Real estate coupons and the $30B question

Re: 'Chicago real estate broker first to offer Groupon' (April 8)

Dear Editor:

My Google alerts continue to forward a flurry of news stories (related to real estate Groupon deals), including one at AOL that questions whether the coupon is a good deal for buyers and another that asks if Groupon can save the real estate market.

My own reaction, as quoted by Inman News, was less enthusiastic.

The real payback of Groupon's entry into real estate isn't about coupons; it's the opportunity to seed systemic change by refocusing industry innovation on consumer savings -- an estimated $30 billion dollars annually.

Just as ordinary citizens are making their voices heard as the U.S. Congress debates what kind of government will emerge from the "Great Recession," consumers and change agents should ask what kind of reforms and new business models are needed to deliver billions of dollars in savings to homebuyers and sellers annually.

A year after the near collapse of Wall Street, it looked like real estate innovators were refocusing on that mission, as described in a blog post, "Comeback of the Consumer Savings Value Proposition in Real Estate."

(Ironically, the government got into the game, twice, but its $8,000 tax credit actually caused overeager homebuyers to miss larger savings -- an estimated $38,000 in Boston -- simply by waiting for price reductions.)

But back to the bottom line: How much is $30 billion? My guess is that it took Bill Gates a decade or two to amass a $30 billion net worth; and last week, the Democrats and Republicans nearly shut down the U.S. government before agreeing to cut $38 billion in spending (the largest real dollar spending cut in American history, according to the New York Times).

It's hard to believe that real estate consumers could save $30 billion annually, but a number of studies have estimated that number (for details, see footnote No. 1 on Mark Nadel's "Critical Assessment of the Traditional Residential Real Estate Commission Rate Structure").

If homebuyers and sellers realized their economic value as a lead, they would ask real estate companies how much they'd be willing to pay them upfront, rather than paying Groupon or anyone else $25 to get a discount at closing.

Toward that end, new technologies and business models are being developed to enable homebuyers and sellers to issue personal RFPs, or requests for proposals, to generate customized money-savings proposals, rather than group discounts, from competing agents based on specific services requested in the RFP.

What consumers need is a way to aggregate savings opportunities that already exist in the marketplace or that they can create through personal RFPs from a wide range of sources, including sellers, lenders, brokers, vendors and government agencies.

What's the best way to co-author a folksonomy, or tagging system, of savings opportunities (not just coupons) to deliver billions of annual savings to homebuyers and sellers?

Bill Wendel
Broker-owner
The Real Estate Cafe
Cambridge, Mass.

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