It’s no secret that the real estate industry has seen its fair share of change in the past decade. With the introduction of large information portals like Zillow, Trulia, Redfin…the list goes on and on, the way information is shared today is light years away from just a mere decade ago. While I believe change is good, and I firmly support the access the general public has to information that was once solely controlled by real estate Brokers and attorneys, there is perhaps an ugly side developing…one deeply rooted in corporate greed.
The introduction of all of these new options for consumers is going to come at a price. The question is, who will pay for it?
Until recently, these companies made their money the old fashioned way…they earned it through fees paid by third parties and advertising. However, it didn’t take them long to realize that they could actually make money a different way. A lot more money.
One must remember that the information shared on these portals comes from a source, and that source is real estate agents. Realtors syndicate their listings through these portals to increase national exposure…which is a good thing, right? The portals get the traffic so they can get more advertising, and the listings get seen by more prospective buyers. It’s a win/win.
However, that’s simply not good enough for some of these corporations, so in an effort to capitalize even more, they now have found ways to “sell” the leads derived from the very information provided by real estate professionals to…you guessed it…the same real estate professionals.
Wait a minute. You’re telling me that the same companies whose sole existence relies on the information provided by real estate agents are now selling back to the same agents the fruits of that information? Yes, I am. You give your name and phone number to the likes of zillow, and they will sell that information to the highest bidder (a real estate agent), whether you buy a home or not. Not a bad gig, huh?
Just how much money are we talking here, I mean, twenty bucks here, twenty bucks there, who cares, Curt?
Would you be surprised to hear that your name and number are being sold for as much as 30% of the total commission earned by the agent? On a $400,000 dollar sale, at a 3% commission (half of the total), that company is going to charge the agent 30% of their share earned…or in this example, $3600. For a name and a phone number.
Now, not to sound like I’m bitter about this, because I’m not. I refuse to do business with these companies any more than I have to. Here is where the rub lies.
At one point in time, it was common for a homeowner to pay 6% to list their home, and they were happy to pay it. It represented a good value for the service. Along came the crash of 2007 and we saw banks controlling much of the inventory, through foreclosures and short sales. They saw an opportunity to slash commissions to 5%, because they had a captive audience. Today, 5% is almost the norm anymore, although commissions are 100% negotiable.
Now, if a real estate agent is paying 30% of his/her commission out to an “internet marketing company” just to get your name and phone number, the homeowner’s leverage to negotiate a lower commission just got destroyed. By the time everyone takes their portion of that commission…the Franchisor, the Broker, MLS companies, insurance companies, etc., there’s often very little left for the agent. Take another 30% away and it’s an insult to the effort put forth.
I have my own way to deal with this latest development in our industry, and it doesn’t involve participating in a pay-to-play scenario. But make no mistake, it’s not going away, it’s only getting bigger. More players, more dilution. More reselling of the same information. The likes of corporate behemoths like Amazon are jumping in, anxious to leverage their own internet traffic into easy profits for simply gathering a name and phone number. Think about this…over 46 million “leads” were sold to real estate agents last year, but only 5 million homes were sold nationally. It’s not uncommon for the same lead to be resold 5-10 times.
Based on your own interpretation, you could say that real estate agents will pay the price for all of this. I say it will be the same people that typically pay for it…the consumers. There’s only so much pie, and when it’s gone, it’s gone.
So next time you enter your name, phone number, and maybe an email address, ask yourself this…”I wonder how much money is being made from this information?”
Then ask yourself this…”How much did I get?”
Someone has to pay for all of that…and real estate agents can’t afford to give up much more. That only leaves you at the table.