 per listing, to make $150,000 in revenue (not profit) you have to sell 100 listings. Good luck with that. Finding that much business is hard. Then, you say you want to make it up by representing the buyer side. Good luck with that, too. There's a couple sayings in the business "you have to list (homes) to last" and "buyers are liars." I've seen both statements to be true. Buyers are more difficult, unreliable, uncommitted, and untrustworthy than sellers. Not to mention the amount of time that is required to go from initial meeting to the closing table. A seller can go from listing to close in about 2 months on average while the average buyer takes 4 months, or sometimes longer. So, you are better off focusing on sellers because of their natural commitment and incentive to get a deal done faster.

    So, the answer is probably somewhere in the middle. I think a flat fee is a fair way to do business but takes out any sales incentives of a percentage-based commission. Would somewhere in the middle around $7,00-$8,000 flat fee per side be good for the business. Probably.
    Then, there's the question of paying a buyer agent. Good luck trying to convince them to take a smaller paycheck to show your property compared to the rest of the market. That's why it's been hard for commissions to decrease because you have to convince buyer agents to accept less when they have the rest of the market offering a bigger paycheck at 3%. That shift is hard to initiate, sustain, and accelerate.
    I believe it will happen in about 20 years as home prices continue to rise because of inflation and debt creation (the fed printing money), though. Just don't think now is the time. I don't think the costs have reached a tipping point, yet. Truth is, nowadays there are a higher percentage of people using real estate agents than selling their house on their own, compared to 10 years ago. Even with all the improvements in technology and available information people would rather use a licensed professional. There are so many more opportunities to get scammed now then you are definitely better off using the protection that a real estate brokerage offers.
     

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