So far, the U.S. real estate industry has maintained its 6% standard commission despite mass adoption of the Internet for researching available properties. And the run-up in housing prices in many areas has made real-dollar commissions much larger than they were in 1995. Certainly Redfin and others rebating commissions on the buyer’s side have made inroads. But if the seller’s agent is still taking 3% the total commission remains stubbornly high.
Enter Allre.com, a San Diego-based startup that debuted at TechCrunch Disrupt today (demo video). Taking a page from Zenefits model (free payroll services if you buy your healthcare through them), Allre will do the real estate transaction for free. That would save the average California seller $24,000 in commissions.
The catch? Buyers use the Allre platform to buy their title insurance, homeowner’s insurance, mortgage and other closing services. Allre is able to book these ancillary commissions because as a free service it does not come under RESPA regulations forbidding such arrangements.
Allre said it will work with multiple vendors in each category; however, for now its exclusive mortgage provider in its first market is Prime Lending.
Real estate is a business with huge network effects, which is why the various MLS services around the country continue to maintain a tight grip on real estate marketing, and commissions. So the challenge for Allre, or anyone who wants to take on the local commissioned base, is to get a large cross-section of homes listed on its site. The company has some ideas on how to do that (see the Q&A session that follows the TC demo, specifically, the question at the 7:06 mark), but no one has really cracked that nut yet.
Relevance for Netbankers: Home ownership, and the financial services surrounding it, is an area that holds significant profit potential for banks and credit unions. Working with Allre or other real estate disrupters could be an effective way to find new mortgage (and banking) customers.
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Allre homepage (8 Sep 2014)
Allre transaction dashboard
