In today’s blink-and-you-miss-it real estate market, Realtors are sometimes selling properties before they have time to put the for-sale sign in the yard.
With a market that so heavily favors sellers, it can be easy to understand why homeowners might consider listing their house with a lower-cost brokerage, especially in a high-demand market such as Tampa Bay.
The real estate industry is also taking notice. A new firm announced its expansion to the Tampa Bay area — a company called Houwzer, which has set up shop in Tampa with the aim to further disrupt the way homes are bought and sold in Pinellas, Hillsborough, Polk and Manatee counties.
Houwzer charges a flat $5,000 fee for selling a house (plus the typical 2.5 percent for the buyer’s agent), which the company says saves sellers an average of $15,000 in commission.
Like other, similar companies, Houwzer pays its agents as salaried employees, “which allows us to focus on the goals of the consumer and not just commissions,” said CEO Mike Maher. One way it sets itself apart, Maher said, is Houwzer’s brand as a one-stop shop with an in-house title insurance company and mortgage brokerage.
“Houwzer has modern technology and savings, but also a human-based approach to help you with biggest investment in your life,” Maher said, calling it part of the “next generation” of brokerages.
It’s starting with four Tampa employees, but Maher said he’s hoping to grow that number to 25 in the coming years.
Redfin was an early pioneer of this slice of the industry, and also hires real estate agents as employees and charges a lower rate to list a home than a typical commission, at 1.5 percent, plus the commission for the buyer’s agent.
Another competitor in the Tampa Bay area is REX, which charges 2.5 percent to list but markets the property outside of the Multiple Listing Service — potential buyers might instead see an ad for the house on Facebook or YouTube — in an effort to find buyers without agents and thus avoid paying their commission.
A 2019 report from university researchers published by the nonpartisan Brookings Institution said new real estate business models were a positive step to increasing competition.
They found that the typical percentage for real estate commissions has remained steady over the years and has increased faster than inflation as home prices have appreciated. The report also noted that while consumers intensely shop around for what house they want to buy, few shop as much for their brokerage. That’s in part because “information on the price and quality of agents is difficult to obtain, in stark contrast to the ubiquitous information on housing,” they wrote.
Mariya Letdin, an assistant professor of real estate at Florida State University, said lower-cost brokerages can increase transparency for consumers. They are serving as disrupters to the market, she added, because regular people are often not savvy enough to fully understand what they’re going to pay in commission until closing.
“But the online flat fees and other listing services, they make that the first point of the conversation. That’s their selling point,” Letdin said. “It’s making people ask, ‘What are the fees?’ And they weren’t asking it before.”
It hasn’t been only academics calling for more transparency.
Late last year, the U.S. Department of Justice filed an anti-trust lawsuit against the National Association of Realtors, alleging that traditional brokerages were stymying their competition by using certain tactics, such as limiting access to lockboxes only to brokers affiliated with the association.
The National Association of Realtors has admitted no wrongdoing, but agreed to change its policies as part of a settlement, according to its website.
So when should sellers consider using a lower-cost brokerage?
Letdin said it’s an individualized decision, and perhaps first-time buyers would feel more comfortable with a traditional Realtor, while others might find lower-cost brokerages a better alternative to selling their homes without an agent, called “for sale by owner.”
“These companies, like Redfin, are somewhere in the middle between for sale by owner and (traditional) brokers,” Letdin said. “The more experienced you are (at selling homes) and the more confident you feel, maybe limited service is where you’re comfortable.”
Joseph Troy, a broker associate with Charles Rutenberg Realty in Pinellas and an instructor at the Bob Hogue School of Real Estate, said every buyer and seller must evaluate the risks and rewards of who they hire.
“If people are offering discount services, you better be careful what they’re discounting. For example, if someone is going to recommend you don’t have a home inspection, that’s a huge risk,” he said, citing an example he’s noticed becoming more common in an intense market. Home inspections are a routine part of the closing process that can allow buyers the chance to back out or ask for repairs if inspectors find hidden issues with a property.
“You may need skillful negotiation skills and someone who understands market conditions and understands inspections and inspection outcomes,” Troy said.
Robert Azpeitia, 63, decided to go with Redfin when he sold his Tampa home earlier this year.
In the nearly 17 years Azpeitia lived with his family in the house, which they built in 2004, he saw the surrounding area, on the eastern side of the Hillsborough River, appreciate substantially.
He had previously sold a different house without using a real estate agent, but said this property was too valuable to go it alone. The price breaks that Redfin offered were top selling points. He recently retired from his job in the postal service, and he and his wife wanted to make enough money to be mortgage-free and purchase a new home with cash.
The sale closed in January for $695,000, according to the Multiple Listing Service, allowing them to do just that.
“Redfin pretty much understood what we were trying to do, and they helped us make that happen,” Azpeitia said. “That was a great experience.”