As new kinds of startups continue to disrupt the real estate industry by offering discounted real estate services and Do-It-Yourself offerings, agents are left wondering where they fit in.
Redfin recently launched a program where sellers can sideline the buyer’s agent. Many other startup brokerages are offering discounts or rebates to buyers. And of course there are all the iBuyer companies out there claiming offering to pay “fair” market value.
But the reviews for these companies aren’t exactly stellar. Redfin has a 3-star rating on Yelp in its own home city of Seattle. Opendoor had the hidden page scandal on Yelp that has made recent news. And in February, Redfin CEO Glen Kelman reported that most people who receive cash offers from his company reject them.
Agents across the country are touting that they are the better choice because of the services that they provide. But as more and more of these emerging services make their way, they are taking some market share. It’s becoming a trend.
I spoke to one of Austin’s highest producing lenders (who wished to remain anonymous) about how this is affecting his business. He cited a situation where a consumer was in contract on a deal, and they were using a discount mortgage company on a luxury home.
The financing was delayed and the discount mortgage company couldn’t get it together so the buyer went to a top producing lender. The lender said he could have the deal closed in two weeks. That extension was not granted, so the lender worked with the buyer on the next property. Days before closing the next deal, the buyer comes back and says he was going to still go with the discount lender, and he was going with them for the minimal price difference.
Stories like these are fairly common across the country these days. Many agents across the country are losing listings to Redfin’s 1 percent listing program. Agents are forced to be more competitive than ever before. And agents will say that discount brokerages entered the market in the ’90s but not at the level we’re seeing now.
This leaves one to wonder — have we seen a more extended trend of price winning over service?
I think it’s too early to tell at this point. The fact is that discount brokerages like Redfin and iBuyers like Opendoor, Zillow and others like it are entering new markets every day. They’re backed by deep-pocketed venture capitalists — leading some to think that a trend is catching on.
Sacrificing service for price
Do these companies truly offer less service? A quick look at Google and Yelp reviews would lead one to believe that the answer is: “yes.” But only for those of us who can actually find the review.
As Inman reported, Opendoor’s own Yelp page is very hard to find unless you have the link. And Google reviews are even harder to find. But you can find an average of 4.5-star reviews for Opendoor. A quick search on Google for “Opendoor Reviews” reveals a page called reviews.io in the top 5 spot of Google.
If you’ve never heard of this company, you’re not alone. I passed this around the office and on Facebook, and no-one I spoke to had ever heard of this company. How easy is it to get reviews that aren’t on Google or Yelp? Well if you Google “Online Review Companies,” you’ll see the top 5 Adwords results, and some of them say “Buy Online Reviews.”
So this leads to my next question: If the reviews of these companies are, on average, 3 out of 5 or close to it, but consumers can’t find them, how does the consumer find a transparent picture of what they’re getting when they sacrifice service over price? The short answer is that they don’t.
The new businesses may be winning over some segments of customers, but the overall war for their hearts and minds is not over yet.
The real test will be when we go through the next recession. And that’s not to say that service will win.
As VC money seems to be drunkenly poured into every real estate startup with the inkling of an idea, some of these may take off and some may not.
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