YouGotListings (YC W11) looks to provide the best tools for real estate(techcrunch.com)
techcrunch.com
YouGotListings (YC W11) looks to provide the best tools for real estate
http://techcrunch.com/2011/03/06/yougotlistings-offers-a-broker-tested-rental-listing-management-software/
12 comments
Thanks for the comment. Your point is certainly well taken and not alone. Unfortunately, one of the things we do is to help brokers and agents "spam", but it's a supply / demand thing. Landlords are well aware of Craigslist's existence, and if they wanted to be on there themselves, they would, right?
We ultimately are trying to tackle this issue and make it better for the renters and buyers. Yet, going against the market force will not help. Brokers will do what makes them money, that's that. Many startups came before us trying to cut out the brokers have failed utterly.
I believe companies like us in the long run will actually improve this situation. As software like ours become the standard toolset that brokers and landlords use, then we'll be able to improve the actually renting / buying experiences. It's an uphill battle.
We ultimately are trying to tackle this issue and make it better for the renters and buyers. Yet, going against the market force will not help. Brokers will do what makes them money, that's that. Many startups came before us trying to cut out the brokers have failed utterly.
I believe companies like us in the long run will actually improve this situation. As software like ours become the standard toolset that brokers and landlords use, then we'll be able to improve the actually renting / buying experiences. It's an uphill battle.
Thanks for responding, I certainly see where you're coming from, as you've said, you can't change an entire industry over night, but that won't stop people like me from wishing that you could.
I guess I'm impatient for a company like yours to succeed and visibly improve things for renters & buyers. I wish you the best of luck going forward.
I guess I'm impatient for a company like yours to succeed and visibly improve things for renters & buyers. I wish you the best of luck going forward.
A good alternative is PadMapper.com. Somehow, they are able to cut out a ton of crap from the over postings. Worth a shot if you are looking for an apartment.
Padmapper is phenomenal, but craigslist sucks so bad, that it ends up just being mildly useful. The ability to constantly and repeatedly relist the same (often fictional) property really depresses me. So easy to fix, and would make life so much better for users, yet, it will never get fixed. And yet, craigslist continues to dominate so many markets. Why god, why?
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Theoretically the broker also has the incentive not to waste time with you, and to make you happy so that you give referrals. Since rental turnover is a lot higher, this would be even stronger an incentive than for home sales.
I cofounded a startup named RentRunner, in Boston, and spent a year trying to get a similar sounding system to be used by real estate brokers. We had an agent on our team, and he was our sales person. We could not find a model that would get us sales without expensive direct sales. And although direct sales seemed to work, the possible price points wouldn't support it.
My experience was that real estate brokerages have very little money, and even less desire to part with it. I'd like to humbly suggest that YouGotListings mentally prepare to consider a pivot rather early if you find the same. There is still so much good that can be done in this space.
I have some ideas for pivot directions--email me if you are interested in hearing more about our experiences.
My experience was that real estate brokerages have very little money, and even less desire to part with it. I'd like to humbly suggest that YouGotListings mentally prepare to consider a pivot rather early if you find the same. There is still so much good that can be done in this space.
I have some ideas for pivot directions--email me if you are interested in hearing more about our experiences.
Thank your for the feedback. I agree with you on your points. I'll ping you separately for a more in-depth discussion.
Brokers are inherently lazy, too. That's the other missing piece of the puzzle. Meaning that no matter what you make for their industry, they're less likely to use it unless they can use it from bed (while still sleeping) and it costs them nothing (because the're broke).
So my advice is, take your revenue assumptions and divide by 100, then multiply your expenses by 5 and triple your timeline for adoption.
So my advice is, take your revenue assumptions and divide by 100, then multiply your expenses by 5 and triple your timeline for adoption.
On a serious note. Brokers are very hardworking. They may not be the most tech savvy people, but they most certainly are not lazy.
They do not have it easy, and technology is changing so fast, I think they'll have to as well.
They do not have it easy, and technology is changing so fast, I think they'll have to as well.
That's awesome advice. We find it to be something like that too. My competitor actually did divide his price by 100 (almost, haha).
We are looking for our help too! If you are a developer and looking for work, or want to join a start up. Email us, and join us as the 1st employee, and perhaps more. We are pretty open minded.
Being a Real Estate agent in Texas I'll be the first to say most "solutions" for agents suck. We've completely destroyed our reputation as agents (if there was much of one anyway) on Craigslist by flooding the different areas. Many agents lie or use old listings or data to do bait and switch type ads.
I haven't used this solution, but I hope it helps to thin out some of the crap that gets posted to craigslist. Something that'd be awesome is to have the software ping the IDX to make sure the property being posted is still available. If it's not then maybe have an extra dialog to be SURE the person wants to post the property.
I haven't used this solution, but I hope it helps to thin out some of the crap that gets posted to craigslist. Something that'd be awesome is to have the software ping the IDX to make sure the property being posted is still available. If it's not then maybe have an extra dialog to be SURE the person wants to post the property.
I come from Australia, have lived in the UK, Germany and Switzerland and now live in the US.
What I find really interesting is just how badly real estate works online in the US. To quote Bart Simpson, it achieves what was previously thought physically impossible: it sucks and blows at the same time.
In Australia there are basically two online sites for both rentals and sales: realestate.com.au and domain.com. They have a lot of crossover and you could honestly find somewhere to live or buy just by looking at one. Estate agents have their own sites too but I really don't know why. Anything they post gets cross-posted to one of these two sites.
In the UK, it's basically the same story with findaproperty.co.uk and 1-2 others I'm now forgetting.
In Switzerland it's even more centralized where you will find everything on homegate.ch.
In the US? It's a disaster. There are so many sites and nothing centralized has really taken off. Even when you boil it down to one city.
As a buyer or renter I want to go to a handful of sites and find up-to-date listings. Ideally I'd like that site to tell me how to contact the agent, when the open house is (if there is one), the location (even if only down to cross-street) and photos of the property. Oh and the date it was listed (which should be specified by the site, not the person writing the listing).
Online real estate in the US reminds me a lot of recruitment in the UK (both are fragmented disasters).
Typically sites will charge for a listing and that listing will stay there until whoever posted it removes it. It's important to have the right incentives here. Charge the advertiser by the amount of time it's shown so brokers and agents don't keep up listings to act like honeypots (much like UK recruiters do with jobs, both fake and real).
I feel that some government regulation is required here to stamp down on the misrepresentation that is both possible and actual (in both markets).
Even the fact that brokers exist is a sign of market inefficiency. Why do I need an intermediary to find an apartment? In NYC (where I now live) using a broker is almost a must (if you want a non-crappy apartment, which is taking money out of the pocket of the renter and the landlord, in the form of a below market rent). In Manhattan these brokers typically charge 15% (of the annual rent). In Brooklyn and Queens it could well be 1 month or lease.
So when I see software that helps brokers and landlords find each other, I see a business model that is perpetuation a market efficiency that I believe is ultimately doomed.
Also, $50/month for 1 user but $100/month for unlimited? Big mistake. I seriously suggest you read Joel [1] on this one:
> Bad Idea #1: Site Licenses.
> The opposite of segmentation, really. I have certain competitors that do this: they charge small customers per-user but then there's a "unlimited" license at a fixed price. This is nutty, because you're giving the biggest price break precisely to the largest customers, the ones who would be willing to pay you the most money. Do you really want IBM to buy your software for their 400,000 employees and pay you $2000? Hmm?
> As soon as you have an "unlimited" price, you are instantly giving a gigantic gift of consumer surplus to the least price-sensitive customers who should have been the cash cows of your business.
Not that I have the answers on how to fix the situation in America but cities (possibly even states) could (and IMHO should) regulate rental practices. In the larger cities, it clearly seems to be required.
[1]: http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...
What I find really interesting is just how badly real estate works online in the US. To quote Bart Simpson, it achieves what was previously thought physically impossible: it sucks and blows at the same time.
In Australia there are basically two online sites for both rentals and sales: realestate.com.au and domain.com. They have a lot of crossover and you could honestly find somewhere to live or buy just by looking at one. Estate agents have their own sites too but I really don't know why. Anything they post gets cross-posted to one of these two sites.
In the UK, it's basically the same story with findaproperty.co.uk and 1-2 others I'm now forgetting.
In Switzerland it's even more centralized where you will find everything on homegate.ch.
In the US? It's a disaster. There are so many sites and nothing centralized has really taken off. Even when you boil it down to one city.
As a buyer or renter I want to go to a handful of sites and find up-to-date listings. Ideally I'd like that site to tell me how to contact the agent, when the open house is (if there is one), the location (even if only down to cross-street) and photos of the property. Oh and the date it was listed (which should be specified by the site, not the person writing the listing).
Online real estate in the US reminds me a lot of recruitment in the UK (both are fragmented disasters).
Typically sites will charge for a listing and that listing will stay there until whoever posted it removes it. It's important to have the right incentives here. Charge the advertiser by the amount of time it's shown so brokers and agents don't keep up listings to act like honeypots (much like UK recruiters do with jobs, both fake and real).
I feel that some government regulation is required here to stamp down on the misrepresentation that is both possible and actual (in both markets).
Even the fact that brokers exist is a sign of market inefficiency. Why do I need an intermediary to find an apartment? In NYC (where I now live) using a broker is almost a must (if you want a non-crappy apartment, which is taking money out of the pocket of the renter and the landlord, in the form of a below market rent). In Manhattan these brokers typically charge 15% (of the annual rent). In Brooklyn and Queens it could well be 1 month or lease.
So when I see software that helps brokers and landlords find each other, I see a business model that is perpetuation a market efficiency that I believe is ultimately doomed.
Also, $50/month for 1 user but $100/month for unlimited? Big mistake. I seriously suggest you read Joel [1] on this one:
> Bad Idea #1: Site Licenses.
> The opposite of segmentation, really. I have certain competitors that do this: they charge small customers per-user but then there's a "unlimited" license at a fixed price. This is nutty, because you're giving the biggest price break precisely to the largest customers, the ones who would be willing to pay you the most money. Do you really want IBM to buy your software for their 400,000 employees and pay you $2000? Hmm?
> As soon as you have an "unlimited" price, you are instantly giving a gigantic gift of consumer surplus to the least price-sensitive customers who should have been the cash cows of your business.
Not that I have the answers on how to fix the situation in America but cities (possibly even states) could (and IMHO should) regulate rental practices. In the larger cities, it clearly seems to be required.
[1]: http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...
There are so many sites and nothing centralized has really taken off. Even when you boil it down to one city.
Wrong. There IS something centralized: it's called the Multiple Listing Service, and ONLY Brokers and Realtors have "access" to it. They are salespeople, and salespeople compete only with each other. That 6 percent commission is the unwavering aspect of their model -- they built it to ensure that it always gets dropped into their shark tank. Consumers do not benefit from this system, ever, and every single entity in the real estate industry wants to keep it that way.
Even the fact that brokers exist is a sign of market inefficiency. Why do I need an intermediary to find an apartment?
You don't. However, brokers are not the intermediaries; they are at the top of the pyramid scheme. After studying this industry from every possible angle, my conclusion is that purveyors of the current system are rotten to the core. Their lobbying group (the National Association of Realtors: http://www.opensecrets.org/lobby/top.php?indexType=s) is about as rotten as a swimming pool of maggot-covered dead skunks that's been sitting in the sun for a week.
The pecking order is as such:
Build an excel spreadsheet that shows how much interest vs principle people pay on a typical 30-year loan over time. Now figure out how long it'll take to pay off the commission that your Realtor earns for his 2.5 hours of "work" on your behalf. Oh, and don't forget to include every penny of your life savings you've already forked over as the "down payment." (Down payments don't go toward equity, they go to pay the salespeople!) Pity the people who have been hoodwinked into thinking that their house payments are actually going to equity, that that 30-year mortgage means that they're going to own their house some day. The banks are too smart to let people do that, that's why they invented refinancing!
As long as the greatest portion of income people earn goes to rent, neither savings nor long-term equity can be obtained. As long as people are unable to build equity, they are trapped in a system that essentially forces them into paying whatever rents are demanded of them. Most people who live in Silicon Valley know this: 1K for a 0 bedroom apartment? Really?
The solution for consumers is NOT going to come by making it easier for Brokers and Landlords / Agents to hook up and control prices, that's for sure. This is a recipe for disaster on a grand scale.
Wrong. There IS something centralized: it's called the Multiple Listing Service, and ONLY Brokers and Realtors have "access" to it. They are salespeople, and salespeople compete only with each other. That 6 percent commission is the unwavering aspect of their model -- they built it to ensure that it always gets dropped into their shark tank. Consumers do not benefit from this system, ever, and every single entity in the real estate industry wants to keep it that way.
Even the fact that brokers exist is a sign of market inefficiency. Why do I need an intermediary to find an apartment?
You don't. However, brokers are not the intermediaries; they are at the top of the pyramid scheme. After studying this industry from every possible angle, my conclusion is that purveyors of the current system are rotten to the core. Their lobbying group (the National Association of Realtors: http://www.opensecrets.org/lobby/top.php?indexType=s) is about as rotten as a swimming pool of maggot-covered dead skunks that's been sitting in the sun for a week.
The pecking order is as such:
Broker Realtors + Mortgage Brokers
Agent Realtors + Mortgage Loan Agents (Bankers)
Leasing Agents (Realtors)
Property Management Companies AKA "Landlords"
Build an excel spreadsheet that shows how much interest vs principle people pay on a typical 30-year loan over time. Now figure out how long it'll take to pay off the commission that your Realtor earns for his 2.5 hours of "work" on your behalf. Oh, and don't forget to include every penny of your life savings you've already forked over as the "down payment." (Down payments don't go toward equity, they go to pay the salespeople!) Pity the people who have been hoodwinked into thinking that their house payments are actually going to equity, that that 30-year mortgage means that they're going to own their house some day. The banks are too smart to let people do that, that's why they invented refinancing!
As long as the greatest portion of income people earn goes to rent, neither savings nor long-term equity can be obtained. As long as people are unable to build equity, they are trapped in a system that essentially forces them into paying whatever rents are demanded of them. Most people who live in Silicon Valley know this: 1K for a 0 bedroom apartment? Really?
The solution for consumers is NOT going to come by making it easier for Brokers and Landlords / Agents to hook up and control prices, that's for sure. This is a recipe for disaster on a grand scale.
This comment would be better if you dialed down the invective a few notches. As it is I think your passion gets in the way of seeing reality as it actually is:
home ownership remains an unattainable pipe dream for most people
This is objectively untrue for any sensible definition of "most": 67.4% of inhabited housing units in the US are inhabited by the owner.
Is home ownership going down? No, by any sensible measurement, it is increasing, across all races and most income groups. For folks who are often the have-nots in the US economy, home ownership increased rapidly (did people think "sub prime mortgages" existed solely to inflate bank revenue numbers? The flip side of that coin is giving loans to people who would historically have been classified as too risky for a mortgage gives houses to people who historically would have been too risky to qualify for a mortgage.)
http://en.wikipedia.org/wiki/Homeownership_in_the_United_Sta...
An addition underappreciated side-effect of financial engineering in the last twenty years is that, even post-bubble, down payments have gone from "your life savings" (which, at 20%, they really were) to "optional for many people and often and achievable in 3~5 years of dedicated work" (norms are in flux now, but there are a lot of banks which will take 5% as sufficient skin in the game for a prospective owner with decent credit).
I have no significant disagreement with you regarding the value add by Realtors and the 6% commission structure, although that is not inviolate, particularly in the current climate. (5% of something beats 6% of nothing every day of the week.)
home ownership remains an unattainable pipe dream for most people
This is objectively untrue for any sensible definition of "most": 67.4% of inhabited housing units in the US are inhabited by the owner.
Is home ownership going down? No, by any sensible measurement, it is increasing, across all races and most income groups. For folks who are often the have-nots in the US economy, home ownership increased rapidly (did people think "sub prime mortgages" existed solely to inflate bank revenue numbers? The flip side of that coin is giving loans to people who would historically have been classified as too risky for a mortgage gives houses to people who historically would have been too risky to qualify for a mortgage.)
http://en.wikipedia.org/wiki/Homeownership_in_the_United_Sta...
An addition underappreciated side-effect of financial engineering in the last twenty years is that, even post-bubble, down payments have gone from "your life savings" (which, at 20%, they really were) to "optional for many people and often and achievable in 3~5 years of dedicated work" (norms are in flux now, but there are a lot of banks which will take 5% as sufficient skin in the game for a prospective owner with decent credit).
I have no significant disagreement with you regarding the value add by Realtors and the 6% commission structure, although that is not inviolate, particularly in the current climate. (5% of something beats 6% of nothing every day of the week.)
Did people think "sub prime mortgages" existed solely to inflate bank revenue numbers?
Yes. Read _All The Devils Are Here_ for an excellent exposition about how the subprime market was first invented as a vehicle to get private banks out from under the thumb of Fannie Mae, then turned into a vehicle for boiler room speculation, and then fed back to Fannie Mae. The interests of homeowners were not a primary feature of the development of the subprime market; in fact, one open secret of the phenomenon was how few of those loans actually went to first mortgages on owner-occupied sole residences.
Yes. Read _All The Devils Are Here_ for an excellent exposition about how the subprime market was first invented as a vehicle to get private banks out from under the thumb of Fannie Mae, then turned into a vehicle for boiler room speculation, and then fed back to Fannie Mae. The interests of homeowners were not a primary feature of the development of the subprime market; in fact, one open secret of the phenomenon was how few of those loans actually went to first mortgages on owner-occupied sole residences.
> This is objectively untrue for any sensible definition of "most": 67.4% of inhabited housing units in the US are inhabited by the owner.
Are you sure that 67.4% of inhabited housing units in the US are actually inhabited by the owner? If I take out a 30 year loan on a house and then move in, the bank still owns that property. I would expect the number to be significantly lower than 67.4% when you factor in rentals + people living in homes with refinancing or otherwise not-fully-paid-off mortgages. But I don't actually know what the number is or where to find it.
Are you sure that 67.4% of inhabited housing units in the US are actually inhabited by the owner? If I take out a 30 year loan on a house and then move in, the bank still owns that property. I would expect the number to be significantly lower than 67.4% when you factor in rentals + people living in homes with refinancing or otherwise not-fully-paid-off mortgages. But I don't actually know what the number is or where to find it.
The bank does not own your mortgaged house. They have a claim on it when it comes time to liquidate. It's easy to see that the homeowner "owns" the house: they can rent it to anyone else at any rate, raising rates as the market changes; the bank is stuck with the terms of the 30 year mortgage.
Good point. But there does seem to me (never owned a home) that there is a qualitative difference between someone who owns their home in the clear, and someone who is using their home as collateral for a loan, which I thought the original poster was getting at. I might be way off though.
Sure there is: one homeowner has a couple hundred thousand dollars of secured debt, and the other doesn't. In neither case is there any practical difference vis a vis the house itself. The homeowner who "owns his home free and clear" can still lose the house owing to any other major debt; there are even states where you are likely to lose your house in a conventional bankruptcy.
> It's easy to see that the homeowner "owns" the house:
More to the point, the homeowner is the one exposed to appreciation or depreciation on the open market. The bank has a fixed dollar value worth.
More to the point, the homeowner is the one exposed to appreciation or depreciation on the open market. The bank has a fixed dollar value worth.
home ownership remains an unattainable pipe dream for most people
This is objectively untrue for any sensible definition of "most": 67.4% of inhabited housing units in the US are inhabited by the owner.
Pedantically, "Most homes are occupied by their owner" is not the same as "Most people own their home"
This is objectively untrue for any sensible definition of "most": 67.4% of inhabited housing units in the US are inhabited by the owner.
Pedantically, "Most homes are occupied by their owner" is not the same as "Most people own their home"
As it is I think your passion gets in the way of seeing reality as it actually is
This is my soapbox issue, yes. But there's no invective here, just a bit of "why!?" b/c I hoped to see a YC company in this industry on the side of the little guys/gals, not the 500 pound gorillas.
This is my soapbox issue, yes. But there's no invective here, just a bit of "why!?" b/c I hoped to see a YC company in this industry on the side of the little guys/gals, not the 500 pound gorillas.
How exactly does this conspiracy manage to overcome market forces to keep rents artificially high?
Market forces can't really work effectively on the problem when there is information asymmetry, can they? Market forces presume rational behavior, and perfect information.
I will assume that the expected result of this startup (why YC invested in it) is that the market will somehow become more "efficient" because communication between brokers and landlords will be facilitated.
I will predict that the actual result of this startup will cause the market to become less efficient, due to the increased cost of information asymmetry. By hooking up brokers with landlords, the information asymmetry between the "producer" (both landlords and brokers would be considered "producers" of listings) and the "consumer" (the renter or home-buyer) becomes even greater.
A pretty interesting paper that explores the idea that the costs of derivatives are increased as a result information asymmetry: www.cs.princeton.edu/~rongge/derivative.pdf
So, the "cost" is being doubly passed on to the consumer from both the broker and the landlord. The market is not more efficient, it's less efficient.
In general, financial experts suspect that the sheer volume of derivative transactions probably allows many kinds of manipulations to go undetected. We are highlighting one particular kind of manipulation where this undetectability as well as its financial cost can be made precise. from http://www.cs.princeton.edu/~rongge/derivativeFAQ.html
I will assume that the expected result of this startup (why YC invested in it) is that the market will somehow become more "efficient" because communication between brokers and landlords will be facilitated.
I will predict that the actual result of this startup will cause the market to become less efficient, due to the increased cost of information asymmetry. By hooking up brokers with landlords, the information asymmetry between the "producer" (both landlords and brokers would be considered "producers" of listings) and the "consumer" (the renter or home-buyer) becomes even greater.
A pretty interesting paper that explores the idea that the costs of derivatives are increased as a result information asymmetry: www.cs.princeton.edu/~rongge/derivative.pdf
So, the "cost" is being doubly passed on to the consumer from both the broker and the landlord. The market is not more efficient, it's less efficient.
In general, financial experts suspect that the sheer volume of derivative transactions probably allows many kinds of manipulations to go undetected. We are highlighting one particular kind of manipulation where this undetectability as well as its financial cost can be made precise. from http://www.cs.princeton.edu/~rongge/derivativeFAQ.html
Markets do not presume perfect information. They're a hack around the lack of it, because perfect information would make a price discovery / resource allocation mechanism unnecessary: you'd just use your godlike powers and pick the best investment at the optional price every single time. One of their handier properties is that they quickly aggregate valuable-but-imperfect information from an incredibly broad group of people to discover prices. They're certainly not perfect, but they often work.
You're right, my typo. I can't remember the exact verbatim text that my economics textbook cited, but one of the underlying assumptions of "market forces" economics is that information isn't unduly restricted; it's more or less accessible to any parties that want it. In this example, the MLS is blatant restriction of information, and it definitely creates information asymmetry.
Far be it from me to stand athwart your argument against realtors, but: how effective can they be at seizing control of the market via the MLS? Yes, you have to be a real estate agent to list there, but when I bought my house in '05, I had no trouble at all getting access to MLS listings.
The MLS --- which, I probably agree, is a shady system --- is not some secret parchment guarded by the Stonecutters. Pretty much anyone can get access to it.
The MLS --- which, I probably agree, is a shady system --- is not some secret parchment guarded by the Stonecutters. Pretty much anyone can get access to it.
MLS availability varies from region to region according to the local board of realtors. And, even in regions where the MLS is generally available, that availability may be limited to specific agencies, with others not participating at all.
(Once upon a time I did some I.T. and software maintenance work for a number of local realtors and the local board.)
Oh, and also, various MLS interfaces (e.g. Paragon) provide a lot more information on properties than non-realtors have access to.
(Once upon a time I did some I.T. and software maintenance work for a number of local realtors and the local board.)
Oh, and also, various MLS interfaces (e.g. Paragon) provide a lot more information on properties than non-realtors have access to.
Let me try again. Suppose I decide to rent out my house. The price I can get for it depends on how much people like it compared to other houses that are available. How is the amount of rent that I can get being gamed upward, in a way that it isn't if, for example, I decide to sell my car? (Unless you believe that used car prices are also inflated across the board.)
I'm renting a house now, and I've been shopping around for a store/office space for a few months now.
And, yes, prices are being held unnaturally high. If they weren't, I would expect to see far fewer empty storefronts than I do now -- and I've recently seen this not just in my local small town, but also in Sacramento, in the Bay Area, and even in Seattle.
Locally, I know for a fact that there are a number of property owners that would prefer to have their space sit empty rather than rent it out for the amounts that people are willing to pay right now. I've talked to them.
Housing is not that much different, except that at the moment there is higher-than-usual demand for rental properties, so the "market forces" are driving the prices upward. Still, unless you are a property owner who foolishly can't afford to let a building sit vacant, you can get away with charging higher rent than other people are for similar properties.
I agree with the person here saying that these effects are due to information asymmetry. As a prospective renter -- either for commercial or for housing space -- in order to find the best possible deal, I must invest a lot of time contacting numerous people, reviewing various Google Maps mashups, reviewing classifieds, and wandering around town. As a landlord, to set a price I simply have to take a quick glance at what nearby properties are going for, add a little bit to that amount, and then wait.
Eventually, a prospective renter will come along, because they don't know where the better deal is.
And, yes, prices are being held unnaturally high. If they weren't, I would expect to see far fewer empty storefronts than I do now -- and I've recently seen this not just in my local small town, but also in Sacramento, in the Bay Area, and even in Seattle.
Locally, I know for a fact that there are a number of property owners that would prefer to have their space sit empty rather than rent it out for the amounts that people are willing to pay right now. I've talked to them.
Housing is not that much different, except that at the moment there is higher-than-usual demand for rental properties, so the "market forces" are driving the prices upward. Still, unless you are a property owner who foolishly can't afford to let a building sit vacant, you can get away with charging higher rent than other people are for similar properties.
I agree with the person here saying that these effects are due to information asymmetry. As a prospective renter -- either for commercial or for housing space -- in order to find the best possible deal, I must invest a lot of time contacting numerous people, reviewing various Google Maps mashups, reviewing classifieds, and wandering around town. As a landlord, to set a price I simply have to take a quick glance at what nearby properties are going for, add a little bit to that amount, and then wait.
Eventually, a prospective renter will come along, because they don't know where the better deal is.
The power the brokers have over landlords' is very limited, even in hot rental markets like Boston and NYC. The landlords set the price, and the brokers try to rent them (first hand experience). Unlike sales, typically, there is no exclusivity in rentals, it's first come first serve. Whoever rents the apartments get the prize. Which creates tremendous competition among brokers.
It is in the brokers' best interest that the landlords lower their price and pay a finder's fee. This makes the apartment easy to rent. The idea that somehow brokers bound together to control the price is simply untrue (this notion is somewhat true in sales). Landlords control the price based on supply / demand.
Everyone tend to think that brokers themselves represent market inefficiency, which is also debatable. Everyone knows Craigslist, and if they wanted to be on it, they can. Now, why do landlords go through brokers at all, knowing there is Craigslist?
Last but not least. The reason that renting is such a unpleasant experience lies in the nature of the business, and also what I call the Craigslist's dilema. If you are interested, I'd be happy to write another article to further elaborate on this point.
It is in the brokers' best interest that the landlords lower their price and pay a finder's fee. This makes the apartment easy to rent. The idea that somehow brokers bound together to control the price is simply untrue (this notion is somewhat true in sales). Landlords control the price based on supply / demand.
Everyone tend to think that brokers themselves represent market inefficiency, which is also debatable. Everyone knows Craigslist, and if they wanted to be on it, they can. Now, why do landlords go through brokers at all, knowing there is Craigslist?
Last but not least. The reason that renting is such a unpleasant experience lies in the nature of the business, and also what I call the Craigslist's dilema. If you are interested, I'd be happy to write another article to further elaborate on this point.
I agree with your point about competition, and I also believe that a broker/agent with a sufficiently large list of property can add value to a search process (they ought to be better at identifying properties that fit your requirements than a couple of grainy photos and a list of bullet points, and competition induces them to show you the most suitable properties first).
Isn't the problem with Craigslist simply spam? The property for rent listings on Gumtree (UK equivalent of Craigslist which is very useful for finding flatshares which don't involve intermediaries) are rendered unusable by spam for fake properties put in place by letting agents who will then subsequently offer you something more expensive and less appealing that actually is on the market. Essentially the agents collecting lists of tenants with multiple fake properties crowd out anyone trying to directly list real properties.
Isn't the problem with Craigslist simply spam? The property for rent listings on Gumtree (UK equivalent of Craigslist which is very useful for finding flatshares which don't involve intermediaries) are rendered unusable by spam for fake properties put in place by letting agents who will then subsequently offer you something more expensive and less appealing that actually is on the market. Essentially the agents collecting lists of tenants with multiple fake properties crowd out anyone trying to directly list real properties.
"Wrong. There IS something centralized: it's called the Multiple Listing Service, and ONLY Brokers and Realtors have "access" to it. They are salespeople, and salespeople compete only with each other. That 6 percent commission is the unwavering aspect of their model -- they built it to ensure that it always gets dropped into their shark tank. Consumers do not benefit from this system, ever, and every single entity in the real estate industry wants to keep it that way."
As much as the industry would like to thwart progress, they can't. There is too much money in this industry for their not to be "rebels" looking to take market-share by keeping prices low.
Companies like Redfin are offering flat-fee listings, with typical realtor services, including MLS listing.
There are quite a few "flat fee MLS" services as well that offer bare-bones services to buyers, mostly getting their house into MLS. While access is still restricted, a couple hundred dollars isn't a huge barrier.
I am currently selling my house and am using a flat-fee MLS service. I pay, I believe, $400 to have my house in MLS. I can then determine what commission a seller agent gets.
In a "traditional" MLS transaction, the seller agent gets 3% and the buyer agent (if there is one) gets 3%. Most realtors will negotiate that down, and I've personally offered 2.5% to seller agents on my house.
As to how worth-it the agent system is, a lot depends on your market. If you're in a large market, I'd expect the value of agents to go down because alternative systems are likely to be in place. I live in a small market and have used MLS, a sign in my front yard, Craigslist, and a few newspaper ads to market my house. I can say that 90% of inquiries have come from buyer agents through MLS. I'm going to have to give up a few thousand due to the 2.5%.
As much as the industry would like to thwart progress, they can't. There is too much money in this industry for their not to be "rebels" looking to take market-share by keeping prices low.
Companies like Redfin are offering flat-fee listings, with typical realtor services, including MLS listing.
There are quite a few "flat fee MLS" services as well that offer bare-bones services to buyers, mostly getting their house into MLS. While access is still restricted, a couple hundred dollars isn't a huge barrier.
I am currently selling my house and am using a flat-fee MLS service. I pay, I believe, $400 to have my house in MLS. I can then determine what commission a seller agent gets.
In a "traditional" MLS transaction, the seller agent gets 3% and the buyer agent (if there is one) gets 3%. Most realtors will negotiate that down, and I've personally offered 2.5% to seller agents on my house.
As to how worth-it the agent system is, a lot depends on your market. If you're in a large market, I'd expect the value of agents to go down because alternative systems are likely to be in place. I live in a small market and have used MLS, a sign in my front yard, Craigslist, and a few newspaper ads to market my house. I can say that 90% of inquiries have come from buyer agents through MLS. I'm going to have to give up a few thousand due to the 2.5%.
So do you have any idea where the solution is going to come from? I really like your analysis of the current situation.
You and I must live on different planets, that doesn't remotely sound like the world I live in. And I have a great distaste for this industry.
Very thoughtful response. I really appreciate your feedback. We have our reasons for that price, and might very likely change it in the future. Startups have to change or die.
As with the US real estate suck, that I 100% agree. There are many many reasons why that is the case, and many startups try to solve this problem with no one succeeding.
We are looking to be the one that eventually solves this hard problem, but as I said in the other post, it's an uphill battle.
As with the US real estate suck, that I 100% agree. There are many many reasons why that is the case, and many startups try to solve this problem with no one succeeding.
We are looking to be the one that eventually solves this hard problem, but as I said in the other post, it's an uphill battle.
I agree 100% on the pricing. You may have your reasons, but whatever they are, an extra $50 is not enough.
Perhaps you've found that real estate agents don't like metered pricing. That's cool, but I think you need to develop some kind of value proposition for the high end.
I know a guy who owns student properties in my town. He's given me loads of advice on how to break into the rental market; he is fascinating, and he owns over 200 properties in my area. I think he could really benefit from your service, especially the credit checks etc.
Consider this: the average student property in my area houses 4 people. Each of those people pay him, on average, $100 a month. So let's call it 4x200=800 people. That's $100x(4x200)=$80,000 a month for his business. I think your service could really benefit him, and you would be charging only $100 a month.
Your pricing is really low event for this guy's business, and I'm talking about one landlord in one small town in the United Kingdom. Recognise your market potential and price accordingly for that segment, you owe it to yourselves.
Perhaps you've found that real estate agents don't like metered pricing. That's cool, but I think you need to develop some kind of value proposition for the high end.
I know a guy who owns student properties in my town. He's given me loads of advice on how to break into the rental market; he is fascinating, and he owns over 200 properties in my area. I think he could really benefit from your service, especially the credit checks etc.
Consider this: the average student property in my area houses 4 people. Each of those people pay him, on average, $100 a month. So let's call it 4x200=800 people. That's $100x(4x200)=$80,000 a month for his business. I think your service could really benefit him, and you would be charging only $100 a month.
Your pricing is really low event for this guy's business, and I'm talking about one landlord in one small town in the United Kingdom. Recognise your market potential and price accordingly for that segment, you owe it to yourselves.
I've never lived in a large metro, so I'm unsure how prevalent brokers are (or even how they operate). Do you have to deal with rental brokers in all large cities? Even the Midwest/south like Dallas, Indy, Atlanta, KC, Phoenix, etc?
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Congrats guys!! Def a much needed solution in an inefficient market
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Visually it looks like Facebook and LinkedIn for real estate agents.
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Services like this one and Rentjuice are services for brokers to find landlords and property managers who want to rent their apartments. (unless I misunderstand what's going on here.) Why are these services uniting landlords with managers and not with renters? I am tired of dealing with aggressive, bullshit-talking real estate agents who make money by having what amounts to a monopoly on rental information. In my experience they've got the incentive to get me into some apartment, any apartment as quickly as possible, they need me off their list ASAP, I need to find a place I'm going to spend most of my time in for at least a year. The general inability to listen to basic requests further annoys me, an agent has 4 apartments that fit my requirements, but I get dragged into places that don't meet my price requirements before getting around to the places I might actually rent.
The situation strikes me as ludicrous and it seems startups should be actively trying to dismantle this old-school ossified way of doing things. (see: AirBnB for hotels/temporary lodging as well as that car service one whose name I don't recall.) Craigslist listings moved us a big step in the correct direction, but they're still full of spam. It seems to me that real estate agents receive a lot more money than the value they're delivering. This may not be true with house purchases which is certainly more complicated and outside my experience.
"The SaaS allows landlords to post new listings, which get distributed in real-time to the brokers they’ve selected." Why aren't these being distributed to the people who need apartments?
Edited to add: "The software also includes tools for syndicate rental listings to general listing sites like Trulia, Hotpads, Craigslist and others. "
I can't believe I missed this the first time around. Worst case scenario (which I lean toward) means the above "feature" may as well read "We're going to ruin other services by helping you to spam them more easily." Sounds like a step in the wrong direction for renters, who should be the customers at the center of all of these transactions.