Despite technological innovations and advances in real estate over the last decade, the cost of buying and selling a home in the US isn’t getting any cheaper. The number of agents working in real estate has also doubled over the last two decades, which should have introduced more competition, yet fees and house prices still remain persistently high.
A significant factor for the excessive costs involved when buying or selling homes, say property experts, is that realtors and brokers are “steering” buyers to higher priced properties. This has a two-fold effect. A buyer is forced to pay more because their realtor is after the higher commission, and the property they end up with may not really be what they are looking for.
As Andrea Riquier from Market Watch says “Often, when sellers try to offer fees lower than the 3% that’s standard across most of the country, brokers tend to steer buyer clients away from those listings even if the house was a good fit.”
“In each market there are a few big-name brokers who tend to be dominant,” agree Panle Jia Barwick and Maisy Wong of RealClearPolicy, “and they are less likely to recommend homes that pay a lower-than-average commission split.”
Not only does realtor steering limit the pool of available houses for buyers, say Barwick and Wong, “buyers never have any reason to demand a higher level of service or a lower fee from their own broker, since the seller is essentially paying the tab for both sides”. Furthermore, they add, buyers aren’t privy to commission information on sites like Zillow or Trulia, so it’s easier to keep them in the dark.
REX is changing the face of the real estate market
In the US housing market, the exorbitant costs that people are paying to buy or sell homes aren’t reflected, like other consumer service industries, in the quality of service or experience of the agents. Sellers have to pay high commissions, because that’s the way it’s always been done. In fact, the current high commission structure harks back to the early 1900s which shows how outdated it is.
But not all real estate agencies are bowing to the pressure. Game changers like REX are showing that you can successfully match buyers with suitable homes, without realtor interference. Here are some of the ways they’re changing the face of the real estate market.
REX sells homes starting at 2%
When you sell a home under the traditional real estate model, you typically pay commission, transfer taxes, and other closing fees. Commission is by far the largest cost that you’ll have to bear, at 5-6% of the sale price. This commission is split 50-50 between your listing agent and the agent or broker who brings the successful buyer.
In comparison to the traditional model, REX sells homes starting at 2% and doesn’t charge sellers a buyer’s agent fee. They can keep seller fees low because they cut out the middleman by using digital marketing and artificial intelligence to attract buyers, rather than agents or brokers. As a result, the commission fee is a lot more manageable.
Buyers also won’t be steered towards higher priced homes by REX. This is because even though REX agents are state-licensed, and provide a full-service experience for clients, they don’t work on commission. They work with clients to find them the right house, not because they’re after a higher commission.
Keeping up to date with technology is one of the biggest challenges that traditional real estate firms face in the next few years. While many have embraced the digital age in some respects, it still may not help to reflect lower costs for sellers, or get their home sold faster, especially if agents continue to list on the multiple listing service (MLS).
The MLS is a closed database that is only used by agents and brokers. Once your home is listed on the MLS, you’re contractually obligated to pay commission to an agent who brings in a buyer.
REX doesn’t use the MLS to list homes, because it doesn’t need to. It has recognized the potential of technology to increase the efficiency of buying a house. By utilizing digital marketing to match qualified buyers with suitable homes, it can sell homes 30% faster than listing on the MLS.
Even NAR recognizes that over 90% of home buyers start their search online, and this is why REX markets directly to buyers on channels like Zillow, Trulia, Homes.com, Google, Facebook and Yahoo Homes, as well as social media platforms. So really there is no reason to use the MLS and for sellers to pay exorbitant commission fees to agents.
Transparency around fees is a problem in the US housing market, with buyers and sellers often receiving a nasty shock when it comes closing time. Some real estate brokerages charge hidden fees, not just on commission, that come under the guise of “real estate transaction fees,” “administrative fees,” or other such names.
Barwick and Wong from RealClearPolicy believe that greater transparency on commissions and more open sharing of information would improve the US real estate market. They also think that more transparency would encourage competition amongst brokerages, resulting in lower fees for sellers and lower house prices for buyers
REX agrees, which is why it keeps information visible and accessible for both buyers and sellers at each stage of the process, from viewing a home and putting in an offer, to escrow and closing. At anytime, anywhere parties can log on to an easy-to-use ‘Home Stats’ web dashboard to keep up to date on their house sale or purchase, and know exactly what they’ll be paying come closing day.
Real estate disruptors, like REX, who are utilizing technology to make the buying and selling process easier and cheaper for their customers are directly challenging the old way of doing things. Hopefully by the next decade, high commissions, realtor steering, and outdated practices will be a thing of the past.
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