For decades, real estate agents have been one of the most valuable tools for those looking to sell a home. Real estate agents serve as professional home sellers who work with owners to help stage the house, highlight the features and score bids. Real estate agents provide a tremendous amount of convenience to homeowners who are not savvy in that area, but also come at a significant cost. On average, once a home is closed, real estate agents earn more than 3 percent of the purchase price, which can be a significant chunk of change.
With the internet and instant connectivity, middlemen have been cut out in a wide variety of industries. Instead of travel agents, consumers now use Kayak and Airbnb to plan their trips and find affordable options. Instead of utilizing stockbrokers, consumers now trade their stocks, ETFs and mutual funds online through platforms such as Robinhood and Charles Schwab. Instead of buying and selling homes, consumers are now turning to the internet. Real estate agents, like stockbrokers and travel agents, are middlemen that are being utilized less as tools and technologies deliver comparable results.
Despite the internet, real estate agents have not been entirely cut out altogether. For almost all consumers, buying a house is a huge experience and isn’t an objective decision compared to a stock purchase or trip planning. Buying a house is an extremely emotional experience and one of the biggest decisions people make in their lifetime. A real estate agent or Realtor can provide the compassion, empathy and overall human support that makes the process of buying a home and transition into the new home much smoother. More than that, real estate agents have an innate knowledge and expertise of the area in which they are selling homes. As they have likely worked in the area or lived in the area for a number of years, agents understand budget expectations and community trends that could influence the buying decision. Finally, buying a home is not a short, quick process. There is a large amount of paperwork involved in any real estate transaction. Agents are well-versed in handling that paperwork quickly and can expedite the process of buyers getting into their new homes.
As consumers have begun to wonder if using a real estate agent is the best use of their money, they are exploring alternatives. The most prominent tool is Zillow, a website which displays all the important features and characteristics of the home, apartment or condo for sale online. In addition, the house features pictures of the home, giving a virtual tour. Homeowners thus have the ability to put their own home for sale on Zillow and the website provides an estimated value, known as the Zestimate, of the home.
While Zillow is currently the most profitable and most popular alternative to a real estate agent, other companies are emerging that offer services to directly compete with real estate brokerages and still turn a profit on the transaction. Open Door Labs, which does business under the name Opendoor, has been hitting it big recently with investors. Through various rounds of funding, the company has raised millions of dollars and is working on a platform in which the company will make an instant offer on the home for sale and allow for the sale to be closed in a matter of days instead of months. Compared to real estate agents, Opendoor provides immediate price certainty and incredible convenience.
OfferPad is another company looking to buy your home. Under the right conditions, OfferPad will make a cash offer for a home and even take care of all the repairs, maintenance and updates needed. With a system of trusted contractors, the company is able to complete the work in a timely and accurate manner while also minimizing the cost.
Knock, a startup like both OfferPad and Opendoor, uniquely serves in a role similar to a real estate agent. Knock helps customers find a new home before their old home is even sold. The startup allows customers to find a new home, place an all-cash offer and then move into the house before the previous home is even sold. Once a customer is moved in, Knock then manages the sale of the old house, thus efficiently completing the process of a real estate agent.
FlyHomes is another startup that wants to buy your home with an all-cash offer. It has an advantage with first-time buyers by not dealing with “the old home.” The all-cash offer that FlyHomes uses offers a real advantage primarily in a real estate market where homes are going fast.
In addition to these startups, there are a number of other companies that have begun to brake into the market. Purplebricks, Openlistings, and Reali have begun to make a name for themselves in recent months. Redfin is a low-cost broker, serving the same role as a real estate agent but at a fee of only 1.5 percent, half that of a typical real estate agent. Homelight is a site that matches the sellers with the right real estate agent based on the home, location and other features.
As alternatives continue to rise, there is still a spot for brokers, agents and Realtors in the U.S. housing market. Explore all the options when deciding how to sell your home.