Sell your house: Flat fee model, not commission based

E

eyephone

Well-known member
"No more 6% commission ? these brokers will sell your house for a flat fee
London-based Purplebricks launches its new U.S. business in Los Angeles.
It offers the full services of a regular real estate brokerage for just $3,200.

It offers the full services of a regular real estate brokerage for just $3,200. That includes professional photography, 3-D virtual tours, help with staging, home tours and listings on all the major online platforms.

Buyers who choose Purplebricks as their agent will receive a $1,000 rebate on closing. The model has been successful in the U.K., and the company expanded into Australia in 2016.

"I think what's great about our model is it's new in the U.S., but it has been proven in the U.K. within three years," said Eric Eckardt, Purplebricks' U.S. CEO. "When they launched in the U.K., they weren't the first flat-fee model, but the way they approached the market, with a full hybrid offering, with the customer service from listing to closing, with a local real estate professional to provide all the services associated with that ? it has really been a competitive differentiator."

Purplebricks is not the first flat-fee model in America. Reali recently launched in San Francisco with much the same offering but a higher flat-fee of $4,950, likely because of San Francisco's higher median home price. It is now expanding to Sacramento, California.

Agents will earn a portion of the flat fee and also a portion of the commission split on the buy side, whether they sell a Purplebricks listing or any other listing on the open market, Eckardt said."
https://www.cnbc.com/2017/09/15/no-...kers-will-sell-your-house-for-a-flat-fee.html

This might be a game changer in the RE industry.
 
Maybe I missed it in the article, but what about the % for the buying agent?

Even though IrvineRealtor only charged us his costs to sell our home, we still had to pay the 2.5% to the buying agent.

Not sure if it's that much of a game changer as it's similar to Redfin's model as you get whatever over their "costs" back as a rebate.
 
Most industries have gone down this path. Hell my company started to slash commission for our sales folks a while ago. Our outside sales used to make more than our CEO some years.

Real Estate has been the last hold out. Will this succeed, who knows. But I sure as hell wouldn't mind paying $3200 commission over 6%. Although 6% is long gone, I think the current going rates are closer to 4-5%.
 
irvinehomeowner said:
Maybe I missed it in the article, but what about the % for the buying agent?

Even though IrvineRealtor only charged us his costs to sell our home, we still had to pay the 2.5% to the buying agent.

Not sure if it's that much of a game changer as it's similar to Redfin's model as you get whatever over their "costs" back as a rebate.
Click to expand...

It looks like the buyer or selling agent will split the flat fee.
 
Every "low fee" sales strategy - and there have been hundreds of them over time - have all failed. The quality of agents is extraordinarily low...well, considering just how low the bar is to begin with, it's surprising just how low the bar can get.... (even I have a RE License, enabling me to slur the industry all day thank you!) The oldest saw in the books - "you get what you pay for" is still true today.

6 percent commission transactions only exist in the minds of old timey broker shops. I'd be amazed anyone selling a home today is daft enough to accept that kind of charge. If they did, I tip my hat to the Agent who pulled it off, wondering how they sleep at night ripping people off like that.

Once you get over the agent quality issue, and the average commission split around 4%, there's the name."Purplebricks" a brand fail IMHO. Anyone with Nationstar? They're now called "Mr. Cooper". Try explaining that name to people. Redfin took many years to establish a brand presence. When companies try to attract business with nonsensical names, you know the end is nigh.

When a Purplebricks agent darkens my walkway trying to drum up business, I'll be waiting on the front porch later sipping a freshly made smoothie from my Juicero machine, letting them know I'm not selling because the loan I have with Mr. Cooper is so affordable, I'll never sell.

My .02c
 
Soylent Green Is People said:
Every "low fee" sales strategy - and there have been hundreds of them over time - have all failed. The quality of agents is extraordinarily low...well, considering just how low the bar is to begin with, it's surprising just how low the bar can get.... (even I have a RE License, enabling me to slur the industry all day thank you!) The oldest saw in the books - "you get what you pay for" is still true today.

6 percent commission transactions only exist in the minds of old timey broker shops. I'd be amazed anyone selling a home today is daft enough to accept that kind of charge. If they did, I tip my hat to the Agent who pulled it off, wondering how they sleep at night ripping people off like that.

Once you get over the agent quality issue, and the average commission split around 4%, there's the name."Purplebricks" a brand fail IMHO. Anyone with Nationstar? They're now called "Mr. Cooper". Try explaining that name to people. Redfin took many years to establish a brand presence. When companies try to attract business with nonsensical names, you know the end is nigh.

When a Purplebricks agent darkens my walkway trying to drum up business, I'll be waiting on the front porch later sipping a freshly made smoothie from my Juicero machine, letting them know I'm not selling because the loan I have with Mr. Cooper is so affordable, I'll never sell.

My .02c
Click to expand...

This is just the start.

Check out the Redfin IPO thread and look at my post of the potential company that might enter this space.
 
irvinehomeowner said:
Not sure if it's that much of a game changer as it's similar to Redfin's model as you get whatever over their "costs" back as a rebate.
Click to expand...

I think on the sales side, they still charge only 1.5%.  So that's pretty competitive, but I don't know what you get for that amount.  Purplebricks sounds more full-service than Redfin.

Soylent Green Is People said:
Anyone with Nationstar? They're now called "Mr. Cooper". Try explaining that name to people.
Click to expand...

Haha... yep, I still can't get used to that name either.  It was focus group driven and seems out of touch.  ("We're a giant corporation with millions of borrowers, but maybe if you call us Mr. Cooper it will seem like we're your neighborhood banker.")

I'm connected to one of their chief legal counsels on LinkedIn and he was congratulating the rebranding team for doing such a great job.  It took all of my willpower not write some snarky comment that would have surely pissed him off.
 
HA! LiarLoan...Congrats indeed.... :-\

A recruiter from "Mr. Cooper" has been dogging me to interview. Perhaps they've had difficulty bringing on new people. Wonder why.  ::)  I told them once "Mr. Cooper" DIAF, perhaps then we can talk. The last thing I need to be associated with the "new Coke" of mortgage lending.

Eyephone: Zillow is trying, and Amazon is next. Those folks in Seattle are very, very close to entering the RE market. Once they do, the buggywhip effect will be felt deeply across the industry. Rocket Mortgage and other "E-lending" sources are doing the same to my biz, and I fully expect them to be successful, but some boutique and more hands on services will survive and those who need them will pay a bit over market for the privilege.

My .02c

 
The biggest problem with the listing commission structure is the lack of a good incentive for aligning the interest of the agent (to make as much commission as possible) with the interest of the seller (to sell the home for as much as possible).  Hence why I thought long and how many years ago on how to set up a unique listing commission structure that was fair for my clients and I.  My listing commission structure is more of a "pay for performance" along with my rebate structure where I get paid incrementally more the higher the price I get for the seller and conversely I get paid incrementally less the lower the price that I get for the seller.  For traditional agents, a $10k increase on price is worth $200-$250...you really think that agent will go to battle for you for that much?  HELL NO!  The big problem is on the buy side though...I've gotten several calls/emails from agents asking if the seller would increase the buyer agent commission up when I had it set at 2% or 2.25% because they'd tell me that they only show homes that were paying 2.5%+ commission.  Really?  Give me a freaking break you greedy pigs. 
 
The hardest lesson for me to learn with deals was they're much more lucrative and easier when everyone makes money.

There has to be something in it for them.  So, at $3200, and $100/hr. (fairly competent but hardly lucrative for a 1099 employee), cradle to grave from the time they start talking to you to the time you have the keys in your hands is 32 hours.  Every open house, every paperwork question, etc.  If the brokerage takes 50% or more, 16 hours.  Every hour you concern pushes the person's compensation towards that of a barrista or person standing behind the counter at McDonalds, which frankly, since they're not 1099, is closer to $30+//hr equivalent.



 
nosuchreality said:
The hardest lesson for me to learn with deals was they're much more lucrative and easier when everyone makes money.

There has to be something in it for them.  So, at $3200, and $100/hr. (fairly competent but hardly lucrative for a 1099 employee), cradle to grave from the time they start talking to you to the time you have the keys in your hands is 32 hours.  Every open house, every paperwork question, etc.  If the brokerage takes 50% or more, 16 hours.  Every hour you concern pushes the person's compensation towards that of a barrista or person standing behind the counter at McDonalds, which frankly, since they're not 1099, is closer to $30+//hr equivalent.
Click to expand...

When I bought my house using Redfin in 2010, I attempted to track the number of hours they devoted to my purchase.  I was curious what it would come out to on an hourly basis.  My estimation was they made about $250 per hour, and remember this was with me receiving a 50% rebate on the commission.  A "full service" brokerage would have made double that at $500 per hour.  So in essence, somebody with a high school education can make an hourly rate on par with the CEO of a mid-size company.
 
Liar Loan said:
nosuchreality said:
The hardest lesson for me to learn with deals was they're much more lucrative and easier when everyone makes money.

There has to be something in it for them.  So, at $3200, and $100/hr. (fairly competent but hardly lucrative for a 1099 employee), cradle to grave from the time they start talking to you to the time you have the keys in your hands is 32 hours.  Every open house, every paperwork question, etc.  If the brokerage takes 50% or more, 16 hours.  Every hour you concern pushes the person's compensation towards that of a barrista or person standing behind the counter at McDonalds, which frankly, since they're not 1099, is closer to $30+//hr equivalent.
Click to expand...

When I bought my house using Redfin in 2010, I attempted to track the number of hours they devoted to my purchase.  I was curious what it would come out to on an hourly basis.  My estimation was they made about $250 per hour, and remember this was with me receiving a 50% rebate on the commission.  A "full service" brokerage would have made double that at $500 per hour.  So in essence, somebody with a high school education can make an hourly rate on par with the CEO of a mid-size company.
Click to expand...

Did that time include all the time that they showed every single home that you did not purchase?  How about the drive to and/from their home or office?  Yes, some transactions are easy and don't take a lot of time and some take longer as you show dozens and dozens of homes to a client.  Also, there is no guarantee that you close every buyer or seller.  That being said, if I had to calculate my hourly pre-tax rate it would be north of $200/hr. 

Don't get me started on how easy it is to get a real estate license versus let's say a CPA license.  I so wish they would require a degree with some kind of apprentice program working under a broker for 1-2 years but they won't because that would reduce the "fees" that the NAR/CAR/local associations collect. 
 
USCTrojanCPA said:
Liar Loan said:
nosuchreality said:
The hardest lesson for me to learn with deals was they're much more lucrative and easier when everyone makes money.

There has to be something in it for them.  So, at $3200, and $100/hr. (fairly competent but hardly lucrative for a 1099 employee), cradle to grave from the time they start talking to you to the time you have the keys in your hands is 32 hours.  Every open house, every paperwork question, etc.  If the brokerage takes 50% or more, 16 hours.  Every hour you concern pushes the person's compensation towards that of a barrista or person standing behind the counter at McDonalds, which frankly, since they're not 1099, is closer to $30+//hr equivalent.
Click to expand...

When I bought my house using Redfin in 2010, I attempted to track the number of hours they devoted to my purchase.  I was curious what it would come out to on an hourly basis.  My estimation was they made about $250 per hour, and remember this was with me receiving a 50% rebate on the commission.  A "full service" brokerage would have made double that at $500 per hour.  So in essence, somebody with a high school education can make an hourly rate on par with the CEO of a mid-size company.
Click to expand...

Did that time include all the time that they showed every single home that you did not purchase?  How about the drive to and/from their home or office?  Yes, some transactions are easy and don't take a lot of time and some take longer as you show dozens and dozens of homes to a client.  Also, there is no guarantee that you close every buyer or seller.  That being said, if I had to calculate my hourly pre-tax rate it would be north of $200/hr. 

Don't get me started on how easy it is to get a real estate license versus let's say a CPA license.  I so wish they would require a degree with some kind of apprentice program working under a broker for 1-2 years but they won't because that would reduce the "fees" that the NAR/CAR/local associations collect.
Click to expand...

It's easy to say the broker is overpaid when a deal closes.  At least in my line of business, 90% of the time when I'm paid, I'm overpaid.  However, 90% of the time I don't get paid.
 
Kings said:
USCTrojanCPA said:
Liar Loan said:
nosuchreality said:
The hardest lesson for me to learn with deals was they're much more lucrative and easier when everyone makes money.

There has to be something in it for them.  So, at $3200, and $100/hr. (fairly competent but hardly lucrative for a 1099 employee), cradle to grave from the time they start talking to you to the time you have the keys in your hands is 32 hours.  Every open house, every paperwork question, etc.  If the brokerage takes 50% or more, 16 hours.  Every hour you concern pushes the person's compensation towards that of a barrista or person standing behind the counter at McDonalds, which frankly, since they're not 1099, is closer to $30+//hr equivalent.
Click to expand...

When I bought my house using Redfin in 2010, I attempted to track the number of hours they devoted to my purchase.  I was curious what it would come out to on an hourly basis.  My estimation was they made about $250 per hour, and remember this was with me receiving a 50% rebate on the commission.  A "full service" brokerage would have made double that at $500 per hour.  So in essence, somebody with a high school education can make an hourly rate on par with the CEO of a mid-size company.
Click to expand...

Did that time include all the time that they showed every single home that you did not purchase?  How about the drive to and/from their home or office?  Yes, some transactions are easy and don't take a lot of time and some take longer as you show dozens and dozens of homes to a client.  Also, there is no guarantee that you close every buyer or seller.  That being said, if I had to calculate my hourly pre-tax rate it would be north of $200/hr. 

Don't get me started on how easy it is to get a real estate license versus let's say a CPA license.  I so wish they would require a degree with some kind of apprentice program working under a broker for 1-2 years but they won't because that would reduce the "fees" that the NAR/CAR/local associations collect.
Click to expand...

It's easy to say the broker is overpaid when a deal closes.  At least in my line of business, 90% of the time when I'm paid, I'm overpaid.  However, 90% of the time I don't get paid.
Click to expand...

Yeah, you have to include all of the time that is spent working on closed and non-closed deals.  No agent closes all of their buyers and sellers.
 
I just tried searching for misc. hidden fees on their website...and guess what...they don't even have any disclosures at all.

I wonder if they include "decluttering" service in the fixed fee. 

eyephone said:
"No more 6% commission ? these brokers will sell your house for a flat fee
London-based Purplebricks launches its new U.S. business in Los Angeles.
It offers the full services of a regular real estate brokerage for just $3,200.

It offers the full services of a regular real estate brokerage for just $3,200. That includes professional photography, 3-D virtual tours, help with staging, home tours and listings on all the major online platforms.

Buyers who choose Purplebricks as their agent will receive a $1,000 rebate on closing. The model has been successful in the U.K., and the company expanded into Australia in 2016.

"I think what's great about our model is it's new in the U.S., but it has been proven in the U.K. within three years," said Eric Eckardt, Purplebricks' U.S. CEO. "When they launched in the U.K., they weren't the first flat-fee model, but the way they approached the market, with a full hybrid offering, with the customer service from listing to closing, with a local real estate professional to provide all the services associated with that ? it has really been a competitive differentiator."

Purplebricks is not the first flat-fee model in America. Reali recently launched in San Francisco with much the same offering but a higher flat-fee of $4,950, likely because of San Francisco's higher median home price. It is now expanding to Sacramento, California.

Agents will earn a portion of the flat fee and also a portion of the commission split on the buy side, whether they sell a Purplebricks listing or any other listing on the open market, Eckardt said."
https://www.cnbc.com/2017/09/15/no-...kers-will-sell-your-house-for-a-flat-fee.html

This might be a game changer in the RE industry.
Click to expand...
 
that may be lumped into help with staging bucket.  ;)

RangeRover said:
I just tried searching for misc. hidden fees on their website...and guess what...they don't even have any disclosures at all.

I wonder if they include "decluttering" service in the fixed fee. 

eyephone said:
"No more 6% commission ? these brokers will sell your house for a flat fee
London-based Purplebricks launches its new U.S. business in Los Angeles.
It offers the full services of a regular real estate brokerage for just $3,200.

It offers the full services of a regular real estate brokerage for just $3,200. That includes professional photography, 3-D virtual tours, help with staging, home tours and listings on all the major online platforms.

Buyers who choose Purplebricks as their agent will receive a $1,000 rebate on closing. The model has been successful in the U.K., and the company expanded into Australia in 2016.

"I think what's great about our model is it's new in the U.S., but it has been proven in the U.K. within three years," said Eric Eckardt, Purplebricks' U.S. CEO. "When they launched in the U.K., they weren't the first flat-fee model, but the way they approached the market, with a full hybrid offering, with the customer service from listing to closing, with a local real estate professional to provide all the services associated with that ? it has really been a competitive differentiator."

Purplebricks is not the first flat-fee model in America. Reali recently launched in San Francisco with much the same offering but a higher flat-fee of $4,950, likely because of San Francisco's higher median home price. It is now expanding to Sacramento, California.

Agents will earn a portion of the flat fee and also a portion of the commission split on the buy side, whether they sell a Purplebricks listing or any other listing on the open market, Eckardt said."
https://www.cnbc.com/2017/09/15/no-...kers-will-sell-your-house-for-a-flat-fee.html

This might be a game changer in the RE industry.
Click to expand...
Click to expand...
 
USCTrojanCPA said:
Did that time include all the time that they showed every single home that you did not purchase?  How about the drive to and/from their home or office?  Yes, some transactions are easy and don't take a lot of time and some take longer as you show dozens and dozens of homes to a client.  Also, there is no guarantee that you close every buyer or seller.  That being said, if I had to calculate my hourly pre-tax rate it would be north of $200/hr. 

Don't get me started on how easy it is to get a real estate license versus let's say a CPA license.  I so wish they would require a degree with some kind of apprentice program working under a broker for 1-2 years but they won't because that would reduce the "fees" that the NAR/CAR/local associations collect.
Click to expand...

Redfin has a highly structured system for touring homes.  You book a 2-hour block of time and they will show you up to 6 homes in that time.  (The homes have to be in close proximity in order for this to be possible.)

In my case, we toured a total of 36 homes, which required 6 appointments of 2 hours each - so a total of 12 hours was spent touring homes.

Maybe for a normal broker it would be fair to include their time spent driving to and from the office, but since these two hour blocks of time are stacked back-to-back, presumably they were showing homes to other clients both before and after my appointments with them.  I guess we'd have to amortize the time spent driving to/from the office over the number of clients each day.  :D

I agree that what I paid helps to compensate them for the time wasted with other clients, but doesn't that point out a glaring inefficiency in the system?  If we got rid of all the time wasters, the realtor fees could probably be cut in half.  We should re-align incentives away from closing a sale to get a commission, to something that incentivizes working with high-value clients and ignoring the time-wasters.
 
The problem with touring resale houses is there is no efficient way to reduce that time.

While pictures help, you really only get a feel for it once you are there and many times you have to go back not once, not twice but several times... and to multiple houses.

That's why people like to buy new, because they have unlimited access to the models (like a buffet).

We've probably looked at over a hundred homes with IR2 and that's not counting the open houses and model homes we went to by ourselves.

I do think there is a good argument for the current commission structure on both the buy and sell side... esp the buy side.
 
irvinehomeowner said:
We've probably looked at over a hundred homes with IR2 and that's not counting the open houses and model homes we went to by ourselves.
Click to expand...

Ok, looks like we have our poster child here.
 
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