Jeff Mindham Buying and selling a home without a real estate agent – and their commission – is very appealing given that the standard commission rate is around 6%. Buyers are sometimes under the misimpression that they aren’t paying the cost of the commission because sellers cut the check at closing. However, what buyers sometimes forget is that the seller has baked-in the 3% buy side commission into the sales price. Sellers, on the other hand, are well aware of the commission which can be, for example, whopping $30,000 on a $500,000 home sale.
Below are the 10 startups that attempt to circumvent an agent in the buying/selling process:
Open Listings
This unique startup model targets home buyers exclusively, offering to rebate half of the 3% buy side commission back to the buyer. In California, where home prices are high, this is a significant benefit. For example, a buyer would receive a $9,000 rebate on the purchase of a $600,000 home.
As the system works now, if a buyer did not have an agent and went directly to the home seller or their agent, they are not entitled to any of the buy side commission because the listing agent can retain both sides of the transaction commission. That means the listing agent keeps the entire 5.5% to 6% commission – ouch! Open Listings stops that.
Currently, Open Listings has 400,000 active buyers in California. They will be expanding soon out of the state, into Seattle, the home of many real estate tech firms. To fund this expansion, they’ve recently raised an additional $6.5 million.
ForSaleByOwner.com
This is the granddaddy of all tech platforms when it comes to buying and selling a home without an agent. They sell more homes, without agent assistance than anyone else by far. Last year they sold over 10,000 homes.
ForSaleByOwner.com has been around for a while, but when they were launched, they were at the cutting edge of real estate tech. The company was founded by Damon Giglio who, sometime in the early 2000’s, bought the URL “ForSaleByOwner.com” around $150,000, a huge amount at the time. Then the company took off. A few years later it was bought by the Tribune Company.
ForSaleByOwner.com is a cash cow. Their margins are huge because all they do is post properties online for a few hundred dollars each. They do not get involved with the complexities of a transaction. Buyers pay nothing. However, the sell-through rate among sellers is not high because they tend to overprice their homes. When that happens, many end up selling with a traditional full commission broker.
Owners.com
Owners.com is the second largest FSBO website. They were acquired in 2014 by Altisource Portfolio Solutions which also owns the real estate platform Hubza. Owners.com was sold for $27 million.
Since the acquisition, Owners.com has expanded its offerings. For example, home buyers get a 1.5% price rebate when they purchase through the website.
https://www.youtube.com/watch?v=hfd9rNhus9I
Owners.com has its own licensed in-house agents which allow them to discount the cost of the transaction, and to legally provide buyers with real estate advice. Last year, they started offering free access to the MLS, following USRealty.com’s lead (more about them later). Free MLS access is a ploy to attract sellers and then, hopefully, upsell them to other fee-based services.
Fizber
This Orange County, California based startup recently surpassed the 100,000 listings milestone, up from 40,000 in 2015.
Fizber charges a flat $99 for their Digital Marketplace Package which puts homes on most of the large listing websites such as Zillow, Trulia, Yahoo Real Estate, and Homes.com.
There’s an additional charge of $295 for their MLS package which also gets a seller a lawn sign and legal assistance. Home buyers pay nothing if the home was not placed on the MLS. If the seller bought the MLS package, a buyer agent is entitled to a commission.
Houzeo
With an Ivy League MBA in hand, founder Amit Ahameja set to work launching the FSBO Houzeo.
He charges home sellers a small flat fee to be listed on his site. Sellers also get their homes posted on most of the other large listing portals.
Houzeo claims to make the buying and selling process simpler and more transparent. They charge sellers a “success fee” of $599 when the home is sold. Home buyers who are not represented by an agent pay no fee at all.
Trelora
This Colorado-based startup allows home buyers to circumvent real estate agents and negotiate directly with the homeowner.
While most buyers find their homes online by themselves, in order to get information about a particular listed property they have to almost always go through an agent.
For example, Zillow, the most popular listing platform in the U.S., posts millions of homes and makes its money by selling ad space to buyer agents so they can appear next to those listings. The potential buyer has to click on to one of those agent-ads to get more information. This then triggers the buy-side commission of 3% if the home is bought. Trelora lets buyers and sellers avoid agents and their high commissions.
Craigslist
Craigslist isn’t really a startup anymore; it’s more like an institution.
Nevertheless, it remains one of the popular websites for home buyers looking to find a house that doesn’t have a real estate agent attached to it.
It is simply a classified selling platform and like ForSaleByOwner.com. Thousands of properties are sold on Craigslist every year.
USRealty.com
This real estate startup began as Private Sales Partners. After burning through millions of dollars of their investor’s money and having little to show for it, new management was brought in to right the ship. Colby Sambrotto, the former COO of ForSaleByOwner.com, took over and tested various models including flat-fee MLS, fee for service, and 3% commission models.
Today, USRealty.com offers home sellers a free listing on the MLS in the hopes of selling additional services like lawn signs, help with transaction details, mortgages and title fees. Buyers pay nothing if they find their home on the USRealty.com website.
However, most of the company’s revenue comes from HousePad.com, a little known USRealty.com subsidiary which has the unique ability to directly list homes on hundreds of MLS’s in over 40 states. FSBO sites such as Owners.com and ForSaleByOwner.com pay USRealty.com/HousePad to list their client’s homes on the MLS in states where they are not members.
SideDoor
This startup claims to be the first peer-to-peer marketplace that allows people to buy and sell a home online without a broker and commission free.
They generate revenue from lenders, lawyers and title companies who are happy to pay fees for buyer and seller leads.
SideDoor helps buyers navigate the complicated buying process. Everything can be done online, without an agent or a commission. And because sellers aren’t paying a commission, they are more likely to negotiate or list their home at a lower price, which, SideDoor hopes, will drive more buyers to their website.
eXp
Lastly, eXp doesn’t fit nicely into the category of non-real estate agent/broker platforms. However, given that their agents are digitally created avatars, they made this list. Yes, you heard me correctly; eXp has computer generated agents who interact with buyers and sellers. eXp’s “virtual campus” allows hundreds of agents, from 42 states, share experiences and attend meetings in their “virtual auditorium.”
Real people are behind these digital-cartoon characters. Many conduct business from home, in their underwear, while their avatar substitutes dress in computer-generated coats and ties. Does this model work? It remains to be seen. However, eXp is growing. In 2015 they had just 300 agents. This year they have 3,000 according to the CEO, Jason Gesing.
https://www.youtube.com/watch?v=bj2Ud-esKG0
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