A real estate technology company that aims to lower the cost of home-selling by using robots and “big data” instead of commission-based real estate agents has opened a Long Island office — its first outside of California.
REX Real Estate Exchange, which charges a selling commission of 2 percent instead of the usual 5 percent to 6 percent, launched its Long Island operation last week, when it started operating out of a co-working space at RXR Plaza in Uniondale. The Los Angeles-based company expects to start listing New York-area homes on its website, rexchange.com, later this week.
Traditional real estate fees “are just crazy high compared with every other industry in the United States,” said Jack Ryan, Rex’s chief executive and a former partner at Goldman Sachs. Decades ago, investment brokerages charged 12 cents a share for stock trades, but now they charge less than a penny, he said. By lowering real estate fees, he said, his company is “doing the same thing with residential real estate.”
REX, which has raised $16 million from investors, is not the only company seeking to upend the residential real estate sales model.
Another new entrant to the housing market is EasyKnock, a Sag Harbor startup that is rolling out a website designed to match sellers with buyers without the intervention of brokers.
The company, which has raised $1.2 million in venture capital and plans to go live in about a month, lowers commissions to 1.5 percent and does not list homes on the Multiple Listing Service of Long Island, said co-founder and chief executive Jarred Kessler. The MLS is a way for brokers to share information about homes for sale.
“We’re a broker-free ecosystem,” Kessler said.
To be sure, few home sellers choose to bypass agents. Last year and in 2015, 89 percent of home sellers used a real estate agent, the highest share since at least 1981, said Adam DeSanctis, a spokesman for the National Association of Realtors.
Buyers typically start their search online, he said, “but at the end of the day, most people are still relying on the value a real estate agent provides.”
That could change once sellers and buyers discover how much they could save, REX’s Ryan said. For instance, he said, if the seller or buyer of a $500,000 home saves 3 percent on real estate brokerage fees, that adds up to $15,000.
Despite the discount fees, REX will provide full service, he said. The company expects to employ 10 licensed, salaried real estate agents here by the end of the year, and 50 by next year, Ryan said. The agents will guide buyers and sellers through listing and marketing a home and negotiating a sale, but the most sophisticated work will be done by computers, he said.
REX finds likely buyers by doing rigorous analysis of consumers’ income, location, spending habits and other data, and it reaches them through targeted ads on social media and other sites, Ryan said. The company even tracks potential buyers’ browsing on its website, so if a buyer spends time checking out one home’s pool and its zoned schools, that buyer will get more ads for homes with pools and information about schools, he said.
“It’s working brilliantly in southern California,” where the company closed 30 home sales in June, he said.
The company does not list homes on services such as the MLS. Instead, Ryan said, it uses ads and listings on websites such as Zillow.
And rather than relying on commission-based agents to provide information about homes, it is testing a tabletlike “robot” named REX that will be stationed in listed homes, programmed to answer some 75 typical questions. REX agents will let buyers into the homes.
One of REX’s Long Island-based agents, Bryan Starck, 22 [uh huh] who moved from California to Great Neck two months ago, said he has met with 10 to 15 buyers so far. The lower fee “makes a ton of sense” to sellers, and so does the use of technology to identify buyers, Starck said.
“You used to really need a traditional agent to buy a home or sell a home,” Starck said. But now, he said, “there’s an unprecedented amount of information available . . . I really do think this is going to be the company to change the industry.”
We'll see. One share of, say, Apple, is exactly the same as another, so paying a premium to a third party to buy one is just stupid. Houses are unique, and generally aren't purchased in lots of one thousand, so it may be a case of apples to oranges. Still, ask traditional "financial advisors" what's happened to their business since index funds came along, and there's no reason for traditional real estate agents like myself to be sanguine.
A couple of more years of the traditional, and very lucrative present arrangement, please, and then you can all just fire up your computers, with my blessings.