Buyer Beware: FREE-for-service vs Fee-for-Service real estate agents

Insert Thumbtack screen

Two weeks ago, I disclosed that I am attending Dave Ramsey’s Financial Peace University class for the third time.  Tonight’s lesson is one home buyers should heed: Buyer Beware.

As consumer advocates with a long track record of championing money-saving real estate business models, we were excited to learn this week that OpenChime released a new update.  We first corresponded with their founders, fellow MIT grads, about their bid model in January 2011 and subsequently added The Real Estate Cafe to their directory.  Last summer we added our fee-for-service business model to another RFP (request for proposals) app, Thumbtack, using the headline:

Wanted:  Cost-Conscious, Tech-Savvy DIY Home Buyers

Long before “FREEmium” was added to the digital marketplace, real estate agents routinely — and we would argue deceptively — advertised that their services are available at “no extra cost” or “free.”  The Consumer Federation of America (CFA), Consumer Advocates in American Real Estate (CAARE) and others have offered alternative perspections on negotiating real estate commissions and the question: “Who pays the real estate commission?

Because the buyer’s pays the real estate commission out of the funds they bring to the closing table, our perspective is that is their cost.  If they are not receiving a rebate of the buyer agency fee, they maybe financing the cost over the life of their loan. So what appeared to be a FREEmium, is actually a PREMIUM — the true cost exceeds the 2.5% to 3% buried in the sales price because interest is being paid on the commission every month instead of getting cash back at closing.  In contrast, The Real Estate Cafe has offered a Menu of Fees & Rebates since 1995, and our 100% rebate option has been featured in an article in Wall Street Journal on “Cutting the commission.”

Thankfully, the internet and mobile devices enable homebuyers to do much of the home buying process themselves.  Unfortunately, our experience is that DIY homebuyers unintentionally short change themselves in at least three ways.  We’ll write more about that subject soon; in the meantime,buyers beware.

If you’d like to become more aware of money-saving opportunities in real estate, we’d love to demonstrate how buyers can use new request for proposal business models like OpenChime andThumbtack to save money.  Want to TweetUp at your convenience for a tabletop demo or participate in a demo online?  Either way, we’ll show you how to monetize the difference between alledgely “FREE-for-service” and fee-for-service business models.

DEMO Request for Proposal sites

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