To truly appreciate the relative value of the new on-line home sales models compared to the traditional agent approach, one must recognize that there are two very distinct elements involved in the selling-side of a house sale. (We’ll ignore the listing-side dynamic for now. More on that later).
First, is the search process. What has changed so dramatically over the last few years is the ability and willingness of prospective home buyers to search for available properties on-line and conduct their own preliminary search. The difficulty in narrowing the list of potential homes, however, is still a daunting task. This factor will continue to support the active involvement of a knowledgeable selling agent who is willing to tour with clients and invest the considerable time to research various properties. This is particularly true in resale homes that are scattered, unique and often come with their own baggage.
Second, is the contracting and closing process. This where I think the Quill model offers the greatest value. Again, in the resale market, an attorney can provide the direction and counsel that can be critical to the buyer of an existing home that may have accumulated some “hair” over the years.
With all that said, there is another model that is emerging that looks at the selling process through yet a different prizm. Newhomelink (www.newhomelink.com) is a sales platform that presents only new construction homes by local homebuilders that develop new communities. In this model, prospective buyers search on the Newhomelink site for homes in new communities that fit their search criteria of location, size, price and type. They then work with Newhomelink who introduces the buyers to the respective site agents of the chosen communities to begin the contracting process. What differentiates the Newhomelink process from the others is the reliance on the buyer to be more self-sufficient in both the search and closing process. This recognizes that professional builder programs are consistent and balanced in a way that resale transactions are not. Being brand-new, builder homes are freshly and thoroughly inspected, have clean Titles and are warranteed. The professional, corporate approach by today’s builders leaves little room for the type of error and non-disclosure that often characterizes the resale market.
The trade-off here is that the buyer receives the lion’s share of the selling commission – 60% – which equates to 1.8% of the typical house sales price or, on average, $7500 to the buyer. (There is enough money there for the buyer to hire a good attorney to review the documents). This model does not work for the resale transactions for the reasons stated above but it does mean that Redfin, Quill and Newhomelink can peacefully co-exist. At least until someone comes along with a more disruptive model.
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