Friday, March 28, 2014

"Disrupting" Real Estate Agents

Recently read this Gawker article about how real estate agents in over-saturated markets can just absolutely gouge renters and can even scuttle sales by taking just enough commission on both sides of the deal to make it less palatable for everyone involved.

This is a particularly bad problem in New York, which the article discusses in some detail. However, the problem is even worse in close proximity to popular colleges with huge student populations that can't quite fit into school-run or school-sponsored housing or dormitories. For instance, when I rented my house in Cambridge last year, I did absolutely all of the leg work, negotiation (for what little of it there was), and even found the place. All the realtor did was post a largely inaccurate and poorly crafted advertisement on Craigslist that I came across after a couple hours of searching. I called that agent, and had to hound her on the phone in order to get a call back and get her to show me the place at a mutually convenient time. She was late to the showing, which lasted all of 10 minutes, and took forever to get the paperwork together once I told her we were ready to move on the place. (By the way, all of that paperwork is completely standard and cookie-cutter and just needs to be filled out for maybe 10 minutes tops).

For all of my troubles, my four roommates and I had the pleasure of paying her a grand total of about $20,000. This total was comprised of: First month's rent, last month's rent, security deposit, and a $5,000 broker's fee (equivalent to one month's rent). So, for her 30 minutes of work, or let's say an hour to be generous...she was compensated $5,000. And, if we factor in some of her costs like the costs in attracting that client (the owner of the house) to allow her to rent it out, some of her fixed costs, and what she probably had to give to her broker as a cut, she probably still made out like a bandit. She made somewhere above $1,500 per hour for basically doing the easiest thing in the world.

There needs to be a way for renters in crowded markets like this to change the game by either going straight through the landlord (facilitated by some kind of sublet or leasing database). This money shouldn't be going to any middleman. It should discount the real estate, or be more profit for the landlord. Anything else (other than maybe a database posting fee) is just pure inefficiency waiting to be capitalized on by someone entrepreneurial enough to take the plunge and do it.