BUT WILL IT LOWER HOME PRICES?

Say “Buh Bye!” to real estate agents?

A real estate technology company that aims to lower the cost of home-selling by using robots and “big data” instead of commission-based real estate agents has opened a Long Island office — its first outside of California.

REX Real Estate Exchange, which charges a selling commission of 2 percent instead of the usual 5 percent to 6 percent, launched its Long Island operation last week, when it started operating out of a co-working space at RXR Plaza in Uniondale. The Los Angeles-based company expects to start listing New York-area homes on its website, rexchange.com, later this week.

Traditional real estate fees “are just crazy high compared with every other industry in the United States,” said Jack Ryan, Rex’s chief executive and a former partner at Goldman Sachs. Decades ago, investment brokerages charged 12 cents a share for stock trades, but now they charge less than a penny, he said. By lowering real estate fees, he said, his company is “doing the same thing with residential real estate.”

REX, which has raised $16 million from investors, is not the only company seeking to upend the residential real estate sales model.

Another new entrant to the housing market is EasyKnock, a Sag Harbor startup that is rolling out a website designed to match sellers with buyers without the intervention of brokers.

The company, which has raised $1.2 million in venture capital and plans to go live in about a month, lowers commissions to 1.5 percent and does not list homes on the Multiple Listing Service of Long Island, said co-founder and chief executive Jarred Kessler. The MLS is a way for brokers to share information about homes for sale.

“We’re a broker-free ecosystem,” Kessler said.

Among national brokerages, Seattle-based Redfin charges sellers a 1.5 percent listing fee — or 1 percent in a few communities, including Washington, D.C. — though unlike REX and EasyKnock, it also pays a commission to the buyer’s agent.

In a typical home sale, the commission gets split between the seller’s and buyer’s brokerages. If a home sells for $300,000 and the seller pays a 6 percent commission divided equally, each brokerage receives $9,000 and pays out a portion of that to the agents.

Long Island real estate brokers expressed skepticism about the tech-focused companies’ prospects for success.

“Discount brokers have attempted to be around for many, many years, and they just fall away because it is important to provide good personal services to the seller and to the buyer,” said Joe Moshé, owner of Plainview-based Charles Rutenberg Realty.

To be sure, few home sellers choose to bypass agents. Last year and in 2015, 89 percent of home sellers used a real estate agent, the highest share since at least 1981, said Adam DeSanctis, a spokesman for the National Association of Realtors.

Buyers typically start their search online, he said, “but at the end of the day, most people are still relying on the value a real estate agent provides.”

That could change once sellers and buyers discover how much they could save, REX’s Ryan said. For instance, he said, if the seller or buyer of a $500,000 home saves 3 percent on real estate brokerage fees, that adds up to $15,000.

Despite the discount fees, REX will provide full service, he said. The company expects to employ 10 licensed, salaried real estate agents here by the end of the year, and 50 by next year, Ryan said. The agents will guide buyers and sellers through listing and marketing a home and negotiating a sale, but the most sophisticated work will be done by computers, he said.

REX finds likely buyers by doing rigorous analysis of consumers’ income, location, spending habits and other data, and it reaches them through targeted ads on social media and other sites, Ryan said. The company even tracks potential buyers’ browsing on its website, so if a buyer spends time checking out one home’s pool and its zoned schools, that buyer will get more ads for homes with pools and information about schools, he said.

“It’s working brilliantly in southern California,” where the company closed 30 home sales in June, he said.

The company does not list homes on services such as the MLS. Instead, Ryan said, it uses ads and listings on websites such as Zillow.

And rather than relying on commission-based agents to provide information about homes, it is testing a tabletlike “robot” named REX that will be stationed in listed homes, programmed to answer some 75 typical questions. REX agents will let buyers into the homes.

One California home seller said REX provided better service than the traditional agents he had used before in a dozen or so transactions. Bob Simpson, 62, of Ventura, agreed to be interviewed by Newsday at the request of REX.

Simpson said he liked that his for-sale sign listed a webpage dedicated to his own home, instead of to a brokerage’s website, and that he always got quick responses to his questions.

Moreover, he said, when his home sold for $518,000, “we saved $21,000 by using REX. That’s indelibly inscribed in my head.”

One of REX’s Long Island-based agents, Bryan Starck, 22, who moved from California to Great Neck two months ago, said he has met with 10 to 15 buyers so far. The lower fee “makes a ton of sense” to sellers, and so does the use of technology to identify buyers, Starck said.

“You used to really need a traditional agent to buy a home or sell a home,” Starck said. But now, he said, “there’s an unprecedented amount of information available . . . I really do think this is going to be the company to change the industry.”

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6 Responses to BUT WILL IT LOWER HOME PRICES?

  1. B Woodman says:

    Good question? WILL it actually lower home prices? Or will the agent’s fee go into the pockets of the sellers?
    I guess among all the Q&A of buying and selling a home, add a new question for the buyers, “do you use an agent, or an internet robot?” And depending on the answer, the buyers will adjust their bid accordingly.

  2. bogsidebunny says:

    It reminds me of a car dealer in my area who advertises on TV “We’re open for you 24/7” and then indicates after 7 PM you can visit there web-sight and look at all the pretty cars and their selling price. I called and asked the dealer: Is it true like your ad on TV says that you’re open 24/7? His answer was “that is right”. I said then I’ll be past at 3 AM and I expect to be greeted by a human in a suit and tie. He started the usual blather about the web site and then I hung up.

    PS: I use an untraceable cellphone for purposes like this.

  3. dekare says:

    I would think typically this will lower the price. I have seen many a negotiation where the fees of the realtor and the title company, inspections, work needed on the home and so on, all enter into the negotiation process. I have even seen where the realtor both represents the buyer and seller, give up a percent or two to make the deal happen and can do so as there is no other agent involved to share the sale with. The savvy buyer will use this internet sales as a means of getting the price down. I am sure the seller has a price he wants to pocket in mind, and if lowering the price but making it up in less sales fee make it happen…then it’s all good man.

    Of course, expect the blather of how Realtors are being put out of work, and how WE THE PUBLIC need them to make sure we buy and sell homes properly, since of course, we are too stupid to make a sale happen without them. Basically all the horse and buggy whip arguments.

    How long before the internet and robots put everyone out of business?

  4. I wouldn’t lose much sleep if these wastrels were put out of business. They are on not quite a par with lawyers for picking your pocket, but they are definitely in the money for nothing category.

  5. B Woodman says:

    dekare,
    I don’t see my job going away for a LONNNG time……I’m a bench electronic repair technician.
    Let’s see a robot do that!

  6. dekare says:

    The people who work using their brains after years of shoving specialized knowledge and skills into their heads will always be okay. The people at risk are those that have mundane and/or repetitive jobs that require no thinking. Anything that a retarded monkey can do will be replaced by machines…or an actual retarded monkey…whichever costs less.

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