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The fun part of buying a home is searching for your dream home online. The fun part of selling is getting your list price in short order and then closing within 30 days.
The nasty part of home buying and home selling is when your negotiated deal falls apart. Besides the emotional disappointment, there are hard dollars lost by the seller, buyer, and both of their agents.
My friends in the title insurance industry claim that deal ‘bust outs’ can be as high as 15% of all open orders. That’s one out of seven.
There’s many reasons why deals bust out, such as low appraisals, inspections that reveal serious property deficiencies, buyer remorse, seller demands, and many more.
For whatever the reason deals fall out, here’s my guesstimate of what those broken deals cost, with a grand total waste of $4.5 Billion.
Why would anyone want to get into this ‘profession’?
The National Association of Realtors’ (NAR) membership profile states that the typical Realtor makes just $41,800 in commission income on 11 transactions. There are 1.3 million Realtors, in case you didn’t know.
For illustration, take the median income of $41,800 and deduct 30% from it for business expenses and taxes. You are left with $29,260 to live on and pay out of pocket for your health insurance, 401K (SEP), paid vacation, maternity leave, sick days, etc.
Works out to just $14.63 per hour based on a 2,000 hour work year.
Pity the poor real estate consumers, entrusting their sale or purchase of a $300,000 asset to a minimum wage earner. Then worse, the seller asks the listing agent to reduce the listing fee commission, and the buyer expects his agent to give a cash rebate.
We have discussed supply and demand before: too many Realtors allows the consumer to force price compression. I’m about to throw up.
In my Prelude post I mentioned how much consumers enjoyed searching for homes online, but once they enter the actual transaction process, all transparency and sense of order goes out the window.
Just trying to locate the best services and products, with the best solutions, and the best prices can be a thankless task.
One of the reasons might be the sheer fragmentation of products and services, each operating within their individual supply chain process and not collaborating fully with each other.
So I have this view that a marketplace platform could bring about a new paradigm of the real estate transaction experience for consumers as well as the providers of products and services required for those transactions.