Show HN: My Passion
8 comments
One thing you're wrong about- RE brokerage is under heavy fire right now and is being attacked by many, many startups.
The strongest moat that’s defended residential RE brokerage from disruption is the interdependent nature of the business. Because both the buyer and seller are represented by agents in most transactions, brokers must collaborate to close deals at the same time as they compete for listings. Buyers’ agents have an incentive only to show their clients homes whose sellers offer them a standard 3% commission. To attract more listings and still retain interest, sometimes seller’s agents offer to cut their own fees while still offering the full price to the buying agent. The reason that this approach hasn’t become widespread and significantly whittled down commission standards is that the vast majority of sellers’ agents are also buyers’ agents, meaning that both parties have a vested interest in preserving the commissions on either side of the table.
Because of this solidarity among buyers’ and sellers’ agents, the only way for the brokerage business to be hacked and rendered truly competitive is for one half of the equation to vanish. Either FSBO listings will have to become so widespread that sellers’ agents largely disappear from the picture or property search, negotiations, and closings have to be made so simple that buyers’ agents fade to irrelevance. But when one side crumbles, both sides do.
IMO, it's far easier to hack the buying-side process than the selling process. RealDirect and DotLoop are interesting in that they try to essentially automate the process of selling a property yourself (RealDirect by providing appraisal services, submitting listings to MLSes, and curating marketing channels etc. and DotLoop by standardizing legal docs/paperwork), but these companies face an uphill battle in convincing sellers that they are every bit as talented at receiving top dollar for their home.
IMO, the best way to hack the industry is to streamline combine a Trulia/Zillow/StreetEasy proprietary MLS with DotLoop's standardized legal/paperwork management system. The one missing piece is data-driven appraisals accurate enough to convince buyers of their worthiness. Nobody's quite got this down yet, but Kwelia seems to be closest. The trouble is that not enough sales data is available to accurately correlate prices to location/amenities/property info. Although most US cities maintain public data mines that contain title documents, many buyers mask their purchase prices with evasive chicanery that reads along the lines of "sold for $10 and other goods of significant consideration".
All that being said, your model of offering perks is an interesting way of convincing attracting clients to an existing brokerage. Partner with some furniture suppliers/local businesses to offer some exclusive discounts and I think you're onto something.
The strongest moat that’s defended residential RE brokerage from disruption is the interdependent nature of the business. Because both the buyer and seller are represented by agents in most transactions, brokers must collaborate to close deals at the same time as they compete for listings. Buyers’ agents have an incentive only to show their clients homes whose sellers offer them a standard 3% commission. To attract more listings and still retain interest, sometimes seller’s agents offer to cut their own fees while still offering the full price to the buying agent. The reason that this approach hasn’t become widespread and significantly whittled down commission standards is that the vast majority of sellers’ agents are also buyers’ agents, meaning that both parties have a vested interest in preserving the commissions on either side of the table.
Because of this solidarity among buyers’ and sellers’ agents, the only way for the brokerage business to be hacked and rendered truly competitive is for one half of the equation to vanish. Either FSBO listings will have to become so widespread that sellers’ agents largely disappear from the picture or property search, negotiations, and closings have to be made so simple that buyers’ agents fade to irrelevance. But when one side crumbles, both sides do.
IMO, it's far easier to hack the buying-side process than the selling process. RealDirect and DotLoop are interesting in that they try to essentially automate the process of selling a property yourself (RealDirect by providing appraisal services, submitting listings to MLSes, and curating marketing channels etc. and DotLoop by standardizing legal docs/paperwork), but these companies face an uphill battle in convincing sellers that they are every bit as talented at receiving top dollar for their home.
IMO, the best way to hack the industry is to streamline combine a Trulia/Zillow/StreetEasy proprietary MLS with DotLoop's standardized legal/paperwork management system. The one missing piece is data-driven appraisals accurate enough to convince buyers of their worthiness. Nobody's quite got this down yet, but Kwelia seems to be closest. The trouble is that not enough sales data is available to accurately correlate prices to location/amenities/property info. Although most US cities maintain public data mines that contain title documents, many buyers mask their purchase prices with evasive chicanery that reads along the lines of "sold for $10 and other goods of significant consideration".
All that being said, your model of offering perks is an interesting way of convincing attracting clients to an existing brokerage. Partner with some furniture suppliers/local businesses to offer some exclusive discounts and I think you're onto something.
Interesting. Real estate is definitely technologically underserved relative to its market size.
I think this is a play at incentivizing residential buyers/sellers to let you refer them to the local Realtor the first referral and taking the referral to let the user buy things with "points"? If so, I love it.
for giggles: existing home sales 5mm/yr * 200k/house. Assuming a full commision of 3% on one side and if you get 25% as a referral:
A typical transaction could be worth:
$200k * 3% * 25% == $1500 (less redemption value in points, so basically a redeemable user point has to be less than .03.25 purchase price)
If you owned one side of every single existing home sale, that is worth: 5mm * 1500 == $7.5B/yr
How do you intend to reach users? I guess with a value of $1500 per conversion, you can afford to spend liberally on adwords to catch users as they are searching, but I suspect the words in that space are competitive and expensive. Even if you get the a 25% referral on the full commission, someone else is able to pay up to 100% of the referral on the commission in user acquisition costs, so you'll never be able to outspend the actual broker in paid search.
Basically you'll have to be creative with how you pay for traffic.
Which isn't to say its not doable... This sort of reminds me of deal aggregators like Yipit -- they get a commission of the transaction from someone like Groupon, so that means groupon can always outspend them, so you ahve to find some other way to get your leads.
What is your plan?
I think this is a play at incentivizing residential buyers/sellers to let you refer them to the local Realtor the first referral and taking the referral to let the user buy things with "points"? If so, I love it.
for giggles: existing home sales 5mm/yr * 200k/house. Assuming a full commision of 3% on one side and if you get 25% as a referral:
A typical transaction could be worth:
$200k * 3% * 25% == $1500 (less redemption value in points, so basically a redeemable user point has to be less than .03.25 purchase price)
If you owned one side of every single existing home sale, that is worth: 5mm * 1500 == $7.5B/yr
How do you intend to reach users? I guess with a value of $1500 per conversion, you can afford to spend liberally on adwords to catch users as they are searching, but I suspect the words in that space are competitive and expensive. Even if you get the a 25% referral on the full commission, someone else is able to pay up to 100% of the referral on the commission in user acquisition costs, so you'll never be able to outspend the actual broker in paid search.
Basically you'll have to be creative with how you pay for traffic.
Which isn't to say its not doable... This sort of reminds me of deal aggregators like Yipit -- they get a commission of the transaction from someone like Groupon, so that means groupon can always outspend them, so you ahve to find some other way to get your leads.
What is your plan?
More or less your on target, our rev comes from referral fees, which vary, and also monthly subscriptions from local Realtors who would "own" their market, similar to how they can own their market on Zillow or Trulia.
Your are 100% correct that this space is competitive and expensive to catch users, and being creative is key, which is why we are going after strategic partners to help with the acquisition costs.
Your are 100% correct that this space is competitive and expensive to catch users, and being creative is key, which is why we are going after strategic partners to help with the acquisition costs.
> and is hardly ever attacked my entrepreneurs
> but literally you never hear about a real estate start up
I don't think you're looking hard enough: Zillow, Trulia, 42Floors, Yahoo Real Estate, Redfin, Movoto
I'm sure there are many more.
Realty has poor technology because realtors generally don't utilize technology well. The MLS is a festering mess of non-normalized data, and no one cares because real estate is still very much people-driven.
> but literally you never hear about a real estate start up
I don't think you're looking hard enough: Zillow, Trulia, 42Floors, Yahoo Real Estate, Redfin, Movoto
I'm sure there are many more.
Realty has poor technology because realtors generally don't utilize technology well. The MLS is a festering mess of non-normalized data, and no one cares because real estate is still very much people-driven.
I am aware of all of them and do agree that real estate is still very much people-driven, and in my opinion always will be. That being said, the way Realtors market themselves these days is not effective enough, that coupled with just the sheer number of Realtors, (Over 1 Million), makes for a bunch of marketing noise.
I like the site so far, one of the things that annoyed me is when your choosing to buy or sell a house. You should add a hover effect so the user knows what they're about to click.
Cool site. What tool did you use to design it?
link: http://RealtyPerks.com
You illustrate how real estate is under-served by technology, but your startup doesn't solve an offline problem with technology. Where's the Salesforce for realtors or property managers? Where's the service that makes selling your home easier? There are huge problems to solve in Real Estate. Finding/getting in touch with a realtor isn't one of them IMHO.
Not to criticize, but what is the value from this particular service to someone who is buying or selling a home ? Are you making the process easier or just giving rewards like a credit card cashback etc ? I am asking since I would love to work with something that makes my buying or selling part easier. I want to know good realtors in my area, recommendations for my housing preference (based on factors such as affordability, choices, what matters to me most etc). I do not care about reward points necessarily. Just my 2 cents.
Our service may not be for everyone. If you are not concerned about a reward program, than most likely you would not use it. However, we do our best to connect our members with excellent Realtors in their marketplace, who are extremely knowledgeable in regards to affordability, what's on the market, etc..
My site http://RealtyPerks.com, just went live a few days ago and I have always sifted through HN admiring and gaining advice from everyone out there, so I thought I would show my start up, and would love any feedback from the HN community. It's far from done but it gets the message across. We have been establishing relationships with Realtors on the northeast and are gearing up to start Rewarding some new homeowners.
Real Estate isn't sexy, and is hardly ever attacked my entrepreneurs, even though its a 60 Billion dollar market. Although recently sites like 42floors have come up and are attacking commercial real estate, which is another vertical within the real estate industry ripe for disruption. (I love their site/concept)
I also find it intriguing that there are so many start ups dedicated to gaming, mobile payments, fashion, etc. but literally you never hear about a real estate start up, but the industry is so antiquated! We still have companies like Coldwell Banker dominating their marketplace. Yes, Coldwell Banker where you walk into one of their offices and see chairs with gold and oil paintings and their agent's don't have email but rely on fax machines.
Enough of my rant, I just wish real estate marketing got up to speed with the rest of the world, and I hope RealtyPerks does just that.