Market Overview

Death Of A (Real Estate) Salesman

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Death Of A Real Estate Salesman
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Industries that thrived off a lack of transparency are destined to encounter significant disruption.

The traditional real estate agent model is a key offender — primarily due to the fragmented nature of the business — and buyers and sellers are forced to split the standard 6-percent commission. With the amount of research and knowledge available to a consumer before ever stepping into a prospective home to buy or sell, it's clear the industry is ripe for some change.

Alex Doubet shared the frustration felt by many homebuyers who felt they paid too much to an agent or received less-than-desirable service. Doubet is the founder of Door Homes, a Dallas-based flat-rate real estate brokerage that charges $5,000, no matter the size or cost of the home.

“I think the real estate agent is dead and the industry just hasn’t realized it yet. The days are numbered. Agents are interpreters of information as opposed to gatekeepers. The information asymmetry is gone — a majority of people buy a house on their own now,” Doubet told Benzinga.

“This is the equivalent of the e-commerce movement. Real estate is the last thing you buy and sell that hasn’t been rocked by e-commerce."

'If You Don't Like That House, We'll Just Go Find Another'

Doubet's business provides a transparent pricing model and agents who don't work on commission, with the mission of aligning the best interests of buyers and sellers.

While the average real estate agent makes four to five sales per year, the average Door agent sells 5 1/2 homes per month.

The company has sold 400 homes since February 2016 and grew revenue by 400 percent year-over-year in the most recent quarter.

Door CMO Paul French told Benzinga the business was designed through the eyes of a consumer.

"How many people like to be sold? Your job as a typical agent is riding on your transaction — how can you not be biased on the fact that you need to make a sale? Our agents go off your needs. If you don’t like that house, we'll just go find another,” French said.

Doubet said the traditional real estate model no longer makes sense.

“It doesn’t cost anymore to sell a $200,000 or $2-million house. The homebuyer takes the risk and the realtor takes the benefit to the tune of 50 percent, and that just doesn’t make sense."

Door is operating in the Dallas and Austin markets. The average customer saves $12,000 per transaction, Doubet said.

The break-even point is $168,000: anything above that figure, and customers start saving more than they would with a traditional brokerage.

A home sale price of $835,000 saves the customer over $20,000 versus a traditional realtor commission.

“Home prices have been rising but realtors have not done anything to drive the price [up]. The market has simply appreciated. In Dallas-Fort Worth, home prices have increased 50 percent in the past five years, meaning realtor fees have increased 50 percent. That is prompting people to look elsewhere," Doubet said.

The Amazon Of Real Estate?

While flat rate real estate brokerages are not a new concept, a scalable real estate platform powered by technology is an intriguing prospect for the $100 billion industry.

Could an Amazon.com, Inc. (NASDAQ: AMZN)-like player emerge in the industry that makes the traditionally arduous process of buying and selling homes more efficient and cost-effective?

Door projects that comission prices will come down even further in the future.

Door's key differentiator is that the company aims to deliver a consistent product across the regions where it operates. Typically, buyers or sellers find an agent on the basis of their local knowledge. With Door, consumers go to the company first, and management is confident that increased volume will enable greater knowledge of the local landscape over time.

“It’s a much more uniform experience. We are building something that is highly repeatable. We absolutely could be operating in hundreds of markets. The market is so ripe for disruption. Once the information advantage was removed from the real estate agent, you didn’t need them anymore,” CMO French said.

Door plans to launch in San Antonio and Houston by 2019.

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Posted-In: Alex Doubet Door Door HomesREIT Top Stories Exclusives Interview Real Estate Best of Benzinga

 

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