Today, my real estate firm Quill Realty is announcing its imminent withdrawal from the Northwest Multiple Listing Service [Quill Press Release 5/19/15]. We have some current inventory we need to clear. But by July 1, and likely sooner, Quill will withdraw from the NWMLS.
Why? Because that is where the future of real estate lies. For a long time – 10 years – I have been working on developing a better business model in real estate. It’s been apparent that real estate simply would have to change given the ongoing information and technological revolutions that have changed pretty much everything else. Yet 10 years on, and nothing has changed much at all.
The real estate broker system, with its hallmark of cooperation between brokers, has been around for more than a century. A hundred plus years ago, the term “marketing” didn’t exist, and the only way to sell a house was to have folks talk it up, literally. So today, just like 100+ years ago, a seller must hire two brokers to sell the house: the listing broker; and the cooperating or selling broker who often represents the buyer.
Notwithstanding the fact that listing brokers today take pride in their marketing abilities and are more than capable of selling the home themselves. Or that the internet allows for easy and widespread dissemination of market information. Or that nobody – nobody – “brings a buyer” to the sale anymore. Buyers usually find the home themselves, and very few – if any – buyer’s agents today actually “sell” a house to their client. Buyer’s agents today simply are not, either legally or ethically, “selling” brokers (a fact long recognized by Ardell).
So why do sellers continue to pay a selling office commission? Because it is a requirement of entry into any MLS (understandably so, given their cooperative nature). And for whatever reason – conspiracy theories abound! – sellers today continue to pay at least 2.5% and usually 3% to buyers’ agents. So the price of admission to the MLS is steep.
Meanwhile, the ability to market a property off of the MLS has continued to grow. The FSBO market has been around for a long time, and today there are more opportunities than ever to list a home in places other than the MLS.
This of course allows the seller to skip paying the selling office commission. Today, non-MLS listings appear on Zillow and Redfin, two very large and very popular real estate web search sites, as well as elsewhere across the web. Plus, in this seller’s market, does a seller even need that sort of high tech marketing? A professional yard sign and a couple of open houses are likely enough to get full market value in this historic seller’s market.
So Quill will be withdrawing from the NWMLS. We will be the very first and only broker in Seattle – as far as we know – to offer “single broker listings.” It’s a brand new term to refer to a listing contract with only a single broker. That one listing broker then has the opportunity to sell the house and earn the commission. Until today, sellers only had access to “multiple broker listings,” notwithstanding the fact that there is no longer any actual reason for or benefit to such a listing, other than that is simply how the system works.
Surely we can do better. Ten years on, and I feel like I might finally be making progress. Single broker listings will of course not appear on any MLS. They will, however, appear in many other marketing channels where buyers are looking (like Zillow, and Redfin). Plus the broker has access to every other marketing tool: a yard sign; high quality flyer; open houses and tours. And what about social media? Surely that offers an untapped opportunity for marketing a home. In other words, sellers simply don’t have to pay a cooperating broker commission in order to sell their home for market value, if they get the professional services of a real estate broker. So that is where Quill is headed.
What do you think? Is there a future in single broker listings? Or is Quill doomed to scuffle along like every other alternative brokerage, staying in business but neither getting rich nor changing the world?
WOW! I scanned it but have to run out to meet a photographer at a new listing. Holy Caboley Craig! I’ll read this more fully in the car on the way over to Shoreline (Kim drives) and will be back to comment later. But my jaw dropped at first glance. Finally…something interesting happening in RE. LOL!
Good for you in being a leader and standing up for what you believe in.
Thanks Erik. But nothing so grand, I’m just trying to make a living, plus change the world for the better. 🙂
Having spent the majority of my career in broadcast media – also the old, stubborn dinosaur of its industry – I have to say, I love the spirit of your mission.
I’m actually moving into real estate (currently studying for the broker’s license exam), so please excuse any naivete with my thought/question… While I totally agree with you that the buyer’s agent no longer “brings the buyer”, in the sense that the buyer fully relies on the agent to find inventory, isn’t there still value in other services that the buyer’s agent provides, that ultimately contribute to the sale? Help with negotiation stands out in my mind as being important, especially for first-time home buyers. If the process is handled by a single broker, isn’t there an inherent conflict of interest? How does a listing agent balance the interests of both parties?
Great questions, Jessica! Of course a buyer’s agent brings value to the transaction – but that value benefits which party? As you point out, the buyer gets the benefit of that value. So why does the seller pay for it? Because it is an historical vestige, nothing else.
A Quill buyer is free to engage an attorney or another licensed real estate broker. The buyer will – like in every other aspect of modern life – be responsible for the professional fees incurred on the buyer’s behalf. In other words, real estate finally joins the 20th Century… 😉 At the end of the day, I envision a world where the seller pays for the seller’s real estate services, and the buyer pays for the buyer’s real estate services.
However, I can appreciate that some buyers will be put off by this twist. Plus, Quill will no longer have access to the NWMLS forms. So Quill will have its own forms. And Quill will offer these to a buyer for a reduced fee, so that the buyer isn’t required to hire their own professional.
Is this a conflict of interest? Sure. Is it allowed in real estate? You bet. Quill will specifically limit its relationship to the buyer to one of “customer” who receives brokerage services, rather than a “client” to whom a higher duty is owed. So Quill will still be able to facilitate the sale of the property to an unrepresented buyer, 100% consistent with the laws and ethics that apply to real estate brokers.
Thanks for the response, Craig. What an interesting value proposition. I’m excited to see where real estate is headed, particularly in this market…I moved from San Francisco, and it seems like Seattle is headed in the same direction…housing insanity.
Best of luck!
This is perfect timing. What do you think about THIS article in relation to your post? http://www.seattlemortgageplanners.com/2015/05/how-millennials-have-affected-the-housing-market/
I like it!! Particularly this part: “When millennials do buy homes, they do it differently.” I think that means off of the MLS! 🙂
So I was a first-time homebuyer 5 yrs. ago and will likely be selling this home sometime within the next 3-5 yrs. Since I’ve not yet sold a home that I’ve purchased (but will be doing my due diligence so that I’m prepared when that time arrives), I’m a bit in the dark about how this will affect buyers and sellers but I want to follow the discussion. IF I choose to buy another home (lots of variable factors going into that decision), then it will clearly affect me so I want to better understand your company’s decision in the event others follow suit (which may then affect the housing market in general).
Jennifer, my departure from the MLS affects sellers the most. No longer will they need to pay a cooperating (or buyer’s agent) commission of 3%, plus the listing fee. Instead, they will simply pay a 1% listing fee. Period. So Quill just cut the broker costs of selling by 84%!! Let me know when you’re ready to sell! 😉
On the buy side, I will help you buy a home for a 1% commission or $5k minimum. If the home is listed on the MLS,you should be able to pay 2% less and still be a “full price” offer, since I only need 1% and the seller is paying 3%. So there is a big price advantage to using my services as a buyer. But the offer must call out this reduction in the SOC, so if there are multiple buyers yours will stand out as unusual. Not a great thing.
But if you’re looking at homes that have been on the market for a while, or non-MLS homes, Quill is great fit that will save you significant money when you buy.
But again, the real value – and easy pitch – is to sellers.
Awesome! Super creative! Here’s why it could work.
1) Have you ever set up this great custom MLS search just for some clients but they continuously call you about (sold and pending) listings they found on Zillow? You tell them the search you set up is better, more accurate but soon you get another call about another listing they found on Zillow. These people started using Zillow weeks or months before they contacted you. They know Zillow (or Redfin or whatever) very well and they don’t want to learn your MLS system even if it’s more accurate.
Since buyers are already spending a ton of time on Zillow, Craig’s non-MLS listings could very well get a ton of online views.
2) In pretty much every other country in the world, home sellers do not pay for buyers’ agents and real estate agent fees are typically much lower than in the United States. If a buyer wants an agent, fine, the buyer will have to pay for their own agent. But buyers usually don’t hire their own agent because they always have their own real estate attorney (or similar), anyway.
3) As Craig mentioned, Seattle is lava hot real estate market. You might be able to just list it on Facebook, so to speak, and find buyers with no other marketing.
I expect the idea will work well. The question is how the concept will do in the next down market.
Craig, who will do the showings, the seller or you guys?
John, thanks for those thoughts! We will do the showings. We’re going to be exactly like any other real estate broker. Except we will work by ourselves and won’t employ cooperating agents.
I recognize the pressure on my overhead that may result. Accordingly, my fee will not remain 1% forever. It will likely rise to 1.5% as I get sales under my belt and can demonstrate this new system works.
As for the next down market and how Quill will fare: I am not concerned, In good times or in bad, sellers will be interested in shaving 4 points or more off of their transaction costs.
And the internet certainly isn’t going to shrink in the meantime. Real estate data is online and independent of MLSs. That genie isn’t going back in the bottle.
At the end of the day, real estate must change. The cooperating system isn’t consistent with the modern world. Quill is going to lead that change.
Your “single broker listings” kinda sound a bit like the system in England. (I’ve only researched it online. Maybe a reader here knows the system in England.)
Over there, apparently, the listing agent pre-qualifies buyers over the phone before agreeing to show the property. The advantage to sellers, of course, is that they aren’t inconvenienced by showings unless the buyer is at least qualified to some degree.
Theoretically, in the United States buyers’ agents screen their buyers before showing them home but, of course, that doesn’t always happen. Since showings can be very inconvenient for sellers with children and/or a lot of dogs, eliminating showings to unqualified buyers is a plus.
Bravo! Someone that see’s the future for what it is. The full brokerage model has been on its death bed for years. The broker makes no money. The agents working for the broker make no money because of all the fee’s they have to pay just to have a desk in the brokerage. Those agents that know how to market their listings will do fine in this new world. Those agents that do not know how to market and that have relied on the brokerage will soon go the way of the dinosaur. This had to happen and the sooner the better because Zillow/Trulia has been working as hard as they can to create an app that works on the smart phone to do away with the Realtor all together. Just watch their advertising and you see their view of how they see things. You will quickly notice there is NO REALTOR involved!
So if an agent’s client likes your listing, can they add the Buyer Agent fee to the final agreed price so it can be financed? That’s how we do For Sale By Owner’s usually and for as far back as I can remember. Would that work with your new model for other agents’ clients wanting to buy your listings?
The last time I did one which was two years ago I just charged nothing on the purchase since I was selling their house too, and took a bit extra on the listing of their home side. That’s the easiest way to do it. I sometimes do a flat fee on move up buyers that includes both transactions, so it’s easy for me to move it from the purchase side to the sale side.
It’s all very doable. Lots of options Craig, and I wish you good luck!
Ardell, thank you!! Your well wishes are deeply appreciated. And yes, as you know, in real estate everything is negotiable! 🙂 So I will absolutely counsel my clients to entertain such offers (where the buyer’s agent’s fee is paid by the seller).
Again, Ardell, thank you. I look forward to working with you – off of the MLS! 🙂
” (where the buyer’s agent’s fee is paid by the seller). “You mean where the buyer agent fee is paid by the buyer, but stacked on top of the price “for the convenience of the transaction”, so as to include it in the buyer’s financing as it is in most transactions. 🙂
When you “stack” a cost it is not the seller paying it. You negotiate the home sale to final agreement as to price and terms…and then “stack” closing costs or buyer agent fees or both, adding the language that the seller agrees ONLY and as long as the property appraises at that new and inflated “stacked” price.
That’s how we did what you are doing…back in 1993. 🙂
Sounds like a great business model, Craig. Indeed, in this market, why 6% to sell a home that will sell on its own? Why has it been the case in the USA that the home buyer does not pay his agent directly? I suppose you can say he does pay if the seller adds the commission into the selling price, but still…
“why 6% to sell a home that will sell on its own?” A home will sell on its own if the price is low enough which means money left on the table. If a seller wants to get market value then a home definitely will not sell on its own. The role of the listing broker has changed since I started listing and selling homes here in Seattle back in 1975.
Today, unlike it was 40 years ago the internet is the window to the world for any property listed. Things changed drastically with the advent of the internet. We no longer have the books delivered to us which contained only a black and white photo of the home. Now there needs to be, at least, 15-25 photos. Some properties demand an aerial photo to properly showcase it. A good listing broker will make sure the home is professionally landscaped, cleaned, staged, photographed, and presented to the world. That home needs to be properly set up to present to appeal to, catch the eye of the buyer searching on the internet. That is the way to get top dollar for a home and that is just the first step.
Once a buyer is found any broker can work toward closing. Like any profession, especially one which concerns a huge amount of YOUR money, when things go smoothly it is no problem. When something out of the ordinary pops up the experienced broker calmly addresses it thereby protecting YOUR money.
Jim, we are in 100% agreement! Honestly, I could not agree more on the value of a real estate broker. If you want fair market value, you need a competent listing agent. Period. And that certainly includes the value when something starts to fishtail and the transaction is in doubt. Good brokers are invaluable.
Here is my point: You don’t have to pay 6% to hire a good listing broker. How do I know that? Because HALF of that cost – 3% – is going to the buyer’s agent. In other words, a seller spends 3% entirely for the buyer’s benefit. By withdrawing from the MLS, I can list homes for sale on the internet where most buyers are looking (Zillow, Trulia, and Redfin being the biggest sites) without having to pay a buyer’s agent. And because Quill is structured like a modern business (employed brokers, brand-building marketing efforts, etc.) it can provide high quality listing services, exactly as you describe above, for 2%.
Craig, you got a mention on HousingWire, http://www.housingwire.com/articles/33986.
Pingback: Quill Leaves NWMLS, Dramatically Slashes Listing Cost • Seattle Bubble
The discount brokerage business model doesn’t work long-term. I’ve been in the business a long time and seen many fail because people ultimately need real estate agents to hold their hands and they get paid accordingly to how much they have to put up with and coordinate for 30-45 days. The only way these discount brokerages make it is by doing volume and it’s not sustainable to maintain excellent customer service or personalized attention. Real estate brokering not as easy as people think. This perception is only validated by the large percentage of real estate brokers who are idiots. The top brokers earn their fees. Particularly during down markets, which we’re headed for again at some point, consumers needs full service agents. That said, I love that this company ditched the NWMLS. Instead of creating a discount brokerage, I would LOVE to see this company start another MLS as an alternative to the NWMLS in WA State. That is by far the best business opportunity in the State of Washington. I will be the first customer.
Craig I appreciate coloring outside of the lines. In the 40 years of both active and full time selling homes I’ve seen many different business models come and go. There was John P. Nagle with their flat fee and florescent orange signs. Microsoft tried their hand with model similar to yours called Home Gain. Some business models take hold and some don’t. Perhaps yours will endure and maybe it won’t. I wish you the best of luck.
I find it interesting reading the blog article and posts and it brings up several questions. First time home buyers many times can barely scrape up enough cash for a down payment and closing costs. Maybe your model targets move up buyers instead of first time buyers?
Since this new model is all about paying the buyer’s broker in thinking it through a several questions come to mind. In ellipitco’s post “Why has it been the case in the USA that the home buyer does not pay his agent directly? I suppose you can say he does pay if the seller adds the commission into the selling price.” Ardell wrote about “stacking” as in putting the buyer’s fee onto the sale price “When you “stack” a cost it is not the seller paying it.” In other words, if I understand correctly, the buyers are financing their buyer’s broker fee over the life of the loan because it is included in the sale price. If that is correct then isn’t that how it currently works? I’ve had this discussion many times over the years about who actually pays the real estate fee: the seller from the proceeds of sale or the buyer who includes the fee sale price of the property?
Regarding using the strategy of offering the seller less than asking because the buyer’s broker’s fee is not included, if the buyers deducts the fee from the asking price then the buyer must come up with the cash up front to pay the fee? If that is correct then how is this different from the current system? In addition, does that mean that a pro-active broker representing a buyer must search multiple search engines and sites to find these non-MLS listings? If that is the case that would mean less exposure for the seller?
Btw, I don’t work with a traditional office structure and embrace new ideas as long as they make sense and are an improvement over what is already in place and proven to work.
Once again Craig I sincerely wish you the best of luck!
My wife and I want to move to Seattle or anywhere near there when I retire in 4 years.
I just heard about how rents are skyrocketing there and it scares me to have to wait, but
I do have to wait for Social Security and also, to save more. I have a townhouse and a
small single family dwelling ( both paid for ) but real estate in Tallahassee is less than half
of what it is there.
My hope is that there are some places that are still nice enough places to live where prices
are not beyond what we can afford.
We wanted to rent for a while to figure out which neighborhoods are best that we can still afford.
I’m afraid we may have to find something quickly when we make the move.
As much as I’d like to find the perfect place and buy now before it doubles in price, that’s not
really possible.
Any advice?
David, you seem to be on the right track! 🙂 If you can’t buy, you can’t buy. On the plus side, I think there is some risk of a slight downturn over the next year or so, maybe you’ll be timing the market perfectly. Good luck!
Interesting. A few questions:
Now that you’re not a part of an MLS, do you have another source of comps for helping your agents value a listing properly?
When the market turns and properties aren’t selling as fast or as easily, will you fare as well?
Since most buyers don’t have the cash on hand to pay a commission from their own bank account, and in fact finance the commission as part of their purchase, do you value the home with two prices: one with a buyer agent, and one without?
Are you still a member of a board, or even of the NAR, so if a professional has a gripe they have a place to meet and resolve it other than court?
Do you think you will be able to seo your site and listings higher than the Z or R or T?
Are you aware of other current events that have limited the data on those sites so they are becoming less useful – in spite of their endless ad efforts to make people think they are still relevant?
H Coker, lots of questions are really more rhetorical in nature. But a couple substantive questions merit an answer. Yes, I am a member of the National Association of Realtors and bound to the Code of Ethics. In addition of course I am licensed via the Dept. of Licensing here in WA. And Redin provides a very easy-to-use platform (“map nearby homes”) that allows for us to perform an accurate CMA. Thanks again for the comments.
Really interesting read. I’m left wondering if the same model can be used internationally, it’s given me a few ideas to sit down and look over at least for starters. Thanks, Emma.
I like the idea of the model and would definitely love to try it out.
The biggest problem I see is that most Buyers will have an agent, because on paper they’re free for Buyers. And many Buyers will have signed actual contracts with the agent.
I see 3 possible scenarios:
1) Buyer agents won’t show your listings because they don’t get any $. You can argue that Buyers will request to see them because they’re on Zillow, but I can see lots of buyer agents trying to convince them otherwise.
2) Buyer agents will still ask for commission if the buyer is interested.
3) Buyer agent will demand the commission from their buyers – due to the contract the buyer signed with them.
Liv, we’ve learned that No. 2 is how things play out. And that’s great! We want to sell our listing, obviously. And real estate brokers sell houses, that’s what they do. So we need to make it as easy as possible for brokers to show our houses – and we’re about to roll out a great new system for doing so. Then, the buyer simply requests payment of some commission to their agent in the offer. Negotiations ensue. In both sales so far, we’ve sold above listing because the buyers wanted us to pay something to their agents. In other words, it’s working beautifully!
Hmm not sure if I understand how you’ve sold above listing if the Buyer is asking for commissions to their agent.
Wouldn’t buyers realize that they’re paying extra and that extra is going towards commission for the buyer agent?
And I’m not sure I understand your concern. Yes, of course buyers realize they are paying more, and that extra is going towards the commission for their agent. The one that helped them buy the house. Why is that a concern of yours?
Thanks Liv for the dialogue!
I’m just surprised that Buyers are willing to pay more, that’s all. Especially when they’re used to using agents for free (even tho in reality buyers are also paying for their agent indirectly).
Reminds me of this article I read a while ago…
http://www.pressherald.com/2015/08/06/new-twist-homebuyers-fee-seller-uses-discount-broker
I still applaud you for leaving the MLS. I just think that for buyers who are not willing to pay for their agent (when they’re used to them being free), then the cost would just gets baked into the final price and probably gets split between both seller and buyer.
Unless you’re willing to lose a cut too 😉
Thanks Liv! I gotta close by saying, I expect buyers to be and act like adults. Adults can see right through the “it’s free” pitch, just like you do here.
Moreover, adults appreciate the work done and assistance provided by their broker. If they don’t – if they are so petulant that they feel no obligation to their broker because, after all, it’s free – then they, MORE THAN ANYBODY, need to have a discussion with their broker about their compensation. If you’re a broker, I know you can appreciate that point! 🙂
Lets get to the bottom line. The two agent design really came of it’s own just after World War II as soldiers were returning home and the America was tooling up for the post war boom. Attorneys handled most of the real estate transactions but they had a problem with the GI’s returning wanting to get 100% financing, another words they had no money to toss into the transaction. Attorneys wanted to get paid so they figure a way to do so is go to the person that has the money, the seller. Thus today we have the seller paying out for two agents. I’ve always had a beef with this model, It’s like going to divorce court and you get to pay your ex’s attorney. That attorney isn’t there to play nice, he/she is there to rip your clients gizzard out, all while having their hand in your pocket.
With that said things have dramatically changed over the lat 10 years with the expansion of internet marketing and the big three real estate websites. I would say at least half the the buyers who look at my listings have found the listing on one of the big three sites. They find the house, then here is the catch, the site sells leads to buyer agents.
The only way this model works and I do believe it can is to mention withing the listing that this is an exclusive listing and the seller do not wish to compensate a second real estate agent. The buyers who really want the house will come directly, sure they might make a call to inquire about the commission. If the buyer comes directly to the listing agent then they haven’t yet signed a buyer/broker agreement.
10 years ago when I went toe to toe with Assist to Sell 95% of my listings were sold by myself as no commission was being offered to a second agent, they were withheld from the MLS by contract. Sure there were some complaining agents but what I found was buyers would leave their own mother who was an agent to see the listings, simply no allegiance and I tool advantage of that.
How in the world did I get so many exclusive listings back then? Simple, I just used the story of paying for your ex’s divorce attorney, sellers laughed but fully bought it to the concept. When I first read the article I saw only 1% and I said to myself that isn’t going to work. I think if your doing the work of two traditional agents you should at least get 2.5% – 3%.
Last I would like to say I just want the wars to be done away with. It isn’t fun arm wrestling buyer agents who will do everything they can to be of a pain in the butt. I really enjoy when I bring in the buyer myself and bring to sides together in a very non-combative way. Plus frankly I’m a bit tired of doing a bunch of work only to have a buyer’s agent get the call from a buyer who has already done the footwork and know what house they want. Heck, half the time the buyers have already been to an open house I put on, gleaned me dry of information only to tell me they will contact an agent. There a buyer agents out there that have their clients call the listing agent for a showing. Yup, we do the work and were to get excited about giving away half the goodies?
Ok. I’ve gone on lone enough …………. bottom line, I think the time for a model where each side pays for their agent has come. It needs to as things across the board are getting leaner, there just isn’t enough pieces of the pie to be split between 4 people.
Hi Geraldo, it is a little hard to follow your grammar and typos but I think you said that each party should pay their own agent. Yes I agree.
I do not want to terminate the NWMLS if it will harm my company, however it is about time that we move on and away from this organization. We spend several thousand dollars a year with the NWMLS, between dues we all must pay if we are licensed agents. Plus the cost of the Supra eKeybox. Yes, that is correct, if you are or become a licensed real estate agent and work for a company who is signed up with the NWMLS like we are right now, …then you must pay their dues, go to their classes, use only their forms and pay their heavy and often unwarranted fines.
I am looking at ways we promote our listings and it is apparent that tenants and owners do not use the MLS to find rentals or property managers. They use Google to search and Zillow pops up the most. Appfolio handles a lot of our needs.
Sales is a different story? Not really. The MLS is only convenient for agents to use mostly, not so for the public. So if a person is looking for a home to buy they often will also search Zillow or Google a search term…. very few people know how to even find a way to search the MLS directly.
We will talk more about this over the coming week.
“Thank you!”
Donald J. Leske Sr.
Managing Broker
BCI PROPERTIES, LLC
9702 South Tacoma Way, Lakewood WA 98499
Office: (253) 531-1010 | Fax: (253) 531-5358 | Cell: (253) 241-6695
BCIrent.com – Rentals & Sales of fine homes & properties!
BBB A+ Rated – Please give us a review.
Very interesting topic!
Foxtons in the UK does bang-up business for only 2% total commission and their agents live quite well on the proceeds.