Here are two ways not to save money in real estate
A good friend of mine is selling his house. He is doing it himself and frankly I am enjoying the process. I haven’t been offering advice (except to advise spending the five hundred bucks and getting it on the MLS), but I have been offering comments, quips and funny third party stories from the sidelines. I’ve been commiserating too. Mostly, I’ve been commiserating.
He got a free package from one of the FSBO sell-it-yourself companies. (I can’t mention their name. I must be on their watch list. Every time I blog about those guys, I get a cease and desist letter from their lawyers.)
So he got the signs and the website free. The company told him that they had helped selling a couple of other houses in the neighbourhood and they were giving him the free stuff because they were trying to show dominance in the neighbourhood. Makes sense.
He quickly hooked a likely buyer and over the course of several weeks, they eventually negotiated an agreement. Selling a house is easy right?
The seller’s lawyer kiboshed the sale. Turns out the lady’s separation agreement has not come through yet. She hasn’t got the money. So that was all a huge waste of time for my friend. He is back to square one. If there was at least one agent involved, I think the subject of finances would have come up a lot sooner.
FSBO is not the answer
Real estate is one of the few “worker-based” industries that hasn’t been hollowed out by technology. On the contrary, there are more real estate agents now than every before.
We know that the FSBO (For Sale by Owner) companies are not the silver bullet. There are roughly as many private sellers today as a percentage, as there were two decades ago before the companies came into existence. Only the tools have changed. Instead of getting a sign at Canadian Tire and putting an ad in the local newspaper, now you get a sign from the FSBO franchise and a “listing” on their website.
In essence, the FSBO companies are trying to take the agents out of the equation. But sadly, the general public does not have the experience and know-how to take on the complicated task of selling real estate.
Eliminating the Realtor is not the answer
Because I live and work in Waterloo, I see all the time startups trying to disrupt the real estate industry. The industry is in serious need of disruption, but these startups are focusing on the wrong things. Most startups are trying to eliminate agents from the process. Makes sense. Agents cost money. Take the agents out, save the money, right?
Well right. But it doesn’t work. One of my 365 Rules about Real Estate is that you can’t buy a house on the internet. Real estate agents, are like doctors and plumbers and lawyers and department managers. They are needed. Seller’s agents front load the sale. Buyer’s agents, help buyers make good decisions. Realtors are the local experts and the industry knowledge knowers. You can’t put an agent into a database. There is simply too many variables.
In a recent article on Medium, said:
As a software developer and startup founder that focuses primarily in Real Estate technology, I see all too many people building apps and websites outside of their domain. And from an outsiders perspective I can see why thinking, “Let’s move the home buying process online” makes sense. But the truth is that this will never work. Buyers will make bad decisions if they’re left on their own, and this cannot be solved by another search portal website.
Let’s start thinking differently and using all of these amazing new technologies to give agents more power, not to take it away from them.
Here’s what I’m talking about
Here is a recent example of yet another startup trying to move the home buying process online.
RebateCrew has developed a new software that automates many of the manual real estate tasks. Homebuyers browse the internet for the home they are interested. Then, once the buyer would like to make an offer, they can visit RebateCrew to submit an offer. RebateCrew’s system will then process and submit the offer to the seller, and help negotiate any counter offers. Once the offer is accepted, RebateCrew will help buyers navigate the closing process. Upon completion, 50% of the buying agent commission paid to RebateCrew will be rebated to the buyer.
As George Countryman a commenter on the story so wisely said:
Build an app that enables the agents to sell a house faster or for a higher price and then you have a viable business but this is just another digital termite trying to play in an industry they have zero experience in.
Nicely put George.