How's Internet changing the Real Estate transactionsLast week I wrote about Real Estate and how traditionally residential transactions have happened. I also promised that I'll write about what else is happening to this market and how the system is bringing discounts for end consumers.
In the previous post, we looked at why traditional 6% model doesn't work and consumers need more visibility
into where there 6% is going.
First of all, there are websites who are similar to traditional lead generation model and all they do is to trick and convince buyers/sellers to give their contact information. It could be for "find out the value of your house" or "view homes for sale" etc. Once they know a consumer is interested in any of the activity, they sell the information either to external agents or share is with their own agents. One company recently went public just by selling this information for big money.
Once the agents qualify the leads, they follow up like a traditional agent.
Buyer Focused: One of the great example for this is ZipRealty. If you buy thru them, they'll give you back 20% of the commission, as they advertise on their website, which they get from the seller. That means, if a seller gives 3% of the sale to buyer's agent (ZipRealty in this case), you'll get 20% of that 3%, which is 0.6% of the sale price. Once you register they randomly assign and agent to you who keeps sending you spam and pestering you to respond. Anyways, they can return the savings back to the buyer by streamlining the processes and making "agents" more salaried that total commission.
Similarly on the seller's side also, an east cost company provides full-service to sellers but the agents are their employees and they have organized their services in more vertical fashion. For example, they have teams of people doing only qualification of leads, legal work, staging etc.
All the above models are pretty much Self Service, but they provide better service and savings since they can make better use of the processes, information and technology.
Other extreme is FSBO, For Sale By Owner, which is starting to gain momentum but there's no governing body like MLS so it's all scattered over different websites and channels (print, online, audio, video). In addition to this, since fsbo is even less than 15% of the total listing, buyers don't go to those sites and Buyer's agents do not have any incentive to go there since FSBO doesn't want to pay any (or much) commission.
Then there are sites like MSN HouseAndHome which just give you information about a neighborhood and help a buyer decide on one. They ultimately link to some other listing site and this could not be a complete model in itself. Although, if you have enough research and derived results and IP, you could provide this as a service.
Redfin is another example which is adding value to buying process by providing a geographical search. And, with the introduction of Google Map APIs it'll be much easier integrate MLS data to it. People have already launched craigslist + google maps and what not. A better experience would be to combine informational data + google maps + mls listings + neighborhood bars and pubs + grocery stores + whatever else you can think of.
Coming back to full service and fsbo, what if there was a service which lets me do what I want (as a seller or buyer) and let me hire professionals to do the rest? The ideal scenario would be to itemize all the steps in the roadmap for buying/selling and present it as a menu to the consumer. Just like when I file my taxes with H&R Block, they itemize their fee and give a complete breakdown.
More on this later, or you could ping me at hisacs@gmail.com if you are interested.
