The realtor cartel exists and is still going strong.
That is the view of many as to why the real estate market was not disrupted up to this point. It is an industry where selling a house is a very expensive proposition. Yet the market basically operates the way it always did.
It could be something that is changing if people like Chad Torstenson have their way. Chad, an ER doctor, felt that he did not get value from his experience in selling a home. He noticed that the tours were not even conducted by the agent he contracted with but the buyer's agent. Overall, he felt that his agent did very little to earn the money that was paid.
This is not an uncommon story. Many entities tried to disrupt the real estate market but to no avail. FSBO (For Sale By Owner) had different waves over the years but never made a serious impact. This could be changing as technology becomes more advanced.
Torstenson, for one, is looking to do this. He create ShowPal, a company that is based upon a "graduated services" model.
For $999, homeowners get an appraisal and market analysis, a photo shoot, a yard sign, a listing on Zillow and Trulia, and the services of an attorney for closing documentation. For a few hundred more, sellers also get what might be the company’s secret sauce: a security service that allows interested buyers in for private showings or open houses. And the $1999 “ultimate” package gets the listing on the Multiple Listing Service, the industry-controlled database of housing inventory for sale.
We saw the ala carte approach enter many different industries, why not the real estate market?
The challenge is that the National Association of Realtors has over 1 million members and exerts a great deal of influence. Most of the MLS listing services are local yet owned by the NAR. This creates an arena where the status quo tends to remain.
We also see local ownership and reprensetation presiding meaning that there is little incentive to change. Almost everyone knows someone who is a realtor. Most of the business they get is from repeat business or referrals.
There are defenders of the present system of course. Many believe that realtors provide an extremely valuable service. Selling a home is a time consuming process, something most people do not have time to do. Also, setting up things such as open houses yourself can be an odd process. For this reason, many believe it is better to give it to a professional.
Real estate has always been a non-liquid market. As with most assets like this, selling costs remain high. This brings up another technological innovation that could have an impact: blockchain. A few properties were sold around the world using blockchain. The results thus far show that friction along with paperwork is reduced. It remains to be seen how this will affect the selling process.
Torstenson remains steadfast in his view.
“We don’t think the value proposition of a Realtor is zero. We think it’s approaching zero, but it’s not zero yet,” Torstenson added.
With only five closings under his belt since starting up in May, Torstenson still aims high: he believes ShowPal can garner 15% of the business in any metro market within 24 months of launching there. The company is about to launch a Series A round of funding.
Quotes and image found here
