Startup ideation phase

Palestrino, You may want to research why many discount sale models have failed. For buyers, Keith's model works really well. Question is whether 2.5-3% to the seller's broker is justified. Believe London market is 2% ish.

In addition, in London, believe buyer's pay a small fixed fee if they choose to use a broker at the start and a success fee. American buyers are used excessive service without having to pay a fee if they do not buy.

Thanks for your comments, 300_mercer. I'm sure this is not an easy nut to crack given that so many have tried and failed, but nothing convinces me that this market is not ripe for disruption... At the very least, I think there is space for alternative models that aligns all stakeholder's incentives better.

Just brainstorming. Why are not there more FSBO listings ? One can list at Streeteasy and deal directly with the buyers. I have heard the main issue with this model is that most buyers are represented by the broker. Hence, you have to offer a buyer's broker commission. What are you thoughts?

I think part of it is that buyers perceive the Buyer's Broker to be "free" to them since they split part of the commission the seller is paying to the Seller's Broker.

what if the people who fit into those categories are not available by July 6? Is your unicorn over?

As far as I know and can recollect, in London, buyers don't use a broker. You do the legwork of looking for yourself. This may be different for high-end properties/buyers Estate agents (realtors) have storefronts, with many represented on each high street. Plus, signs are posted out front on properties for sale that list the selling agents details And, theses days, of course, much will will done online. The commission to the seller's broker is between 1% and 2%. I was staggered when I moved to NYC and found out the commission was 6%.

I'm not a broker but just wanted to point out that buyer and sellers brokers split the 6% in half, so they each get 3%, and then I believe they have to give half of the 3% back to their respective brokerage houses, so they're only earning 1.5% for themselves. The vast majority of brokers aren't rolling in crazy dough and are just making decent livings.

There are probably 14,000 agents in Manhattan and about an equal number of deals done annually which would mean that on average there is 1 deal done per agent.

Obviously an over supply of agents.

Too bad they won't utilize the same solution as to controlling the overpopulation of deer.

To the OP. There are plenty of problems with the ecosystem that is NYC real estate. I dont want to get into a full list here, well, because urbandigs is hoping to solve some of these challenges with our next project.

I just wanted to post to advise, if your idea in any way requires the use of data (either listing data or sales data) as part of the platform to help buyers, sellers, and the professionals that service them, just understand that the data issues plaguing this industry go deep and the integrity issues for both list side and sales go deeper. We have spent 4+ yrs building algos to run our systems to fix these issues, most of which was possible because I was a broker here and understood the individual issues and how to properly engineer fixes that make sense. But just know that (i) getting the data and (ii) cleansing, standardizing, normalizing, engineering the data to search, display and be counted properly in charts/graphs, etc, is quite a daunting and costly task.

Outside of NYC, mls's allow for a much simpler access to data needed to build platforms to help the consumers and professionals within a real estate ecosystem.

I'm not anti-MLS (I think that's the position of the big firms; if anything, I think it helps small brokers like myself) but I think there's an argument that because NYC is so co-op heavy, there are always going to be factors that exist outside the data. It seems to me that the difference between the experience of living in the John Adams and living in the Vermeer (buildings built within a couple of years of each other, so very similar as housing stock goes) is greater than the difference in the experience of living in one of two houses in Scarsdale that are similarly only three blocks away from each other.

Thank you all for the interesting discussion. My hope is that the NY real estate market is big enough that even if a solution really adds value to just a very small percentage of the stakeholders involved, it may still be a viable business model. Obviously the challenge is to ensure such value is delivered. You all bring up interesting points: it's not all easy money for the brokers, NY has a lot of idiosyncrasies, organizing data is a Herculean mission, and it's almost like each buinding is its own submarket...

The first thing I asked myself when I decided to start up my biz, "What can I do differently that will benefit my clients from a cost perspective as well as a process perspective." I focused on making both excellent.I knew I wanted to keep it simple and after some trial and error settled on a model that has worked quite well. And after $350M+ in sales and an army of loyal clients and fans I think we found a niche that was longing to be serviced. Look how the travel industry and stock brokerage biz model was disrupted. It is not only more efficient to transact, it is much more cost effective; who doesn't like that? There are still large banks and travel agents that cater to those who want that type of experience. However the E trades and Kayaks of the world also serve a large number of very satisfied people. What is important, you have a choice (even if some are threatened by that).

Good luck palestrino!

Keith Burkhardt
The Burkhardt Group

Good luck with your unicorn. What will you call it?