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kdryden

Here’s another company who intends to disrupt traditional real estate:

http://techcrunch.com/2014/09/08/allre-lets-you-buy-and-sell-your-house-online-without-a-real-estate-agent/

A few thoughts:

1. They have launched their transaction management business in San Diego.  But they’ve been having trouble with their website this week, and you have to register just to take a look.  With Zillow and others giving you free and anonymous access, consumers expect to roam around before committing their email address.  Specifically, buyers and sellers will want to see the homes-for-sale inventory.

2.  Timing is everything.  If they could have caught the early frenzy when there wasn’t as much scrutiny of pricing, consumers would have been more willing to take a chance on a new-fangled system.  People will still be curious, but pricing is the issue with all for-sale-by-owners.  They aren’t as motivated, and without any guidance, they will price high.  But buyers today don’t know if prices are going up or down, and they will want to be conservative about price – creating a significant gap from the start.  The chances of buyers and sellers coming together on price today – even with an agent – aren’t that good.

3.  Her first pitch is for participants to save the commission.  But only one party can save the commission, not both.  For sellers to save the commission, their price has to be so attractive that buyers pay the full price.  But buyers want to save the commission too, so they subtract 6% from the seller’s price just to get started.

4.  She dwells on the fact that her service is free to get around RESPA.  Two points: A) They are appealing to the money-savers, who aren’t going to tolerate paying higher fees for the other services provided.  B) When a customer has a problem or concern, and they can’t get help from her – who is going to make the deal?

5. She does concede that consumers may need an agent, and if so, they can find one and work out a pay structure on the side.  But she is missing the big game-changer that a new-fangled company could provide: realtor help if/when needed, at a reasonable cost.  Consumers don’t mind paying a reasonable fee to get adequate help, and if she just provided that one last step she might pull it off.  But instead, she chides the industry with her snarky comments like she is a ‘recovering realtor’, which alienates realtors everywhere.

6. She said that she was a realtor for ten years, but the BRE says that she obtained her California real estate salesperson’s license in 2007 – who knows, maybe she had a license in another state?  According to the San Diego MLS, she has sold 40 homes in her life, which means she hasn’t handled a big sales pipeline.  A company built on skimming fees needs to generate a large volume of sales, and they are trusting that a computer can do the job that they have never done themselves.

7. The ‘scorched-earth’ mentality means game-on.  Note that she wouldn’t name the title and escrow company yet – why?  Because that title and escrow company already has a book of business with traditional realtors, and they are probably concerned about alienating them.  The mortgage company, Prime Lending, is crazy to think that being associated with this effort won’t affect their normal realtor business, and likewise for whoever the other affiliates are.

Other attempts to disintermediate the real estate business have stumbled.  The old IPayOne was probably the best combination, because they did provide realtor help when needed but they skimped on quality and eventually closed down.  Redfin has been around for years now; has name recognition, a great website, discounted commissions, and 44 team members in SD – yet according to the MLS, they only have a 1.6% market share this year.  Why?

Because the consumers’ perception of realtors tells them to go with someone else 98.4% of the time.

The company that will bust the real estate cartel is the one that provides great-quality help for less cost.  But if that happened, traditional realtors could adjust their commissions accordingly, and then it’s a nothing-burger.

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