SAN FRANCISCO (KPIX) — Most homes in the Bay Area sell pretty quickly, often for more than the asking price.
That realty reality has some sellers wondering if paying a standard five to six percent commission is worth it. Now, a crop of companies are offering new and — they claim — less expensive ways to sell a home.
David Bellagamba knew he wouldn’t have any trouble selling his home in San Jose’s Rose Garden district.
“I’ve watched houses in this area sell in a heartbeat,” Bellagamba said. Instead of using a traditional, full-service real estate agent, Bellagamba tried Faira, a start-up that claims to save the average seller about $20,000.
Faira provides some services for free, and founder Kamal Jain says much of the process is done online.
“It’s a different model, we remove all the complexity,” Jain said.
Faira takes photos, lists the home, does an inspection and holds open houses for free. Sellers who want more can choose to work with a Faira agent, who charges a one percent commission.
After providing a credit card number, interested buyers can place bids on the seller’s dashboard. Offers are automatically declined when a higher bid comes in. The buyer who places the highest bid has five days to commit to the deal and if they back out, Faira charges them $500. Faira says this insures that bidders are serious.
“Here’s the thing, no buyer wants to lose money,” Jain tells KPIX.
If the deal comes together, the seller pays a three-percent commission to the buyer’s agent and Faira collects a half-percent from the buyer. In all, Bellagamba paid about $32,000 and said he thinks he saved “somewhere around $30-40,000.”
Faira and other start-ups are trying to change the way homes are sold by taking advantage of technology and reducing realtors’ commissions. Redfin, the largest of these start-ups, also promises to save sellers thousands of dollars.
Redfin realtors earn a salary and receive benefits, not commissions. However, Redfin agent Miriam Westberg said they do earn bonuses.
“I’m not going to push you to take an offer or write an offer on a property that might not be the right fit,” Westberg said.
“Because we’re not commission-based, we’re not incentivized to close the deal in a certain amount of time or take the first offer that we receive,” she adds.
Up-Nest, which is based in Burlingame, has agents compete to sell homes by submitting proposals to sellers that include how much commission they’ll accept.
“We’re the only website where consumers can essentially comparison-shop for a realtor,” Upnest founder Simon Ru said.
Knock bills itself as a property exchange company. It buys a homeowner’s house directly and moves them into a new home of their choosing before putting the homeowner’s old home on the market.
Some full-service real estate brokers are skeptical of these startups. Mark Lederer is a full-service broker at Red Oak Realty in Berkeley who’s been selling homes in the Bay Area for 16 years.
Lederer says the startups are “not incentivized to get the best result — they’re incentivized to get the project sold and done. The value that we create supersedes the amount of commission that would be saved in a transaction.”
Lederer also warns that a lot can go wrong in a residential real estate deal that less-experienced or lower-paid agents might not be equipped to handle.
“There are always pieces of the process that are new and challenging in every transaction,” Lederer said.
Lisa Tichenor is another veteran Bay Area real estate agent who, after working with buyers and sellers for 15 years, thinks the traditional business model offers something special — personal relationships.
“I think that every deal is made or broken by relationships: agent relationships, principal relationships, all sorts of things,” Tichenor said.
“You can’t sell a house online, you’ve got to live it, breathe it, be in it, I feel, to sell it well.”
Even so, Bellagamba said his experience using Faira was positive and his deal went smoothly. His home was only on the market for eight days and sold for more than $300,000 over asking price — money he’s happy to have now that he’s moving on and out of the Bay Area.
“I think we did a real good job,” Bellagamba said.