Let’s pretend you’re selling your home. You live in a good neighborhood, your house is in great condition, and you decide to price it competitively at $200,000.
Would you be willing to pay someone $12,000 to give tours of your house to interested buyers and facilitate the selling process?
If you think that’s too much, you’re not alone. Jarred Kessler, author of Death of a Real Estate Salesman, believes that there’s a better way for homeowners to sell their homes and keep more of their hard-earned money.
Listen to this week’s episode to learn:
- How Jarred plans to disrupt the real estate industry by empowering homeowners using technology
- Why fewer people are turning to sale-by-owner to sell their homes
- How to negotiate with your real estate agent to get a better deal
Why did you decide to write Death of a Real Estate Salesman?
I didn’t understand why, in 2017, there wasn’t a better process to buy and sell a home.
The active housing market in the United States is made up of approximately 110 million homes and of that, 2% is actively listed for sale at any given time. Yet almost all of those 2.2 million listings are controlled by the real estate brokerage community.
If, as a home buyer, you want to connect directly with a home owner trying to sell, there’s no easy way to do that right now. Yet 73% of the respondents we surveyed said they wanted an online portal that would allow home buyers and sellers to connect directly.
So I knew there was a mismatch between what the market was offering and what the consumer wanted, but I needed to define what was actually wrong with the current process and define what the future of home buying and selling will look like.
My book is the result of thinking through that process.
For example, many people don’t realize that the incentives for real estate brokers in the housing industry aren’t aligned with their client’s best interests. The buyer’s broker wants them to pay the highest price while the owner’s broker wants the buyer to pay the lowest price. Both of them want the deal to happen as quickly as possible and don’t necessarily care about getting the best price for their clients.
I talk a lot in the book about the current dynamics in the housing industry, as well as how homeowners are going to be empowered through technology in the future.
Why are you so passionate about the housing industry?
I’m an outsider — I’ve never been a real estate broker, but I am a homeowner. I care about other homeowners because they deserve to have more money in their pocket when they decide to buy or sell a home. They deserve a better way to do that. It’s their home, after all.
The real estate market shouldn’t be controlled by the residential real estate brokers. When a homeowner pays 6% to their broker to sell their home, they aren’t in control the process, they don’t have access to information the broker has and there’s no real transparency. That’s just not fair.
There are 110 million homes in the United States. Think about how much money 6% of the sale price of those homes is. That’s a lot of cash that could, and should, go back into homeowners’ pockets.
The average home seller could buy 4,500 lattes at Starbucks, a diamond ring, or a dream car with 6% of the sale price of their home.
People deserve that in this country, and the process right now is not fair. That’s why I want to see this happen.
Is this issue personal for you?
I came from the world of financial services. I’ve worked at Goldman Sachs, Morgan Stanley, and Credit Suisse. From the time I entered the industry, there were rooms full of brokers and not just real estate brokers, but equity brokers, fixed income brokers, and so on. People in the industry at that time thought the business was never going to change and this is the way we would always do business.
But over that 17-year period, I watched as technology slowly took over more and more jobs.
Rooms that were once filled with people were replaced with servers and computers. I saw what was happening first hand and understood that technology represented a huge opportunity to change how real estate transactions were carried out.
At the same time, I kept hearing people that I was friends with or family members say things like:
“‘I want to put my house on the market, but I’m embarrassed because my nosy neighbors are going to ask questions.'”
Or they’d say “I want to put my house on the market, but there are 20 houses that have been on the market for 100 days, so what’s the point?”
I realized that there was a gap for people who wanted to sell their homes but just didn’t have faith in the current system. They needed a better process, so that really inspired me to take my unique perspective from financial services and apply it to the housing industry.
Helping my friends and neighbors, that’s what made me so passionate about this opportunity.
What do think the future of home buying and selling will look like?
Right now is a very interesting time.
We have these emerging reselling companies, like Opendoor or OfferPad, that go in, buy your home at a small discount, and then turn around and sell them. Essentially, they’ll guarantee a price if you’re willing to sell quickly.
Then we have companies that offer some sort of derivative of what the traditional broker offers. Things like a flat feet broker, a discount broker, or a technology company that matches a broker with an agent and a consumer.
My company, Easy Knock, connects owners and buyers directly but the difference is that it’s not for-sale-by-owner. A lot of people run into trouble when they try to sell their own homes because you tend to attract bargain hunters who want to undercut you yet at the same time you repel brokers because they know that you don’t want to pay a brokerage fee.
At Easy Knock, we start by asking homeowners how motivated they are to sell their home, how fast they’d like to sell their home, and what price they’re willing to sell their home for. We have all the information on their home and their selling preferences in our system so that we can then match them with a buyer. Buyers come in and then place a bid on the house and it’s up to the homeowner to decide if they want to engage with that buyer or not.
Easy Knock isn’t as invasive as sell-by-owner and we give the homeowner an opportunity to do price discovery and the home doesn’t have the stigma of being on the market for months at a time. Our homes have no days on the market because they’re always on the market.
Finally, we don’t charge the 6% or more that the brokerage community charges. We take somewhere between 1 to 1.5% which is a lot of money back in the homeowner’s pocket. But the #1 reason our customers have said they’d keep using us is that is that we’re bringing control back to both the buyers and homeowners by allowing them to connect directly.
Airbnb is the biggest hotel company in the world, yet they don’t own a single hotel. Uber is the biggest taxi company, but they don’t own a single taxi.
We see the future of home buying and selling going the same way.
“We aim to be the biggest brokerage company in the world without having a single broker because we’re directly connecting people who already have a shared purpose.”
Do you feel people have become jaded about the home selling and buying process?
You hit the nail on the head. But it’s not entirely a coincidence.
The National Association of Realtors is the second biggest lobby group in the United States and they pay an awful lot for messaging. Just recently, from 2015 to 2016, the NAR increased their advertising budget from $37 million to $65 million.
This is part of the reason that homes for sale by owner have decreased from 25% of the market in 1985 to 7% in 2016. The fact is that the NAR is trying to scare people away from selling their own homes, and it’s working.
It’s about time we had an open discussion about the brokerage industry in this country, and that’s something I hope to start with my book.
What are some other insights readers will gain from your book?
First, readers learn about the competing agenda between the real estate broker and you as the home buyer or home seller. I lay out why commission rates are so high and give readers some perspective on how broken the brokerage industry is through some of the horror stories I’ve come across in my research.
One of the more fun things in the book is the misconceptions people have about the brokerage industry and the for-sale-by-owner process.
For example, in reality, lawyers do most of the work involved with the actual transaction, yet the misconception is that the agent holds your hand during the entire process.
I also detail all the different types of brokers and I explain what SFBO is and how the SFBO failed.
How was the book received by both consumers and the real estate community?
There’s been a really amazing cross-section of people that have read it and given me feedback. To be honest, I was expecting a lot of the reviews to be pretty negative because of what I talked about.
I knew I was going to rub real estate agents the wrong way.
But I put the book out anyway and in the first day, I already had 19 reviews—all of them overwhelmingly positive.
These people felt a sense of excitement and empowerment that the industry needs to change and I really seemed to hit all sorts points of what’s wrong with the brokerage industry and what the future of home selling is going to be like. People find those themes very encouraging and that was pretty much consistent with most of the reviews.
I have heard from the occasional real estate agent who argues you can’t cheap out on selling your house and that they just don’t understand what we’re trying to do with the book. But the book is all facts.
Even for someone who is set on selling their house with a real estate agent or through a traditional brokerage, there is immense value in this book. No matter how you decide to sell your home, you deserve to know how you should approach your agent and be aware of what to look for. People don’t understand that agents want you to get the deal done quickly. They don’t really care about getting you the best price.
If Jarred Kessler was going to write a follow-up to Death of a Real Estate Salesman, what would it be?
Death of the Financial Adviser. It could be in the same sort of theme as what I did for the real estate agent, but highlight the value and the pain points involved in using a financial adviser. It would be fun to write about how technology is set to disrupt so many traditional industries.
What would be your advice to any aspiring authors listening?
If you want to write a book, don’t talk about doing it. Do it.