Zillow CEO: startups trying to disrupt real estate commissions will fail (2012) • Hacker News Board

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

#201

Post by no_broker » Thu, Jan 17, 2019, 1:07 AM UTC

Just to add another perspective: I recently bought an apartment in NYC without using a broker.

One common argument for buyer's brokers is that they don't cost the buyer anything: the seller pays for their commission. If I were buying a $1M apartment, the seller would pay $30,000 (3%) of that to my broker.

Alternatively, I could not use a broker and instead negotiate the price I pay to $970k (basically what I ended up doing, though it's hard to definitively say what I would've paid had I used a broker).

One could argue that a broker's experience could more than pay for the fee, but I have a hard time believing this is true 90%+ of the time (which is how often buyers hire brokers).

It was pretty easy (and enjoyable, at least for me) to research what was on the market thanks to aggregators like StreetEasy and major brokers' own websites (I'll also concede that I may have missed out on some off-market listings, but was able to find a place I love in spite of that; this may be somewhat different in a seller's market, but I don't know). I arranged showings directly with the listing broker, researched what to look for in an apartment and what questions to ask, and often brought experienced friends and family to these apartments.

My particular experience was perhaps unique because I ended up buying a condo in a new development with an experienced developer (but I don't think it would've been particularly costly or hard to hire a home inspector myself), but I was still able to provide comps, write a persuasive offer letter, research the developer, and negotiate closing costs. I ended up paying 7% under ask and paying no transfer taxes, and I really doubt I'd have gotten more than 4.5% under ask had I used a broker.

My strategy may be too risky for many others -- this was my first home purchase, after all -- but I did a bunch of research, reached out to friends and family for advice, and consulted an attorney before submitting any offers.

I ended up spending a bunch of my own time doing work that someone more experienced could have done for me, but it was a great learning experience and seems to have had a huge return on investment.

If you're not willing to try this strategy, I recommend looking for brokers who will agree to some sort of commission rebate. In NYC in particular, a company called [Prevu](https://www.wework.com/creator/personal-profiles/real-estate...) offers a two-thirds rebate (note: I have no affiliation with this company and never used their service, but some of their [blog posts](https://www.prevu.com/blog) were quite helpful to me).

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

#202

Post by gnopgnip » Thu, Jan 17, 2019, 1:08 AM UTC

megaman8 wrote: post #18

brightball wrote: post #12

Earlier quoted context omitted.

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…

Not having a realtor as a buyer really helps, because you can add that 3% to the purchase price of the house saving you 3% which can be a huge amount in expensive markets like the bay area.

Even in the best case of a FSBO home, the seller is not going to give you that 3%. The whole reason they are not using a realtor is so that they can avoid paying a commission. And if you are not using a realtor, they can find another buyer who is not using a realtor so it isn't like they would have to pay it if your deal doesn't work

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

#203

Post by no_broker » Thu, Jan 17, 2019, 1:13 AM UTC

pixelpp wrote: post #66

aj24 wrote: post #52

Earlier quoted context omitted.

Fee rebates have become really common as well in my experience.

Yeah, what are you taking about?

Go to a broker and say "I'll use you if you split half of your commission with me." Or seek out a company/brokerage in your area that explicitly offers "commission rebates."

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

#204

Post by theluketaylor » Thu, Jan 17, 2019, 1:16 AM UTC

ams6110 wrote: post #67

sauwan wrote: post #60

Earlier quoted context omitted.

I think this is pretty misguided. 3% of $100,000 is $3,000. Many housing purchases will be more than that, but let's just talk over $3k. Some people will be very comfortable with dealing with negotiations, pricing their house (the quasi-ethical can even talk to a few realtors before hand to get their opinion), and doing the paper legwork. Just because someone chooses to use their time and effort rather than forking o…

When you're buying, a realtor will never tell you that you are overpaying -- it would be less commission for them and greater chance the seller will reject or counter the offer which creates more work for them. When you're selling, they will always tell you that you are priced too high. They want a quick sale with minimal work. I've used realtors on the buy and sell side of the first house I owned. I was disappointed…

When I bought my house my realtor convinced me to make a much lower offer than I had planned. Even after the negotiation was all done I still ended up paying less than I had been planning to offer initially. Cost them some commission, but I'll happily use them for any future transactions and recommend them to others needing a realtor.

Not all realtors are out to maximize the commission on a single transaction. Many are like lawyers and are working for the best interests of their client (which is also in their long term interest).

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

#205

Post by tradertef » Thu, Jan 17, 2019, 1:22 AM UTC

imbusy111 wrote: post #131

iwantedjusttom wrote: post #121

As a realtor for the past 6 years I can say a couple of quick things as to why I don't see the real estate industry going anywhere, even though I think that real estate brokers are extremely overpaid. - selling your house, at the end of the day, is quite the undertaking. A lot goes into it, it can get emotional, messy, and sometimes quite complicated. Having someone that does it on a daily basis can be nice and reall…

I fail to see how they are overpaid. If someone sells 4 houses per year for 1M for 1.5% fee, that's only $60k per year. That sounds like a mediocre income in markets where houses even go for 1M. I am using numbers for the Bay Area that I have heard of. Maybe other markets are different.

Think about the amount of work that you would do to sell (ignoring buys) 4 houses.. At most 2 months of work for them.

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

#206

Post by surrealize » Thu, Jan 17, 2019, 1:25 AM UTC

Axsuul wrote: post #47

harryh wrote: post #32

Earlier quoted context omitted.

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).

As more agents enter the business, a lot of their time and effort ends up going into getting clients in the first place. You end up with lots of agents spending more of their time trying to get business, with actual home-sales work taking up a smaller proportion of their time. But the increase in home prices is enough to make up for the decrease in the number of homes sold per agent.

Point being, an increase in home prices, and the resulting increase in commissions (in dollar terms) doesn't necessarily result in any benefit to clients.

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

#207

Post by airstrike » Thu, Jan 17, 2019, 1:26 AM UTC

soheil wrote: 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…

Can't open website

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

#208

Post by no_broker » Thu, Jan 17, 2019, 1:26 AM UTC

cletus wrote: post #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…

I agree that there's benefit in hiring a broker when selling.

But I'm not as convinced that brokers are necessary when buying; at least to me, it seems like selling a house will often be more work than buying one. When selling, you need to advertise the house, show prospective buyers around, research the market to better understand pricing, etc whereas for buying it seems less time intensive overall, and easier to find some reasonable options, meet with sellers or listing brokers directly, and write a persuasive offer letter.

I recently bought a condo in NYC without a broker, and if you're interested, I left a comment with more info about my experience: https://news.ycombinator.com/item?id=18927393

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

#209

Post by no_broker » Thu, Jan 17, 2019, 1:28 AM UTC

blazespin wrote: post #23

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.

Maybe. I personally had a very different experience [1]

[1] https://news.ycombinator.com/item?id=18927393

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

#210

Post by gnicholas » Thu, Jan 17, 2019, 1:33 AM UTC

everythingswan wrote: post #178

lxe wrote: post #169

Earlier quoted context omitted.

Expecting 3%/$30,000 k for being "someone that smoothes things out" on a sale of, let's say a $1M home in CA, is theft.

What if their knowledge of the market and negotiating helped you get an extra $60k in value on the sale of your home vs. selling it yourself?

Then it would make sense to have a model where the agent gets a very small percent up to a certain price, and a much larger percent above that threshold. Does this ever happen?