To those that have wondered, or hoped that our real estate landscape would change (for better or worse), look to Boston, where CondoDomain.com is introducing their exclusive buyers flat fee real estate brokerage. No, they aren’t the first, but certainly it appears to be gaining steam.
Unlike traditional real estate models, we believe that we should be compensated the same amount whether you purchase a $300,000 condo or a $30,000,000 condo. After all, why should we earn more if you spend more? That’s backwards in our opinion!
You do the searching, they make the deal, you save the bucks–it’s a pretty simple concept, really.
Anybody have any experience with CondoDomain?
Our city is so often compared to New York City, and God forbid Los Angeles, but what about Boston? Is there something to learn from this? Will it survive? Care to wager?
[Update: To get more of the low-down on the new structure of being exclusive buyer’s agents (EBA) the man behind condo domain has spoken.]
30 thoughts on “Boston Goes Flat Fee (for some)”
Hey Alex. Thx for the plug! We have been live now almost a week and the response has been overwhelming. We will surely keep you posted with our progress.
how is this different than redfin, other than th flat fee? i like it, don’t get me wrong but i think you need to do more to change what is a severely broken model. for example, pay for my inspection, appraisal, title fees as the broker/agent. none of those folks should be a separate industry.
Your opinion is that inspection, appraisal, and title fees should be paid for by agents? Then surely 10K isn’t enough. That’s like 6K or more right there.
by their boss, the broker. and if it was, watch all those fees come way down, overnight!
ps where are sending your clients for these things?
appraisals are 600, title is 1000 even on a refi (criminal) and inspections are 250
I was figuring both sides, and your numbers are low. I paid for a client’s inspections last summer. It cost me $1100. He bailed on the deal and stiffed me too. We live and we learn.
flat fee is tough for sF, property types are so different, transactions are so different– some are insanely complicated and frankly, the sale of a $450K condo vs a $450K TIC is going to be a much different and more complicated transaction. do you know anybody with $30million that wants to search on their own and have the transaction handled by somebody that is an “expert” from san jose to marin? i don’t. flat fees work great for new construction or track homes, but i don’t think they work well for resales in sF (i’m sure to get blasted for this comment. bring it on..)
Actually, Garret, I’d have to whole-heartedly agree with you on this one. In SF I could see this working for a lot of the new developments popping up, and whoever takes advantage of that statement (HomeSF maybe) could see some pretty good growth. As for flat fee on a $30M purchase, or Outer Sunset 2/1 with “un-warranted” tenant occupied inlaw downstairs…not going to happen…ever! As long as I live at least.
james, not much different than Redfin, I agree, but CondoDomain is focusing more on condos…so it seems, and hence the name.
Garrett, yes and no.
I guess what we all mean is NOT that fees should be 10K period. But rather there should be a standard fee – and then, let the freedom of the open market let agents set theirs own packages – something that *some* (that’s the point, right now it’s *some* when it should be *most*) agents do already.
Say I specialize in selling 4+BR $4-10M houses in SF. Then I can offer
– pack basic: advertise up to a year sell, close and pay for expenses (closing, inspection etc). for 40K (that’s 1%)
– pack medium: advertise up to a year, fix/stage for up to 6months, pay moving out etc for 80K (that’s 2%)
– pack delux. advertise including premium magazines, fix,stage, promote, .. unlimited (up to 5years) for 150K.
Then, when you want to sell, you figure out what you need to be included in your package, then you shop around, and find exactly what you need at the price you know for sure.
From the realtor point of view. He (she) gets PAID upfront. He can choose if he takes troubles on board or not (like you dont want to deal with unwarranted space? just set an additional fee for that). Then it’s up to the realtor to include in his contract a bonus of 5K if, for example, the closing price reaches a set target.
For the buyer point of view. He can more safely guess that there is no hidden problem that the agent isnt aware of – as the agent’s best interet was to smell rats and charge for them BEFORE the property was even on the market. So once the property is on the market AND the selling fees are paid by the seller, the property is in full view, including problems with tenants etc.
ok – that system doesnt address how the agent of the buyers would get his (her) chinchin. But I’m sure it could work.
Sides effects of the system. Agents get payd, property sold OR NOT. So it’s in the best interets of the seller to PRICE right, not to have to spend the fees twice – that is eliminate some of those ridiculous stalefish.
Agents can be “graded” by ratio of closed properties/listed properties. And would most likely advertise on their time to close – something IMPORTANT when people NEED to close fast.
I guess you get the picture. IMO it’s fairer than the % fee as there are some flat expenses on one side, and because the property closing at 95%, 100% or 115% of asking price shouldnt translate in paying more or less the agent who did probably as well.
now loopholes? yes. attracting crooks? probably. But that wont change anything for efficient and good agents. And maybe sellers will actually do their research of a GOOD agent, instead of just dumping the property to the first number in the yellow pages, resulting in listing agents whose offices are miles away and other stalefish, pulled off listing and other stupid tricks hurting the whole market.
Alex, and all other agents…. I think you are missing the point. The concept here is valid. There is a market for people that don’t want to pay 6% and don’t need a lot of marketing to sell their property. How many people are living in a $1.5M 3br/2ba vic in Noe right now that could sell their property in a weekend with multiple bids? 300, 500? At least. If I were an agent, I’d be sending targeted flyers out and buying an ad in the local Noe paper stating that I’d gladly sell your home for seller’s commission + 1% or a flat fee and just split it with the listing agent. With sites like this and SS and curbed to market your property + craigslist and the local papers — there is a lot of opportunity for the hard working agent willing to get a bad name in the local scene :-)
And for the obvious (but unstated) response that your house will not get viewed or noticed by the vast majority of home buyers looking for a house since they are working with Realtors — shame on the agents if they don’t show an off market property to their customer — and shame on them if they are not working hard to find their customer the best property. And shame on the buyers for not watching the local scene for potentially off-market properties!
The issues are different from buy side to the sell side. Sellers in hot markets like your DOE, may not need agents at all,or the price may fall for listings to under 1%, or flat fee territory. We’ve all seen listings so nice we were sure they could sell themselves- but, atleast in most markets, this is a minority of listings.and there are costs to marketing a property… I would be very open for a fixed fee up front, plus a smaller commission on the sale, thus reducing the risk of no sale, and better aligning client and agent incentives.
On the buy side, there is room for discounting or rebating some commissions, but there is much less demand for it when the average price of a single family is under $300,000, which it is in probably 2 out of 3 major cities/MSA’s in the country. (Obviously excluding NYC, SF, Boston and a few others)
I also think that the top of the market demands expertise, and is willing to pay for it… if you are at or near the top, you should be paid at or near the top of the market for your services.
Last but not least, it is not the agents but the major brokers who are the biggest barriers to change. Sure some agents too, but I work at one of the few 100% brokers in town- the rest say NO to any change (rebate) in commissions.
Mr Longo and his team at condoDomain only work with buyers. There aren’t as many expenses with buyers as there are with sellers, so perhaps the business model has some merit.
If you work with buyers, the only expenses you have are 1) advertising or another means of finding buyer clients; 2) office & administration; 3) car; 4) errors & omissions insurance.
Especially if you pay some of your staff on salary, you can figure out a way to make the numbers work, on a flat fee.
They sell Starbucks coffee for the same amount, coast to coast*. They’ve somehow figured out how to make it work, even with different salaries and rents in each city. Can’t the real estate industry do the same?
* Actually, not true. A cup of coffee will cost you more in big cities, but you get my point.
Just wondering, If I were to sell by myself (list on MLS, spread the word etc), can i say I will pay $10,000 for any person/agent who brings me a buyer for at least my asking price, and I accept?
If there are a lot of “starving realtors” out there, why not give it a go if you have a client in my price range, and house type? Also, can i say i will pay cash, which may allow the realtor to avoid paying part of the $10,000 to his/her real estate company? Not my business what they do with my commission pay.
I for one am against the 5% selling commission one has to pay regardless of property value. $50,000 for a $1million property? That is aggressive in this internet day and age.
I think eddy hit the mark. If the public keeps hammering away at cleaning up the “price fixing” within the real estate industry, at some point sellers (and buyers) will finally be paying a fair and reasonable commission.
And yes, great or even just “good” properties will sell themselves and with over bids.
You can hire a lawyer for a number of hours to complete the paperwork and you’re done.
ResortAtSquawCreek, you cannot get on MLS if you are not represented / contracted with an agent, which by default has certain contractual oblications and costs.
There are a lot of ways to market your house. I’m sure if you post up an ad and aggressively market your property and state that you will pay 10k to whomever brings you a buyer (including buyers themselves) that you would get some traffic.
NAR tells you it costs 6% to sell your house. So if 6% of $2M is $120k that assumes that $120k is split between the buyer and seller agents and their companies– and all you have to do is sit there and wait for your house to sell. Of course, in SF there are other costs, like staging and pre-inspections that are not covered in your 6%. My point is that if you want to sell your house yourself there is a lot that goes into it and you cannot expect to spend 10k and pocket $100k. You’ll still need a website with pictures, marketing flyers, open houses, a new can of paint and throw some of your junk in storage and clean out the closets. Truth is that it might cost you $35-50k to sell your house without the help of an agent. Bottom line is that if you commit 50k to selling your $2M house than you will probably end up getting it sold (assuming it’s priced right) on your own — and at the end of the day you will probably pocket the diff of the $120k+ other expenses less 50k.
If you factor all of this into the equation, and the time consideration– than you probably start to see the benefits of using an agent.
there are more costs than that in a major metropolitan market like ours. for instance, i had to pay 450.00 for official disclosure documents from my hoa for my buyer. all the pre-sale/post-sale stuff should be added to estimates as well. the transfer tax here in the city. that’s about 15k for a 2mm property. then there’s my favorite leach like charges. title and appraisals and inspections.
Eddy – Thnx for the insight, and I agree, there are costs involved in selling, not just 10K fee to the buyer’s agent.
I donno if you are a realtor or not, but you’ve got to admit, 5 or 6% commission fee split two ways is very egregious on a 2 mil property.
I think the downturn in the real estate market, and the desperation of some sellers and realtors will serve as catalysts to agree on lower fees, and probably a flat fee, or at LEAST a gradiated fee bsed on value points of the property.
BTW, 6 inches in tahoe last night :)
I just visited back to this site and I am overwhelmed by the response here and am trying to get through it thoroughly but the topics have splurged out into a few different areas. I will do my best to answer anything related to our business model, which is the buy-side only.
The Basics: We choose really 3 niches and mashed them together.
1) First and foremost we are condominium experts. It’s the only product type our firm works with. We get condominium ownership.
2) Second, between market conditions, readily available technology and one secret we have, we decided to become and Exclusive Buyers Agency (EBA). We truly believe that we think ‘we have something’ on the buy side with use of technology to create efficiencies, etc, however we did not see so on the sell side just yet
3) Third we took a step back and said, “Hey, why should we get compensated more if our clients buy $3M condo vs. a $300k condo?” It didn’t make sense to us…actually we thought it was completely backwards. As buyers agents aren’t we supposed to be negotiating the lowest possible price for our clients, the introduction of flat fee.
Our high-level goals is to bring as much local data as possible to a cleanly formatted website easily navigateable by any demographic. Give them ever listing: Live MLS feed, All New Construction Developments, Existing Buildings, Lofts FSBO, Foreclosure, and even Auctions and then combine that with local market news via our blog and some user generated information via listing comments.
With this information our hope was that the clientele that contacts us is a well-educated and informed homebuyer and so far that is what it has turned out to be.
Why $5,000? Well, when we ran local business models, we believe the $5,000 flat fee to be a very fair price for our services and a price where we can make a nice profit. The flat $5,000 fee also allowed us to be tremendously competitive in the local buyers agency market. We have had 3 offers accepted this week for a combined commission refund of more than $100k back to our clients.
I hope this helps and clarifies what we are doing out here in Boston.
Please feel free to contact me with questions/concerns.
The problem with this type of operation is buyer/broker relationships. It happened to me recently – I showed thirty homes to a couple, then they purchased through a discount broker to get their kickback. I have agreements, so I will definitely be pursuing it. Behavior unethical…so my question to flat fee brokers is, how are you going to avoid a situation like this?
did they sign anything with you chantal?
Condo domain is not the first flat fee buyer agency in MA. TRE was the first movers – http://WWW.Territoryre.com – proving there is definitely room for a flat fee buyer brokerage in all markets (except those states that consider rebates illegal, which will change soon). CD and TRE business models offer a better and cleaner way to represent home buyers, it’s really the ONLY way to truly represent a home-buyer …
Coming to your town next …. Territory Real Estate
Chantel, just because your client left you for another agency has no bearing on the flat fee buyer brokerage or even discount brokerage operations. The real estate industry is plagued with unethical behavior, most of which stems from the way traditional agents get paid … the stories are endless and they have no relation with TRE’s new business model. We are buyers’ brokers, not just independent contractor real estate agents.
So, the question is, what will you do about it? How will you earn your full commission (whatever that may be) with these new flat fee models slowly infiltrating and changing (for the better) the industry?
Historical footnote: The Real Estate Cafe has offered a menu of fees and rebates in Boston since opening in 1995. When we first opened, I believe we offered two flat fees, plus our preferred method of compensation: hourly fees paid as services are rendered with a 100% rebate of the buyer agency fee! See WSJ article:
Cutting the Commission
Over the past 12 years, our fees RARELY exceed $5,000 but we respect a consumer’s right to OVERPAY us, so we reintroduced that flat fee, plus a $3,000 plus performance bonus option in March 2007 with a “cause marketing” twist. We let buyer select from our current Menu of Fees & Rebates…
…or propose their own fee / rebate combo! Like Burger King, we think home buyers should “Have it your way!”
So what RE Cafe, TRE, and Condodomain are saying is that what Redfin is doing is hardly unique? Then why all the press?
exactly … They are still % based so their representation is almost identical to traditional brokers they are just charging less. Not to mention they still have a relation with the sell side – they take listings – so, they can’t ever be a true niche agency as long as there is that conflict of interest. They were born from the tech end of the business – trying to deliver the best online search tools – and have now switched gears and really focused on the agency side. All the press comes from the VC $ they took very early. i believe over the course of the last 2 years (?) they have raised (and almost spent) somewhere close to 10 million and that = large ad pockets.
redfin is a good company … i love the introduction of change within this business but their idea isn’t unique and it is certainly easy(ier) to duplicate.
ps. real estate cafe, sorry i didn’t mention you in my previous email … i have known of your biz and am impressed with your niche and ideas :) we should meet up sometime and talk shop!
One of the big barriers to the variety of pricing schemes is the big agencies. Try telling your boss at Coldwell Banker that you’ll be rebating your next buyer client 95% of your commission.
“Don’t let the door hit you in the butt on your way out the door.”
If agents started rebating all their commissions, the big guys would be out of business.
Coldwell Banker takes 50% of a new agent’s commission, PLUS a 6% marketing fee. Right off the top. Sotheby’s, not much better. Keller Williams – 70% off the top, until you make them 30k.
That’s insanity. Especially if you’re a buyer’s agent.
David & Goliath?
David will win. Rates are coming down, which is great for buyers and sellers.
My money is already with David ;)