Sites like Zillow, Trulia and Redfin make it easy for consumers to find homes for sale without the help of an agent — and Seattle-based brokerage Quill Realty believes sellers shouldn’t be saddled with paying commissions to buyer’s agents.
To sidestep the co-brokerage fees its sellers would have to pay, the 2-year-old firm’s founder, Craig Blackmon, plans to withdraw Quill Realty from its MLS, Northwest MLS, “around July 1.”
Homes listed with an MLS include a guarantee of compensation for any broker who brings a buyer to a deal. That compensation is typically set by the seller and listing agent and is one of the core functions of the MLS. In many areas, buyer’s agent commissions hover around 2.5 percent.
If buyer’s agents find buyers for Quill Realty’s listings, they will not get a dime from Quill Realty or its sellers when it unplugs from the MLS.
“In their offer, buyers are free to ask that the seller pay some or all of the buyer’s broker’s fee,” Blackmon told Inman. “There will be no commission offered by the seller. If I wanted to offer a cooperating commission, I would remain in the MLS. The point of leaving the MLS is that it allows me to list without offering a cooperating commission.”
Craig Blackmon
With this move, Quill Realty joins a host of other real estate startup firms betting that the efficiencies and changes made possible by real estate’s tech revolution have devalued agents.
Although small, the firm’s piloting an idea based on some clear, thought-out reasons. We’ll see if it works. If it does, you can bet other firms may follow the leader.
Philadelphia-based broker Houwzer, Denver-based franchisor Redefy and Los Angeles-based brokerage Evolution Real Estate are all piloting business models based on assumptions that developments in tech have made listing agents a less critical, and lower-cost, component of getting a real estate deal done.
“Zillow is a huge part of my model,” Blackmon said. Zillow captures a huge real estate audience and allows anyone to list their properties on the site, for free. Listings submitted to Zillow also show up on sites it owns or powers, including Trulia, Yahoo Homes and AOL Real Estate.
As another consequence of pulling from the MLS, Quill Realty’s listings won’t show up on the websites of NWMLS-member brokerages under an Internet data exchange feed. IDX feeds are composed of the pool of listings brokers in a market make available to each other for consumer display. Listings also won’t automatically appear on realtor.com, which gets the vast majority of its listings directly from MLSs.
Quill Realty, which launched in 2013, describes itself as an “alternative” brokerage. One of the two-agent firm’s marks of distinction is its practice of pairing real estate clients with one of three Quill Realty-affiliated attorneys who help usher a deal to completion. The firm closed 12 deals in 2014 at a sales volume of approximately $3 million.
The firm began offering flat-fee services to buyers earlier this year, but this new effort is squarely focused at fleshing out the listings side of its business, Blackmon said.
Low cost, full service
With this unusual model, it will charge homeowners a fee of 1 percent commission to sell their homes, with a minimum listing fee of $5,000. Listing agents typically earn a commission of closer to 3 percent to sell a home.
Quill Realty’s new model is also a play to double-end the deal.
For unrepresented buyers, Quill Realty will provide broker or attorney services to them for a “reduced fee,” Blackmon said. Broker services would be provided by someone other than the listing agent, he said.
“Buyers of Quill Realty listings won’t need their agent to tour the home, and they won’t need their agent to make an offer,” Blackmon said. “At the end of the day, I like how those disincentives stack up.”
Thanks to an efficient model, which includes paying agents as employees with a salary rather than a commission as independent contractors, Blackmon said Quill Realty will still provide full service to sellers for that relatively low fee:
- Quill Realty will list the home across the Internet using FSBO platforms (which now include Zillow, Redfin, Trulia, etc.).
- The firm will install a “For Sale” sign at the home and host open houses and provide tours for qualified buyers. While the firm would evaluate potential buyers on a case-by-case basis, Blackmon said his firm will require buyers to send both a loan preapproval letter that guarantees they have financing for at least around 90 percent of the home’s list price and a copy of their driver’s license before scheduling a showing.
- Quill Realty will have attorney-prepared forms that can be used by buyers if they choose to represent themselves, or they can hire Quill Realty or any other broker or attorney to represent them.
- The firm will make the home available as necessary for buyers to complete their due diligence.
Exposure concerns
Quill Realty acknowledges that its listings will receive less market exposure than they would if listed in the MLS, but the firm argues the listings will still get plenty of attention, both through old-school methods like yard signs and via popular sites like Zillow, Trulia, Redfin and, possibly, realtor.com.
Blackmon initially assumed that realtor.com would not display Quill Realty listings if the firm was not an MLS member. But after Inman reached out to realtor.com about its protocol and shared with Quill Realty that the portal decides whether to accept listings from non-MLS brokerages on a case-by-case basis, he said he will look into it.
The firm will get its listings on Redfin via a for-sale-by-owner listing database. A Redfin spokeswoman confirmed that the site hosts listings from FSBO databases.
Is Blackmon concerned that buyer’s agents will gently steer clients away from Quill Realty listings?
Yes, but he said the law and ethics will compel buyer’s agents to show Quill Realty’s listings to their clients.
If buyer’s agents have an agency agreement with a buyer that guarantees they’ll be compensated in their work, one way or the other, Blackmon said the act of steering a client from any listing would break Washington law.
“Regardless of the law, and regardless of whether there is an agency agreement, this will be a serious violation of the broker’s professional ethics,” Blackmon said, citing the National Association of Realtors code of ethics. “An agent who discourages a client from a Quill listing is crossing a very serious ethical line that lies at the heart of being a broker.”
But some agents won’t make the effort to alert their buyers to listings that don’t have a clear co-operative compensation offer.
“I’m not going to go out of my way to source Quill Realty’s listings,” Kevin Lisota, CEO of Seattle-based brokerage Findwell, told Inman. If one of his firm’s buyers finds the home on Zillow or elsewhere, agents at his firm will happily show the home.
Kevin Lisota
But if they want to make an offer, they’ll write a request that the sellers pay their commission. If that’s denied, then they’ll turn to their buyer about guaranteeing their commission before making an offer on a home, he said.
“I don’t think it’s sustainable on any volume,” Lisota said. Listing brokers need the participation of other agents, and that participation is based on the guarantee of getting paid, which MLS membership helps facilitate, he said.
There are other hurdles, like lock boxes and the home tours that MLS membership helps listing brokers execute. Those “will be sorely missed,” Blackmon said, but Quill Realty’s betting that it will overcome them.