Engineering the Future of Real Estate

Engineering the Future of Real Estate

Housing affordability solution engineered as an Internet service.

The Internet belongs to users and Internet companies that offer superior user experience. Users pay for the Internet access every month, expecting to receive value otherwise unavailable. This is why superior Internet companies always operate with data to produce value with unbiased and impartial information, it is an obligation established by the Internet medium itself.

Disruption of Referral Fee Networks

In 2017-2019, the online real estate experience has been hijacked with products offering market allocation, consumer brokering, and price-fixing via online Referral Fee Networks and Raked Marketplaces.

To collect a rake on broker commissions, Referral Fee Networks largely buy network effects from the Big Five technology companies: Alphabet, Facebook, Amazon, Apple, and Microsoft.

HomeLight brokerage is one such example of a broker-to-broker market allocation scheme that claims to have “driven well over $17 billion of real estate business nationwide” since inception.

HomeLight rakes each transaction with a 25% referral fee that is charged against the entire volume of all originated commissions. This yields a mind-blowing estimate of $4.25 Billion in commission kickbacks paid to HomeLight from participating brokers across the United States.

A simple ad bought on Google, worth a few dollars, is easily converted into tens of thousands in junk fees. HomeLight claims to make such conversion every two minutes. These are appalling statistics that make homeownership more expensive across the United States.

Technology Companies vs. Referral Fee Networks

Referral brokers, such as HomeLight and Opcity, are not Internet companies, these are actual brokers with valid real estate licenses classified as NAICS Code 531210 - Offices of Real Estate Agents and Brokers.

Internet companies, on the other hand, such as Google, HomeOpenly, and LinkedIn, are classified as NAICS 519130 - Internet Publishing and Broadcasting and Web Search Portals. Internet companies that operate in real estate space do not hold real estate licenses - we do not need to retain brokerage licenses because we operate with data to deliver the superior user experience.

This distinction is important in real estate representation markets because due to the RESPA and the Sherman Act brokers must compete with one another. It is unlawful for brokers to collude, allocate consumers, allocate markets, or even discuss rebates and commissions with one another.

HomeLight, for example, must produce a service as a broker, but instead, it promotes random brokers for profit. Only technology companies can advertise the services of independent real estate agents on the Internet. Brokers can only advertise self-performed services. This legal gap has yet to be addressed by the Federal Trade Commission and the Department of Justice, but it now costs consumers approximately $15 Billion in improperly negotiated real estate agent commissions each year.

In the present discussion, I will ignore the fact that as of 2018 Zillow operates the "Flex" program as a real estate broker (Zillow Group Marketplace, Inc. California DRE License: 01980367) and Realtor-dot-com uses a referral fee brokerage (Opcity, Inc. Texas TREC License 9005100) for lead generation.

True (and legal) real estate marketplaces in the US residential real estate industry thus far produced by these companies: Trulia (before 2018), Zillow (before 2018) , Realtor-dot-com (before 2018), Homes-dot-com, ComeHome-dot-com (powered by HouseCanary), and HomeSnap. These are all MLS Aggregators, in one way or another.

MLS Aggregators work with independent MLS data banks (there are around 600 to 700 multiple listing services in the United States) to publish data that was originally shared between real estate agents, now directly available to all Internet users.

All MLS Aggregators offer similar user experience: the ability to research and post local homes for sale. Most MLS Aggregators heavily utilize the Automated Valuation Model (AVM) that uses mathematical modeling combined with MLS databases of existing homes and transactions to calculate real estate values.

Home sellers and potential home buyers use AVM-generated home values to make important decisions about the future and the present value of a particular home. While most mortgage companies still require appraisals to be performed by certified appraisers, AVM-generated home values are useful and can be easily scaled across all 130,000,000 homes in the United States.

It should be noted that iBuyers are excluded from this discussion because these models only buy and sell a handful of homes. Zillow Offers, for example, has directly bought just over 1,000 homes in 2019, and only about 700 homes in 2018. This article only addresses technologies that span across the majority of all home sales in the United States.

Engineering of Residential Real Estate Data

Engineering of data behind the value of each home and making MLS information available to the public was an amazing step toward transparency in the residential real estate sector. This effort made Trulia and Zillow into massive technology companies.

Unfortunately, this growth and availability of information did not change the real estate representation industry practices. In 2019, it is just as expensive to list and buy homes with help from a real estate agent as it was 50 years ago. Trulia and Zillow still largely exploit the "standard" 6% commission bias to promote brokers who simply pay for advertising.

At HomeOpenly we see the solution to housing affordability as an engineering challenge. An ability to develop a functioning Open Marketplace experience for consumers to meet with individual agents who are willing to offer their best service at a competitive rate.

To accomplish this we attach agent savings data to each property record as a way to transmit savings in volume for each home in the United States. Instead of finding agents who pay to be shown against a specific home address, our users find agents who offer them tens of thousands in home listing savings, or similar amounts in buyer’s rebates.

In combination with MLS data and AVM-generated values, competitive commission rates offer consumers an unprecedented experience – an ability to quickly and easily determine the best local agents to work with.

Using HomeOpenly service, homebuyers can now research local homes and see local agents offering buyer’s rebates. Home sellers can easily find local agents who offer the best listing rates for excellent service. All savings are shown in a relationship to the AVM-generated value for each property.

HomeOpenly is the “Google of real estate” because it was structured from the beginning as a technology service, not a brokerage. As a technology service, we aggregate and organize savings information and offer all our users an unbiased medium for exchange without referral fees or any other costs.

Our mission is to genuinely improve the homeownership experience in the United States with unbiased local saving data for 130,000,000 homes. The future of the real estate is to improve the quality of the Internet experience, developed to scale with the full focus entirely on users.

Related to: affordable housing, Internet, MLS, AVM, savings

Your feedback is incredibly valuable. Please tell us what is important to you about your homeownership experience, what you look for in a trust-focused platform and how we can better serve you as our user.

Leave your comments

Thank you!

Your comments have been successfully received. Please allow 24 hours for your comments to become available.

Feel free to contact us if you need further assistance. At HomeOpenly we aim to make the opportunity of homeownership transparent, affordable and an open experience.

Last updated: November 18, 2019
First published: November 18, 2019