With robots slowly but surely taking over every semi-skilled occupation including in a bizarre development, the production of cocaine which may well unleash the era of cocaine deflation upon Wall Street (a welcome development in light of ever-shrinking bonuses), a new - and familiar - industry has emerged as the robots' next target. According to Newsday, a California real estate technology company that aims to lower the cost of home-selling by using robots and “big data” instead of commission-based real estate agents has recently opened a Long Island office.
The latest potential source of tech-inspired deflation, REX Real Estate Exchange, which charges a selling commission of only 2% instead of the usual 5 to 6%, launched its Long Island operation this summer. The Los Angeles-based company expects to start listing New York-area homes on its website, rexchange.com in the near-term.
Traditional real estate fees “are just crazy high compared with every other industry in the United States,” said Jack Ryan, Rex’s CEO and a former partner at Goldman Sachs. Decades ago, investment brokerages charged 12 cents a share for stock trades, but now they charge less than a penny, he said. By lowering real estate fees, he said, his company is “doing the same thing with residential real estate.” In the process - if successful - it will also put countless people out of work.
According to Newsday, REX, which has raised $16 million from investors, is not the only company seeking to upend the residential real estate sales model. Another new entrant to the housing market is EasyKnock, a Sag Harbor startup that is rolling out a website designed to match sellers with buyers without the intervention of brokers. The company, which has raised $1.2 million in venture capital and plans to go live at any moment, has lowered commissions even more, to just 1.5% and does not list homes on the Multiple Listing Service of Long Island, said co-founder and chief executive Jarred Kessler. The MLS is a way for brokers to share information about homes for sale.
“We’re a broker-free ecosystem,” Kessler said.
Among national brokerages, Seattle-based Redfin charges sellers a 1.5 percent listing fee — or 1 percent in a few communities, including Washington, D.C. — though unlike REX and EasyKnock, it also pays a commission to the buyer’s agent.
In a typical home sale, the commission gets split between the seller’s and buyer’s brokerages. If a home sells for $300,000 and the seller pays a 6 percent commission divided equally, each brokerage receives $9,000 and pays out a portion of that to the agents.
Like any threatened ecosystem, long Island real estate brokers expressed skepticism about the tech-focused companies’ prospects for success. “Discount brokers have attempted to be around for many, many years, and they just fall away because it is important to provide good personal services to the seller and to the buyer,” said Joe Moshé, owner of Plainview-based Charles Rutenberg Realty.
To be sure, few home sellers choose to bypass agents. Last year and in 2015, 89 percent of home sellers used a real estate agent, the highest share since at least 1981, said Adam DeSanctis, a spokesman for the National Association of Realtors.
Buyers typically start their search online, he said, “but at the end of the day, most people are still relying on the value a real estate agent provides.”
That could change, however, once sellers and buyers discover how much they could save, REX’s Ryan said. For instance, he said, if the seller or buyer of a $500,000 home saves 3 percent on real estate brokerage fees, that adds up to $15,000.
Despite the discount fees, REX will provide full service, he said. The company expects to employ 10 licensed, salaried real estate agents here by the end of the year, and 50 by next year, Ryan said. The agents will guide buyers and sellers through listing and marketing a home and negotiating a sale, but the most sophisticated work will be done by computers, he said.
REX finds likely buyers by doing rigorous analysis of consumers’ income, location, spending habits and other data, and it reaches them through targeted ads on social media and other sites, Ryan said. The company even tracks potential buyers’ browsing on its website, so if a buyer spends time checking out one home’s pool and its zoned schools, that buyer will get more ads for homes with pools and information about schools, he said.
“It’s working brilliantly in southern California,” where the company closed 30 home sales in June, he said.
The company does not list homes on services such as the MLS. Instead, Ryan said, it uses ads and listings on websites such as Zillow.
But rather than relying on commission-based agents to provide information about homes, it is testing a tabletlike “robot” named REX that will be stationed in listed homes, programmed to answer some 75 typical questions. The Alexa-like tabletop box can answer nearly any question a prospective buyer lobs in its direction — from when the roof was last repaired to where the nearest Starbucks is. Since in its current generation, Rex can’t do it all, a human rep is also on site, greeting potential buyers. Rex also employs licensed brokers and salespersons but is paying them salaries rather than commissions.
The AI robot may very well appeal to millennials as they grow to house-buying age. Roughly 8% of sales in 2016 were from For Sale By Owner sites, a National Association of Realtors study found, while 89 percent of the sellers used a broker. Rex is trying to increase that 8 percent number by being super smart. Its research has found that the average buyer for a $500,000 home lives within 12 miles and for a $1 million home lives within 18 miles. But for a $50 million home, the buyer is global and already owns a home worth at least $10 million.
One California home seller said REX provided better service than the traditional agents he had used before in a dozen or so transactions.
Bob Simpson, 62, of Ventura, agreed to be interviewed by Newsday at the request of REX.
Simpson said he liked that his for-sale sign listed a webpage dedicated to his own home, instead of to a brokerage’s website, and that he always got quick responses to his questions.
Moreover, he said, when his home sold for $518,000, “we saved $21,000 by using REX. That’s indelibly inscribed in my head.”
One of REX’s Long Island-based agents, Bryan Starck, 22, who moved from California to Great Neck two months ago, said he has met with 10 to 15 buyers so far. The lower fee “makes a ton of sense” to sellers, and so does the use of technology to identify buyers, Starck said.
“You used to really need a traditional agent to buy a home or sell a home,” Starck said. But now, he said, “there’s an unprecedented amount of information available . . . I really do think this is going to be the company to change the industry.”
If he is right, then your next real estate agent may look like this.