It’s an exciting time in Real Estate for buyers and sellers.
Traditionally, both parties to a transaction had to hire a local real estate agent. You still can, but online real estate services like Home Bay are disrupting the traditional model big time. The end result is that buyers and sellers pay less in commission.
Traditional real estate agent commissions add up to a hefty chunk of change. I don’t begrudge the commission because in the traditional process, they hustle. Sometimes homes sell quickly or buyers decide quicky, which is a windfall. Other times, realtors end up doing a ton of work for clients so the commission isn’t all that lucrative.
While commission rates vary, 5% to 6% of the home sale price isn’t unusual in the traditional model. For a $500,000 home, a 5% commission is $25,000. That is split between the buyer and seller agents. At the end of the day, it’s a big chunk of cash that comes off the sales proceeds.
Table of Contents
- Online real estate listing websites changed real estate
- How Home Bay is disrupting the real estate industry
- What types of properties does Home Bay sell?
- Benefits of Home Bay for Home Sellers
- Benefits of Home Bay for Buyers
- 1. What about open houses?
- 2. What’s the cost to buyers and sellers?
- 3. Can a seller also hire a local realtor at the same time as listing with Home Bay?
- 4. What does Home Bay do to get the house sold other than have it listed on the Home Bay site? Does it have realtors on the ground to show the property and market the property?
- 5. I don’t think buyers like it when sellers are in the house when buyers are doing a tour. How does a prospective buyer get access to the key lock box?
- 6. Does Home Bay represent both buyers and seller? Is that a conflict of interest? How do you deal with it?
- 7. Does a Home Bay coordinator show up at scheduled showings? If not, what about theft issues, particularly if the buyer doesn’t go with an agent? Criminals could schedule a showing and clean the place out?
- 8. Can sellers list a house on Home Bay but not retain the realtor services? For example, if a seller already has an agent, can they list with Home Bay for the exposure?
- 9. How is the Home Bay sellers commission calculated? I see it’s a flat rate, but it is different at different price points, right? Also, it seems to cap at $4,000. Is that correct?
- 10. What are your thoughts about Zillow’s Instant Offers and Redfin Now? Where would Home Bay fit in this new arrangement? Is Home Bay going to do this as well?
- 11. What if buyers have an agent, does that buyer agent get paid?
- 12. If the seller’s home does not sell, does the seller have to pay the full flat fee or just the 10% paid up front?
- 13. If the house isn’t sold through Home Bay, will sellers get the 10% paid returned to them?
Online real estate listing websites changed real estate
Traditionally, buyers needed to retain a realtor in order to learn of listings and for getting access to tour houses. The agent also handles all the negotiations and paperwork.
However, now that there are many real estate listing websites, buyers do most of their own research looking for homes to tour. All the information they need is online. These days, buyers give their agent a stack of listings. Agents then arrange showings of the houses.
How Home Bay is disrupting the real estate industry
Home Bay, a real estate listings website, is further disrupting the real estate industry. Not only do they have listings on their site, but they provide realtor services. Today’s technology makes it possible for sellers to remotely grant access to prospective buyers. Buyers can self-schedule the showings. Home Bay, through their online portal, set it up.
It gets better.
What types of properties does Home Bay sell?
The site sells the usual residential properties, including a detached house, condo. townhome or lot.
Benefits of Home Bay for Home Sellers
Not only does Home Bay list houses with the usual set of photos and property description, but they provide some on-the ground real estate services such as photography, signage and coordinating showings. Home Bay does the following for sellers:
- Take photos of the property: Home Bay will have a photographer take photos of your home to be used in marketing.
- MLS: Home Bay lists the property with the MLS and all major online real estate listing websites. In other words, Home Bay isn’t proprietary. They want your listing on as many real estate sites as possible.
- Signage: Receive a “For Sale” sign for their yard.
- Arrange showings for buyers: Buyers can schedule a showing directly on the Home Bay website. At the appointed time, a Home Bay coordinator will meet the prospective buyers to show the home.
For example, suppose Sally and Mike see a house they want to tour on the Home Bay website. They simply go to the listing and click “schedule a showing”. The website offers a list of times that they can choose. Sally and Mike pick a time. At that scheduled time, the key via lockbox will be made available to them for them to tour. This eliminates the logistics juggling with an agent involved. However, if Sally and Mike have an agent, that agent can set up the scheduled showing.
- Save on commission: Not only do buyers save on commissions, so too do the sellers. Home Bay charges a flat rate fee. For example, the commission a seller pays on a $500,000 home is $4,000 vs. $14,970.
- Convenience: When sellers list with Home Bay and hire them as their agent, sellers benefit from the ease and convenience Home Bay offers buyers to view a home.
- Refund incentive: Since buyers receive a big refund when they buy a Home Bay house, that could be the incentive to buy the sellers house.
- Handles all paperwork: Paperwork, while complicated, is entirely handled by Home Bay. There is no need for a local agent to handle the sales paperwork.
- 24/7 help available: Because Home Bay has hundreds of real estate professionals available, if you as a seller need help quickly, it’s available to you.
- Zillow Premium Agent: Home Bay is a Zillow Premium Agent, which means your listing will receive premium placement on Zillow (this is huge because the additional exposure is so good).
Benefits of Home Bay for Buyers
- Save on commission: Buyers save up to 50% of their portion of the realtor commission. Home Bay sends a check to the buyer when the purchase is completed. For example, if you buy a house for $500,000, your estimated refund is $7,485 assuming the overall commission is 6%. In other words, the $7,485 refund is based on the 3% commission the buyers would normally pay. Home Bay sends that amount to the buyer once the transaction is complete.
- Convenience: Buyers can directly arrange showings themselves instead of dealing with an agent to arrange it. Buyers schedule the showing directly on the Home Bay website.
- Don’t need to deal with a real estate agent: While as a buyer you can have an agent and buy a home listed with Home Bay, you don’t have to have an agent. Having an agent when you’re a buyer means you’re subject to the agent’s schedule. Moreover, when I tour a house, I like to rip through pretty fast. When you tour without an agent, you can rip through at your pace (whether you like to take your time or move quickly).
Given Home Bay is an entirely new concept in real estate, I had many questions. I contacted the company with the following questions and they were good enough to send me thorough responses. Here they are.
1. What about open houses?
Let’s address the 800 lb. gorilla in the room. Sellers who list with an online realtor like Home Bay won’t have an agent host open houses. While on the face of it this might seem to be a problem. I thought it a problem until Home Bay provided me some research on the effectiveness (or lack of effectiveness) of open houses.
Consider the following:
- Open houses are for agents, not homeowners: Realtors love holding open houses because they get new business. They often land new buyer clients, collect names and hand out cards. The reality is (and this surprised me) open houses are not very effective at selling houses.
- Open houses are a drag: It’s already a drag as a seller to always keep your home clean and tidy plus having to leave when prospective buyers turn up for showings. But to then have to leave for 2 or 4 hours on a weekend, that’s no fun, especially since open houses aren’t terribly effective at selling a home.
- In-demand houses sell before an open house: If a house is going to sell fast because it’s a hot house and it’s priced right, it sells before any open house is held. It sells as soon as other realtors learn of it. Interestingly, in Austin, TX, 26% of houses for sale sold above asking price with no open house while only 17% with an open house sold above ask (source: CNBC).
- Website listing sells houses, not open houses: The National Association of Realtors found that in 2015 only 9% of buyers found a house they ended up buying via an open house compared to 43% finding the house they bought online. This indicates it’s much more effective putting time and money into marketing a home online instead of hosting open houses.
2. What’s the cost to buyers and sellers?
We’ll wrap this up with addressing the costs to buyers and sellers.
For buyers, there are no costs. It’s free for them. If a buyer has an agent, that agent will expect a commission.
Sellers, on the other hand, must pay 10% of the flat fee up front. This fee goes toward photography, signage and initial marketing efforts. When the home sells, the balance of the flat fee is paid to Home Bay.
3. Can a seller also hire a local realtor at the same time as listing with Home Bay?
No. Home Bay is your acting agent or you hire a local agent and is exclusive for a set period of time. 90 days is the minimum and the engagement can go as long as a year. Home Bay would be the exclusive listing agent and provide all the same services as a local agent might.
4. What does Home Bay do to get the house sold other than have it listed on the Home Bay site? Does it have realtors on the ground to show the property and market the property?
Home Bay does everything a local agent would in getting your home listed on the MLS and popular websites (Redfin, Zillow, etc). We take professional photos and help market your home on HB’s site and social media. Agents may claim to call on other clients with homes that match but the reality is, with companies like Zillow and Redfin with their email & app alerts and users actively searching for home multiple times per day, prospective home buyers are currently doing most of the work.
When prospective buyers want to see your home, their buying agent will use Home Bay to schedule a showing. When buyers show up, you simply open your door or grant access to your lockbox. Home Bay handles offers/counteroffers, all the paperwork using our technology. Because we are a technology company with efficiency built into the process, we charge a simple flat fee and you save thousands on seller agent commissions.
5. I don’t think buyers like it when sellers are in the house when buyers are doing a tour. How does a prospective buyer get access to the key lock box?
Having a lockbox is completely at the seller’s discretion. And typically, potential buyers and agents don’t have a choice as to who is present during showings (and most agents care more about having access that suits schedules), and this is the case across all sellers and agencies.
If the seller has a lockbox, buyer agent would get access info directly from the seller. We have a feature release coming in a couple of months that will provide access all through our user dashboards online.
6. Does Home Bay represent both buyers and seller? Is that a conflict of interest? How do you deal with it?
Sellers who are interested in using HB will sign a listing agreement with HB, similar to working with a local agent, to represent the seller.
HB also has a team of buyer’s agents who represent prospective home buyers. Often times, we do encounter scenarios where a Buyer using HB services finds a home that is a home also listed through HB’s seller agent team. This is an ideal situation where HB is able to save the seller money (by paying a flat fee vs commission) and the buyer will receive half of the buyer’s agent commission as a rebate. Both sides win.
7. Does a Home Bay coordinator show up at scheduled showings? If not, what about theft issues, particularly if the buyer doesn’t go with an agent? Criminals could schedule a showing and clean the place out?
Typically an HB coordinator does not show up unless there is a special request by our seller. Most buyers are accommodated by the buyer’s agent. It’s not common even with local agents that the listing agent shows up to showings. Usually, it is only the buyer’s agent and their buyer at the showing.
With buyers that are not working with a buyer’s agent, we currently do not usually have an HB showing agent at the showing unless the seller makes a request of such.
8. Can sellers list a house on Home Bay but not retain the realtor services? For example, if a seller already has an agent, can they list with Home Bay for the exposure?
Home Bay acts as your agent and a seller can only be represented by one agent, so no. If a seller is looking for additional exposure, the better question might be “why?”. A local agent working for the full commission should already be delivering maximum exposure to get the home sold. Otherwise, what are you exactly getting in exchange for 6% commission?
Marketing your home is more than just getting a listing on the MLS and popular websites, which is standard for all agents, including Home Bay. HB is a Premier Agent on Zillow given our volume of experience, which means your listing through HB shows at the top of local searches. Our professional photographers know exactly how to shoot photos optimized for listings. We’ve sold over 1200 homes, which gives us much more experience with pricing, listing descriptions and negotiations.
9. How is the Home Bay sellers commission calculated? I see it’s a flat rate, but it is different at different price points, right? Also, it seems to cap at $4,000. Is that correct?
HB’s prices start at $2k and move up to $10k for homes in “typical” price ranges.
10. What are your thoughts about Zillow’s Instant Offers and Redfin Now? Where would Home Bay fit in this new arrangement? Is Home Bay going to do this as well?
There are many reasons why a seller might choose a cash offer, ie. need to relocate due to work, cost of repairs, downsize, divorce, financial circumstances, etc. There are many companies that provide this option but it should be made clear that cash offers are usually at a significant discount vs. selling the traditional route where buyers secure financing.
Whatever the seller’s reason might be, we work with a number of partners who offer this option to provide estimates to sellers looking for cash offers.
HB is your best option for selling a home with an agent for a fixed flat-fee. If HB’s solution isn’t a good fit for sellers, we have a network of partners we refer clients to, including cash offers.
11. What if buyers have an agent, does that buyer agent get paid?
In a “typical” home sale transaction, the seller pays 6% commission, 3% goes to the listing agent and 3% to the buyer’s agent. Buyers usually have agents and our recommendation to HB sellers is to offer the buyer’s agent 2-3%, namely because buyer agents are likely to steer buyers away from your home if they see you’re offering a low or no commission
12. If the seller’s home does not sell, does the seller have to pay the full flat fee or just the 10% paid up front?
If the home doesn’t sell with HB, you don’t pay any additional fees. This is not the case with other flat fee or fixed cost selling options.
13. If the house isn’t sold through Home Bay, will sellers get the 10% paid returned to them?
The 10% initial payment is actually used to pay for professional photos and sign installation and is not refundable.