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New Math On the Old Commission
The do-it-yourself approach was "a complete disaster," says Dan Kilcoyne, with his wife, Shira, and daughter, Madeline, at their new home.
(By Ricky Carioti -- The Washington Post)
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"We ultimately feel that finding the home is three-quarters of the work, and that's why we give the buyer three-quarters of the commission," said Joseph Fox, BuySide's chief executive.
The company, launched in April, entered the Virginia market in July and operates in four other states. Their model is similar to that of other rebaters around the country, such as Redfin, which operates on the West Coast.
BuySide agents working with Virginia clients sit in a Chicago call center. They are paid a salary, not commission. Clients who want BuySide to schedule appointments for them must be pre-approved for mortgages.
Sellers' agents should be rooting for BuySide, Fox said, because it delivers pre-approved buyers to their doorsteps and frees up buyers to kick in more money toward the price of a home. In cases where the buyer and seller are $10,000 to $15,000 apart, "I've seen our rebates close the gap on the transaction," he said.
But by BuySide's own estimates, about 9 percent of the traditional listing agents they approach resist working with them, presumably because showing houses and answering questions for BuySide clients adds to their duties without compensating them for it. Some refuse to show homes to BuySide customers, Fox said.
To get around that, "I've had customers who made offers contingent upon seeing the home," Fox said.
Whether on the selling or the buying side, many discounters can pull out plenty of hate e-mails from their traditional counterparts.
Each side accuses the other of doing a disservice to consumers.
Traditional firms say discounters offer poor service, then expect them to pick up the slack. They have pressed several states, with some success, to outlaw rebate firms and to force flat-fee brokers to widen their array of services.
The discounters say that practice is designed to stifle competition and allow full-service agents to charge excessive commissions. In some cases, federal regulators agreed and took action.
"All we've heard is hypotheticals about how consumers would be harmed and how real estate agents would have to do too much or expose them to risk, but there is no evidence of that occurring," said James Cooper, the Federal Trade Commission's deputy director of policy planning. "If there's a market failure, no one has shown us evidence of that."
If a market failure exists, blame it on the cartel-like behavior of traditional brokers, said Stephen Brobeck, executive director of the Consumer Federation of America.
