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Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

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Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#41

I see at least three counterpoints: 1. Real estate agents aren't often "experts" at real estate valuation, inspection or execution; They have dependencies on appraisers, inspectors, and lawyers. The work an average agent does is more or less cookie-cutter from my anecdotal experience, though I think there is a proportion of rockstar agents that do much more. 2. Not every buyer wants homebuying to be a client-services…

>The work an average agent does is more or less cookie-cutter from my anecdotal experience

indeed majority are uneducated, there is a low/no barrier of entry with a similar shark mindset as it exists in recruiting - a lot of promises by your employer (profit sharing etc) but the competition is fierce. I doubt it's an industry that can easily be disrupted. at least to date I've seen no tech proposals/ideas that can compete with this setup because it's already a race to the bottom (and unlike recruiting) requires interfacing with old-school bureaucratic notaries, legal advise etc. In the end you still need a human making an appointment with another human to view the property and a robot doesn't cut it.

Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#42
People love to complain about realtors. Companies like Redfin have been trying to disrupt this market for years. People on HN and other places like to complain that realtors are pointless and that the only reason they exist is they are entrenched.

I posit a different theory, which may well be controversial here, and that is that realtors continue to exist--and charge large commissions doing so--because they provide a service that most people want.

I think of it like advertising. "I never watch ads" is a common catchphrase when decrying ads but again, ads exist because they work.

The job of a realtor, and what they are incentivized to do, is to facilitate a transaction. People might point out that a selling realtor isn't incentivized directly to get the best sales price. They are correct. Why show a house 100 times in the hopes of getting $550k when you can flip it tomorrow for $520k and your work is done?

Thing is: that's what most sellers actually want, even though they might say they want the best price. Most of them are selling for a reason and they just need to sell it and move on with their lives.

Likewise, when it comes to buyers, they too are buying for a reason, typically because they need somewhere to live or they want to establish (more) permanent roots in a given community. The best thing for most of them is to pull the trigger, move in and get on with their lives. It's not to get the best deal. It's not to wait 2 years for the perfect property.

Realtors facilitate both sides of this equation.

Have you ever deal with a For Sale By Owner? I have. I refuse. I won't even go and look at a listing FSBO. It's a nightmare. Those owners tend to be cheap (hence not paying commission), have unrealistic expectations of their property's value, overvalue whatever "improvements" they've done and, worst of all, are emotionally invested so they re more likely to take a lower offer personally rather than as a negotiating tactic.

It's worth noting too that with negotiating in general, it's often better to have someone else do it for you. If you're the guy who can say yes or no you have no fallback. If you represent that guy you now have the position of "my client won't accept that". Think about the psychological difference of rejecting someone personally or just being the messenger.

So add fixed-fee home sales to the other startup traps like dating sites, travel sites and anything to do with "fixing recruitment" (you'd be surprised how many cold call emails I get about this one in particular). Hell, let's add blockchain to that list too, but I digress.

Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#43
post #16

Yeah and startups that tried to disrupt filing taxes failed... Turbotax has kept me from paying an accountant a commission to do my taxes for years. Someone will figure out how to streamline the process online.

Don’t you pay TurboTax? A virtual tax accountant is still a tax accountant. If someone makes a virtual real estate agent to replace real ones, I don’t doubt they’ll still charge a fee.

> Don’t you pay TurboTax?

Yes, but the cost is significantly less. When I first moved to the US I used a tax accountant because I didn't know any better and it cost me ~$500 a year (this was in New York). I now file using either TurboTax or TaxAct and my costs are typically in the $60-70 range depending on which tier of service I select.

Is it more work? Arguably yes, but I enjoy the freedom of being able to do it all from the comfort of my sofa and the tools have improved to such an extent that it rarely takes me more than half an hour start-to-finish.

Real estate is obviously a very different proposition to tax filing, but if disruptors can cut out some of the fat/overhead to bring the costs down I think it would be appealing to a wide range of people.

Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#45

I've used buyers agents (1 traditional, 1 Redfin) when I've bought homes since they are being paid from the Seller's Fees and in most states I believe they are legally bound to act in your best interest. I've had a new construction seller try to convince me to not get an agent and would give a discount instead but felt that the risk wasn't worth it especially since most buyers agents I've engaged with have been open…

The other thing you should absolutely never do, as a buyer, is use a home inspector recommended by either the seller's agent, the seller themselves, or even your own buyers agent. Choose one yourself. Anything else and they have too much of an incentive to produce an inspection report that will result in a quickly closed sale.

Seems like they would open themselves up to some sort of liability if that happens.

Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#46

Earlier quoted context omitted.

Both redfin and Opendoor go through licensed brokers in each state so is agree with what you posit.

I thought Opendoor are themselves agents/brokers, no?

They are, I just opened some junkmail from opendoor and there was something about OpenDoor Brokerage LLC.

Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#47
post #32

6 years old thread. Low end commodity RE commissions will be chipped at, but higher end you want an expert. Buying a million dollar house without an expert is fool money gone.

Weirdly I kinda think it should go the other way. Does it require twice as much work (or expertise) to sell a million dollar house than a 500k house? If not, why do agents get paid twice as much?

An agent is incentivized to put in twice as much work (i.e. spending more time with the client, making the place much more presentable, etc).

Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#48
post #34

Interesting when you read this and have just started a real estate startup [1]. There are many segments in real estate that are ripe for disruption, Zillow is not the end all be all of real estate. Take cap rate calculation for instance, this is something very important to real estate investors, but Zillow hardly has a product that addresses it and tries to predict it accurately. Their strategy seems to be let's go a…

Your company as an idea is a really interesting foil to that of Robinhood and the like, but as an aside, having the text on your landing page being unselectable is a strange design choice along with the ominous graph at the bottom of the page that is very nondescript for users outside of the market.

Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#49
post #2

That's a bold statement. Still, the NAR has data that suggests realtors are more likely to be involved in transactions than 18 years ago: 87% of buyers purchased their home through a real estate agent or broker—a share that has steadily increased from 69 percent in 2001. Source: National Association of Realtors ( https://www.nar.realtor/research-and-statistics/quick-real-e... ) ... But I'm curious if the definition o…

It’s a essentially a giant network effect. Practically, the #1 reason to use a realtor is that if there is an issue with the home that should have been known ahead of time, there is a chain of insured entities that provides legal recourse. The shop and decide part is secondary to their value, but that is how they are so entrenched. The local MLS in any given area has the ability to cut off access to anyone. Some are…

> Practically, the #1 reason to use a realtor is that if there is an issue with the home that should have been known ahead of time, there is a chain of insured entities that provides legal recourse.

Other than title insurance (which is separate from and in addition to the 5-7% commission), what's the insured risk that could possibly be worth that percentage?

Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#50

I see at least three counterpoints: 1. Real estate agents aren't often "experts" at real estate valuation, inspection or execution; They have dependencies on appraisers, inspectors, and lawyers. The work an average agent does is more or less cookie-cutter from my anecdotal experience, though I think there is a proportion of rockstar agents that do much more. 2. Not every buyer wants homebuying to be a client-services…

Most of the appraisers, inspectors and attorneys are filling a compliance role.

The reality is the real estate person usually drives the process. Good ones know which appraisers to call and which inspectors to avoid. There's no real professional ethics involved, so most of them have arrangements with preferred folks whom they get referral fees from. (It's one of the reasons why home inspectors are almost completely useless.)

Real estate is ultimately a shady business that is about who you know.

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