The Future of Real Estate

When I bought my apartment in 2015 I hired a broker. When I went to sell, however, I did it on my own. Sort of.

I’ve never sold a piece of real estate before so why did I think I could pull this off? Let me tell you about my experience on the buy side:

  • I found this apartment on Street Easy.
  • I had my broker reach out to the seller’s broker to schedule an appointment.
  • We got to the building and their broker met us to unlock the door and let us in.
  • We looked around and liked what we saw.
  • We made an offer. The broker countered. We accepted.
  • The broker emailed us a list of items, mostly financial, that the co-op board needed.
  • I pulled all of this electronically and gave it to my broker.
  • My broker printed these documents out and submitted them to the board.
  • Wife and I met with co-op and were approved.
  • Seller paid both brokers 2.5%, or ~$18,000 each.

I remember thinking to myself at the time that this is crazy. The seller paid $36,000 to two brokers on this transaction. Sure they were involved and deserved to get paid, but $36,000 seemed like a lot of money.

Street Easy and Zillow has brought transparency to the real estate market, and yet the two broker model has yet to be disrupted. I’m sure there are very good reasons why software hasn’t penetrated into real estate transactions the way it has in other industries, but clearly I don’t know anything about this space so I’m looking forward to some feedback on this.

When it came time to sell my apartment I decided to list it on my own. The idea of giving up $36,000, which was more than 20% of the equity I had didn’t sit well with me. I figured I would give it a few weeks and if it wasn’t going well I could always hire somebody after.

So I took some pictures, wrote a description, and put the apartment on Street Easy. It didn’t take long before people began reaching out to me. The problem was, it was all brokers. A lot of them were looking to get the listing, but most were representing buyers. I was hoping to work with the buyers directly because without a broker, I was willing to be flexible on price. However, only 1 buyer reached out, it was brokers all the way down. And then I realized, of course I’m going to only hear from brokers because it doesn’t cost the buyers anything to use them!

I was fortunate to work with a buyer’s broker who happened to be very good at his job. He was professional, responsive, and courteous.

He made it very clear several times that he was working for the buyer. He negotiated on their behalf. He was meticulous during the inspection and during the final walkthrough. Yes he represented the interests of the buyers, but in the end, I was the one who paid him. Are there any other services where the person working for one side of a transaction gets paid by the other side?

I spoke about this with Josh and he said that I paid the broker because he brought me buyers. But why shouldn’t they pay him? Didn’t he bring them a home?

The potential for change is on the horizon.

There has been news lately about how Zillow is going to be more aggressive in this market. They started buying homes last year and now their founder, Rich Barton is back in the CEO role and is looking to become a real player here. I’m interested to see how this plays out.

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I’m not as mad as I might appear in the video with Josh, I was mostly just trying to be entertaining. I’m very happy with the way my situation played out. I don’t doubt that real estate brokers can and do provide value, but I’m not sure that 5% of the sale price is the right number. Check out Josh and I talking about this and other topics in another installment of What Are Your Thoughts?

 

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