But in our opinion, the reality of buying and selling actually looks like this:
Aggregators are websites that pull some of the MLS information and make it accessible for consumers to view online. In our opinion, this was a big game-changer for consumers, as they are now able to search for homes themselves online. However, these aggregators are essentially lead generation platforms and make a lot of money by selling leads to agents and other services.
These platforms act as a portal to the MLS but have made a full business model off of collecting and selling your information back to the real estate industry or for their own internal services. Even if the homeowner posts the home, their information could still be sold to others, as could the inquiries.
Referral platforms aren't new but recently have evolved to become the true middlemen of the middlemen (and a billion-dollar business model). We believe these platforms are one reason why commissions have gone down less than 1% since 1992!
These platforms position themselves as “helper” to find you the best agent, or even the best way to buy or sell your home. They typically promote themselves as a free service.
What they really do is lock in your attention and information before you start to find an agent or selling service on your own. They don’t tell you that most referral programs only refer you to agents/services that agree to pay for your information. Sure, some of them vet agents for specific qualifications, but it still comes down to only referring to agents who are willing to pay.
In our opinion, these platforms want to gatekeep your information for the sole purpose of selling it to someone else. Agents with years of experience and big lists of happy clients aren’t typically found on these platforms. The bigger issue with these referral programs is the lack of transparency in how they work and how they can impact your chance of negotiating your listing commission or asking for a buyer’s rebate (legal in 40 states).
When you get referred to an agent from these platforms, the agent has to agree to give the referral platform a big fee or 25%, 30%, sometimes 35% of their commission earned when you close on a home. That 30%+ is agreed upon when the agent takes you as a client. With that much already gone, usually without the consumer knowing, what is left for them to negotiate? Learn more about referral platforms.
This is something that we didn’t know about until we attended a real estate conference (as a consumer).
Once a company has you in their funnel, they don’t want you to shop elsewhere and can place specific companies in front of you for financial gain. Sure, this is business 101 to sell to you while you are already there. However, business 101 is a slippery slope when you are making the biggest purchase or sale of your life. Some home warranty companies, internet services, and even security systems offer kickbacks to brokerages or agents when they sell their specific product.
How do we know this? Because a home warrant company offered us $60 to sell their program to Selling Later members. We said “No way” but it opened our eyes to the kickback system in the industry
This is also why you will see some companies offering additional services like title, insurance, lending (or create a partner service to avoid RESPA violations).
While you may have thought about buying or selling for a long time, a lot of big decisions are made within the small time frame between when you placed an offer (or accepted an offer) to when you close. Big decisions like inspectors, home warranties, insurance, title companies, etc. are all made within that small time frame. As a consumer, your time to shop around and find the best value or best service is tiny. In our opinion, this is where those kickbacks cause an issue. You have to wonder if this company is referred to you is actually good or because there are kickbacks involved?
We hope you are still reading because this is the most important part:
Disclaimer: This is an opinion based on our studies of consumer practices in real estate. This isn’t about a specific company, real estate agents, or anyone in particular. Consumers have a right to know about a problem that starts before a consumer is ready to buy or sell and then works itself the whole way down the process.