It's been more than a year since I posted on the top 6 realtor review Web sites. At that time I promised to circle back and provide more information on HomeLight, a Web site which positions itself as being able to match you with the best realtor. I back-burnered this until I could do a bit more research, which I only just now got around to doing.
My new found interest in this Web site surfaced when I recently found myself blasted with TV commercials on the service - in particular this one:
So, the basic premise is that they rank agents based on their "track record" and determine who in your neighborhood can sell your home for the most money. And they matched this home seller (portrayed by an actress based on an actual testimonial) with Alex, who is obviously a good agent because he sold 12 homes in this woman's neighborhood in the last 9 months and sells homes for 1.2% above list price. And this woman is really happy that Alex sold her home in two days for $40,000 over list price!
OoooooKaaaaay. Am I the only one who thinks Alex is a total clown? He obviously underpriced this house - by a lot. Hell, I can sell any house for even $100,000 over list price if I price it low enough. And it will surely sell really fast. Is that really how you get the highest price for a house? Sell it in two days, before everyone has a chance to look at it and make an offer, with an anchor at least $40,000 below market value? I don't think so.
With HomeLight's focus on sales volume and sell/ list ratios it's clear that they are trying to blindly apply dumb metrics to the realtor selection process. I've written about the perils of focusing on bogus real estate agent statistics as a proxy for a realtor's "track record" before.
How HomeLight Works From The Home Seller's Standpoint
To learn more about how HomeLight works I used the site as a home seller would, entering my address and contact information. While it was thinking it popped up a screen that notified me that the matches were unbiased because "Agents cannot buy their way into HomeLight". I'm going to come back to that later :)
Then it came back with a short list of real estate agents that had closed deals in my neighborhood, which it defined as all of West Town. Obviously this list was totally biased towards agents that had done a lot of transactions in the area so, at least initially, it appears that HomeLight subscribes to the top producer myth.
Then, within a minute or two, I got a call from someone at HomeLight who was going to figure out the best agent for me. The conversation was pretty entertaining - for me at least. He started out by telling me that their agents (we need to come back to this point of who "their agents" are) sold homes 29 days faster and for 3.5% higher prices than other agents - as if I was supposed to be impressed. I quickly asked him why he thought it was good to sell a home faster. He dodged that bullet:
HL: Maybe that's not what you want
Me: I want the highest price. How do you know that your agents sell homes for 3.5% more?
HL: We look at the data.
Me: What data?
HL: Sales, prices, price/SF
Me: But how can you tell what price another agent would have sold any home for? They're all different. It's impossible to figure out.
HL: Not it's not. We have computers that go through the data.
I gave up at this point because it was clear he had been told that they had a magic box and he believed it. Note: They don't. In all likelihood they are looking at higher sale/ list price ratio and calling that a higher price as above.
I asked him about the list of agents in front of me on my computer screen. He quickly suggested that the agent at the top of my list, for whom I happen to have a lot of respect but didn't tell him that, really wasn't good for me because her average sale price was well below the price of my home.
Me: Why does that matter?
HL: Agents working in your price range will target higher priced buyers.
Me: How will they do that? Won't it sell primarily through the MLS?
We go around and around on this for a while.
HL: You'll have to ask the agents what they do.
Note to the uninitiated: there are no extraordinary efforts made to target buyers at higher price points - until you start getting into the $5+ MM price range and even then it's tough.
He then tells me he is going to find me a good agent so I ask him how he's going to do that. After much effort it becomes clear that it's going to be primarily based on who sells a lot in my neighborhood at my price point - as if that matters at all. I actually challenge him on what difference sales volume makes but I get nowhere again.
I then tell him that I'm thinking of using this national, discount realtor.
HL: You don't want to do that. They're awful.
Me: Really, how so?
HL: I just got a call from someone who was using them and they weren't selling their house and they wanted a new agent.
Me: They only charge x%
HL: If they were any good they wouldn't be discounting. Their agents are inexperienced and I've heard a lot of horror stories.
Although I'm not a fan of this discount realtor some of their agents are experienced and pretty good. And the whole argument about them only discounting because they aren't any good is absurd. That's their business model. Discounting lowers their client acquisition costs, which pays for the discounting instead of spending a ton of money on marketing. I know because that's my business model.
Speaking of client acquisition costs...that leads us to the other side of HomeLight's business obviously - what is going on behind the scenes from the realtor's point of view and how HomeLight makes money. But this post is already too long so I'll continue it next Thursday, since Tuesday is my monthly real estate market update for October. Stay tuned because the other half of this epic is pretty interesting as well.
Gary Lucido is the President of Lucid Realty, the Chicago area's full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider's view of the seamy underbelly of the real estate industry, or you just think he's the next Kurt Vonnegut you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.