Cut your commission, offer buyer rebates, rock the website, get that
consumer religion … and, after a few hard-bitten years, fade away.
Such has been the trajectory of nearly all discount or "alternative" brokerage shops for the past decade.
Without getting into the captious snarl of the "discounter" debate,
I’ll offer a few quick observations gleaned from my conversation with
Guy and a test drive of the site:
- They have turned the conventional wisdom on the alternative
brokerage model on its head — shunning buyer rebates. Instead, they
buy down the mortgage rate from their banking partner and negotiate
rock bottom settlement pricing from a national provider. This, it’s
worth noting, also goes against the recent trend among traditional
companies who often look at the brokerage deal as a loss leader for the
higher margins an in-house mortgage or settlement operation can offer.
- From a consumer standpoint, the immediate settlement savings
coupled with the long-term savings associated with a below market
mortgage rate seems more appealing than a rebate check.
- The company makes money by handing off buyers to hand picked agents
(mostly teams) who the company claims are top performing experts in the
buyer’s target neighborhood.
- They have really nailed the home search. It’s as if they took all the great user experience queues from Estately
and then stripped out all the noise. As someone in the "less is more"
design camp, I think this offers a fine model for any brokerage company
looking to retool its search.
- They claim that the business model pencils, of course. Though I
remain skeptical, I give them points for trying a different angle. They
still have to pay programmers and phone "agents", but the amount they
are paying to buy down the mortgage rate is likely less than a lump sum
rebate, while offering more value to the consumer long term.
It’s going to be interesting to see how this one plays out.
— Brian Boero