With the rise of so many real estate tools for buyers / sellers (zillow, redfin, trulia etc), I think the days of the traditional, high-commission real estate agent are numbered. Services like this are bound to replace them – as soon as someone figures out how to deliver a high quality offering at scale! I've seen a few discount brokers come and go around me (South SF Bay Area) Nobody has quite done it right. Best of luck to Front Door! Seems like a huge opportunity.
@rsweetland Thank you so much! I just took a look at Follow Up Then. Great business idea. I wish you the best of luck, too. You look like you're already off to a huge start!
@rsweetland same here! I think you guys will though. :)
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tl;dr: This is a great idea whose time has come, but several thorns in the process make me hesitent about recommending them for transactions of the magnitude involved here.
Let me start off by aying I am in a unique position to review this. I have intimate knowledge of the market, and so knew what to expect going in. This product uses Realtor's Property Resource, a wholly owned subsidiary of the National Association of Realtors likely created in response to a movement in the mid 2000's to try to centralize and make the MLS data more open and shareable between MLS providers, who, at the time, had data formats as diverse as the number of agencies. This made it absurdly difficult to compare data between MLS providers, as not all providers granularized or indexed the same data. This also relies on cooperation from the partner MLSs, cooperation that the NAR does not have in the target area of Buffalo, MO. The governing board there is the Greater Springfield Board of Realtors, using Rapattoni's MLS offering, RapMLS. Neither of these are providing data to RPR, meaning it has to come from neighboring MLSs and MLS aggregators. The RPR is a powerful tool, but like all tools the appication of it is as important, if not more so, than the mere existence. The tool's CompAnalysis feature (which is what FrontDoor uses to pull the onboarding report) receives as input a selection of houses that is input by the agent running the tool. These are then ran through a number of algorithms, determining the Automated Value Model and the Refined Value Model for a property. The AVMs come from public property records and the RVMs come from a refined list of criteria selected by the reporting agent. This began on a rocky start, as their tool did not work properly out of the gate. I spent the better part of an hour making sure all data was aggregated and correct from the different sources for my property in Buffalo, MO, so as to provide the best picture, since I know this is an underserved market.. The next day, I have an email from @jessica_buffington with my RPR RVM report, for my current residence in Tulsa, OK. But the fact that the tool never provided my correct information is only the tip of the iceberg. Perusing the data, 75% of the "comps" are greater than 200% (>252,000) of the last market purchase price of the home (126,000), and half of them are greater than 300% (>378,000) of the value. The low value comp was 157,500 and the high value was 605,000. That is a delta of 447,500. The sample set had a mean of 377,900, and a Standard Deviation of 181,655.50. With a confidence level of 0.05, and a sample size of 8, that puts our normal confidence at 165,432.4. In other words, if the derived home price falls outside of 377,900 ± 165,432.4, then it can likely be determined to be statistically significant, and unlikely due to sampling error. While their estimate of 142,450 does indeed fall outside this range and is therefore significant, I think we also need to look at the feasibility of a model where a 605,000 house with 4 bed 4.5 bath 3 car garage, a theatre room, 4231 sqft on 0.36 acres built 2016 is considered a comp for a 126,000 house with 3 bed 2.5 bath, 2 car garage 1833 sqft on 0.22 acres built in 1993. It looks as though it relies heavily on the Assessed Value of a property, this being 153,500, rather than the actual sales data, with the highest sale being 135,000.
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Once I got the correct data to Jesica, she returned a report for the Buffalo house, which I know from approx 3-5 recent in-market estimates to be 65,000-77,000 based on houses of similar build, size, lot size, etc and their sales/listing values. The last sale was 89,900, when we bought in 2006. The last recorded sale (don't ask me why the discrepancy, I don't know, I chalk it up to dealing with records-keeping in a town 2500) was recorded as to us in 2006 for 62,766, which we have been fighting with for nearly a decade now because buyer's don't want to pay 92,000 or even 89,000 (we attempted both) for a house that was bought less than a decade ago for 62,700, and has only had a few cosmetic touch-ups and a steadily declining real estate market due to employment factors, as well as the general decline in house prices. The report came in at 100,000 (the highest actual sale in the last year for a truly comparable listing was 94,900 in April of last year, and that was in an area of significantly better homes.) The high outside on this report is 96000, but the home in question is indubitibly not worth anywhere close to that price. it is a 104 year old home, updated in the last 10 years, with 1300 sqft and 4 bed 2 bath. houses similar to this in similar neighborhoods have sold for 35000-51000. This data is the only data a client sees prior to the commitment at least to my knowledge, and selling an uniformed client on the notion, no matter how heavily it is garnered that this is an estimate, that their house is worth 135% of the actual value might very well land them on the wrong side of a good faith contract lawsuit when it is revealed that the true value is significantly lower. Add on top of this the fact that upon questioning the validity and applicability of the estimate for the Buffalo house (using Zillow data pulled from active MLS properties showing the top value between 79,000 and 81,500), I was told by Jessica: "The report sent you was generated by "Realtor Property Resource" only accessed by real estate professionals - it is not tied to our algorithm. The data provided is pulled from actual MLS inventory - not Zillow inventory." The problem with this statement is that it is materially false. From the report she sent me on the Buffalo house, it states that the estimate is an AVM estimate, defined on RPR's website as "Property valuations are generated by a specialized computer program called an AVM, or automated valuation model, that assembles public property records to calculate a value." It even appears on the estimate that the records are from Public Record, not MLS info. It even gives the estimate a 1 star confidence rating, though while on the estimate is likely to be missed be an excited, "give me the bottom-line" client as you are likely to attract with such a service. While they are just sourcing this data from NAR, the ultimate job of picking the properties lies in the agent or algorithm or whatever it is that determines the comps, and so the measure of success or failure lies in that selection or the data service(in this case RPR) that is chosen for a backend, not in the applicability or feasibility of the base idea. In my opinion, this product has a lot of maturation of the selection and evaluation models in use before it is a release-to-world product, especially in a litigious hotbox like realty. When you are looking at a 40% discrepancy on what is likely the prime investment strategy for their target market, there are likely going to be a number of people who are not happy with the netted sales price (this is true of all real estate transactions, not exclusive to these, but it is especially true here since you have the bargain hunter type that will initally be drawn to this) and could very well try to sue you. I cannot recommend this as I see it currently, due to large discrepancies in the selection process of comps, and an unreliable frontend that I found ultimately frustrating at time since multiple data fields would refuse to save, combined with unclear directions on the form to fill out (or maybe that is just me as I do have pneumonia right now, so clear following of instructions isn't a current strong-suit). If I am incorrect in any of my assumptions here, as I would love to be, since I think challenging the status quo is the only way to grow, and I want to see a model eventually, that yields even greater access to average joe to the ability to get his property listed on the insular MLS sites with as little contribution from him to a third party as possible. I think the realtor provides a fanastic service in certain markets, where there are too many factors to count, but in other markets, someone with a decent head for relative valuation can set a realistic base offering price.
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I apologize for the wall of text, but I didn't want to misrepresent our interaction, either intentionally, or unintentionally.
@kclewis0614 Keith, Our services and algorithms are not built to provide you an estimation on the value of your home. All algorithms currently built are not exactly accurate and will be off any exact value of your property. Our algorithm was built to match you with a full service Realtor, licensed professional, in your local area that has the ability to dive in the local MLS, view your property's condition in person - to provide the best estimated value of your home before moving forward with our services. We simple help jumpstart that process by running estimated reports on value; the estimated price at that point in time does not include condition of your property - as that cannot be validated until we have seen current detailed photos or our agent as viewed the property personally. Thus, why with match with a licensed agent to secure accuracy of the entire property and listing. At the end of the day, the appraiser holds the golden key to the true value of your home and even then you can challenge he/she with a Realtor if needed. That is why we are building our network of Realtors, on a national level, to help assist home sellers first hand, at the flat fee of $1500 because there is more to a real estate transaction than just basing it off algorithms. We are here to help you, if are in need of a qualified Realtor - who will provide a more accurate estimated value of your home and fully represent you throughout the entire transaction for a flat fee instead of a commission. Thank you.
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@jessica_buffington And I want to make it perfectly clear that I am not saying do not use their service, not in the least. If you know going in that the comps that are pulled are not an accurate indicator, I feel it will help you be more informed about the process as a whole and as to a ballpark of the property. @jessica_buffington, keep working to improve it! I am not typical by any means and I have become necessarily picky when it comes to this property, and by proxy, realty in general. I probably vett realtors with too harsh a scope, but 3-4 bad ones can do that to you. I appreciate the offer, but the problem with the area is I think going to be that at it's core, it is very insular. It does not help that I bought this house from the daughter of the head of the biggest brokerage firm in town. You are going to have people like me that you probably cannot please. Use them as stepping stones to get yourself higher, do not take them as a road block, preventing your way.
@kclewis0614 Appreciate the response and have noted your advice on providing comparable data information. We always listen to our potential clients and customers and take note to what they are saying. There is always room for growth and improvement, as it's forever evolving. We do appreciate it.
Hey, I'm Jessica, founder of Front Door. I'm here to answer any questions you have and look forward to your feedback.
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@jessica_buffington Trying to figure out how the economics make sense from a realtor's perspective - 6% on say $100,000 house split in half is $3k, double what this nets. In Austin, with median pricing at $250,000, the median pre-split commission is $15,000.
I mean, if I get all the services of a realtor for $1500 flat, great, but it seems like this will naturally bias to a lower quality tranche of realtor, and, if it doesn't, it brings up the question - if realtors are a $1500/pop, is their value prop diminishing?
@shloky Great question. There are a few more value propositions then the realtor taking the listing for the flat fee. We bring them the listings exclusively - cutting out marketing expenses and giving them an additional listing to their pipeline they wouldn't have gotten otherwise. The seller is still agreeing to pay a 3% commission to the buyer's agent. We protect realtor brand and integrity - their own personal sign goes in the yard - gaining additional buyer leads at 3%.
We have tracked that at least all of our agents have converted additional revenue at a 3% commission paying out around $9,000 from them taking our flat fee listings. More signs in the yard for realtors more exposure, more buyer leads. Realtors are hungry and this is a additional revenue channel for them. The realtors provide full services at full quality and we keep providing the exclusive leads.
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Hunter
It's one of the only services I've found that matches home sellers with local listing agents who provide full realtor services, but do it for a flat $1500 fee (versus commission). On the flip side, agents are using Front Door as a lead generation tool to cut out marketing costs. Every flat-fee listing they take enables them to put their sign in the yard, and meet new home buyers while running open houses. Great win-win business model.
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Hi Jessica, Great business idea! Do you also provide text message notifications to the users?
@farah_berahman Hi Farah, I'm one of the co-founders of Front Door. We currently just provide e-mail notifications, but I love the idea of text messages. It's definitely something we plan to implement in the near future!
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@samantha_fong Thank you very much for your reply. I work at Infobip, a global A2P SMS provider. We have 350 Direct Connections with the carriers in 190 countries and would love to help with your SMS notifications. My email address is: farah.berahman@infobip.com Feel free to reach out, and we can discuss it in more detail.
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