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Op/Ed

Allre: startup thinks it’s immune to brokerage laws, may lose their main partner before they even launch

Allre is the shiniest new real estate startup grabbing headlines, but has their main partner already pulled out, and are they really immune to real estate laws?

allre

At TechCrunch Disrupt’s San Francisco event last week, startup Allre pitched their attempt to disrupt the real estate industry status quo by taking the entire buying/selling process online. Yes, ladies and gentlemen, Allre will cut out the middlemen (real estate brokers) and allow sellers to list their house on their website for free.

Buyers will shop the site’s inventory, set up appointments to see the house, make an offer directly to the seller, and move quickly and easily to closing. Happy seller, happy buyer, and no fees or commissions to the overpaid agents who don’t really contribute much to the process anyway.

I’ve been mulling this model over for a week, exploring the website (it’s in beta stage now, testing in the San Diego market) and formulating my thoughts. Full disclosure – I am a real estate broker. I have to admit that the disdain the site shows for agents turns me off right away, but besides the bruised feelings, my thoughts come from experience and research.

FSBO Site On Steroids

The company’s platform is like FSBO.com or any number of similar sites – but on steroids. FSBO.com allows an owner to list their home for sale in a similar fashion, but charges for the service and offers no guidance. It’s a paid ad site. It also offers submission to the major portals (Zillow. Trulia, etc.) and submission in a local MLS via a flat fee.

Allre is free for both buyers and sellers to use – but specifically emphasizes that it is its own marketplace. You cannot list your home for sale on the MLS and Allre at the same time, although it sounds like they will help the homeowner get listed on Zillow and other portals. Because Allre does not charge the buyers or sellers any fees, it does not consider itself a broker, thus believes it is immune from state real estate commission regulations.

Along with excluding the MLS and keeping the listings away from agents, it controls the entire transaction on its platform – from helping sellers come up with an asking price via automated valuations (hello, Allrestimates?), asking buyers/sellers to fill in the terms of the deal so the site can then populate a contract with the answers, and then “help walk all parties through the rest of the process to get to the closing date as smoothly as possible,” (according to TechCrunch).

If it Walks Like a Duck

So let’s explore the model here. Allre will allow sellers to list and advertise their homes for sale. It will vet buyers (making sure they are qualified to buy) and bring both parties together for the sole purpose of selling your home. Allre will control the transaction on their platform, create a contract for the parties, match them up with service providers, and guide the parties to a smooth close. What does that sound like to you?

bro·ker noun \ˈbrō-kər\ : a person who helps other people to reach agreements, to make deals, or to buy and sell property (such as stocks or houses)

According to Merriam-Webster, I’d call Allre a broker.

Forget about the fact Allre is not charging the parties a fee for bringing them together, the fact is that someone is paying for this party. The company says it has deals with one of the largest closing services in the world (unnamed) and Prime Lending to help buyers with their financing. Partners and affiliates (home inspectors, lawyers, movers, etc.) could be tapped for marketing fees or referral fees. Thus, Allre is being paid to bring buyers/sellers together and guiding them to closing. I’d think state real estate commissions would be interested in Allre and their platform.

But there are other dangers with this model. Considering the widespread fear of kickback accusations by RESPA or CRPB, who would want to risk paying a fee to Allre to be their provider of choice? Home warranty companies, title providers, and in-house lending groups have been subject to extreme scrutiny for paying fees to referral partners. What makes this any different?

In fact, despite announcing the Prime Lending partnership last week, rumor on the street says Prime Lending may be pulling out before the platform even has a chance to launch.

Another Disruptor (Yawn)

I am sick and tired of reading yet another story about an internet company who wants to disrupt the real estate industry. Texas broker Eric Bramlett (Bramlett Residential Real Estate) summed up his thoughts: “I think the biggest story here is that a startup with no funding and a 10 year old business plan got into TechCrunch Disrupt 2014. Didn’t Zillow announce it’s intent to disrupt the RE industry in 2005? Can I submit my 140 character communication tool to TechCrunch Disrupt 2015?”

Amen.

All of these internet companies that profess to want to disintermediate the real estate business – just as they did with the travel agency business (everyone even uses the same analogy) – forget one major fact: buying and/or selling a home is often the largest, most complicated transaction a person may undertake.

Joe Buyer doesn’t buy or sell a house every year, and when he does, it’s a huge financial decision. There are so many moving pieces to a real estate transaction that it is hard to summarize in a simple checklist or fill-in-the-blank document. When the buyers or sellers realize they’ve messed up with one of those pieces – missing an inspection date, having to re-negotiate a closing date, or are confused as to which repairs to ask the seller for and which to let go – who will be there to advise the consumer?

Allre founder Kathy Dryden is an ex-real estate agent, and it’s disappointing to read her quotes online, saying that today’s Milennial buyers and sellers “rarely need an agent.” Does an entire generation find that it’s a “hassle” working with a real estate professional to buy a house? “We already buy everything else online, after all, so why not a house?”

The truth that the public rarely understands is that the value in the real estate agent is less in opening the door to the house and more in getting them to the successful close. The majority of the agent’s work normally only starts after the perfect house is found – experience, negotiating skills, unsurmountable amounts of knowledge, and guidance are the real estate agent’s true value. I find it sad that Dryden publicly marginalizes the value an agent can give to a transaction – while basically offering to do the same thing (bring buyers/sellers together, and guide them to the closing).

Yeah, she’s just debuted the internet’s newest non-brokerage that looks like a brokerage, swims like a brokerage, and quacks like a brokerage.

Written By

Erica Ramus is the Broker/Owner of Ramus Realty Group in Pottsville, PA. She also teaches real estate licensing courses at Penn State Schuylkill and is extremely active in her community, especially the Rotary Club of Pottsville and the Schuylkill Chamber of Commerce. Her background is writing, marketing and publishing, and she is the founder of Schuylkill Living Magazine, the area's regional publication. She lives near Pottsville with her husband and two teenage sons, and an occasional exchange student passing thru who needs a place to stay.

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