[rubyn00bie]

Preface: I work at Househappy.org a real estate start-up seeking to simplify the search experience.

I completely agree with the article. I read the one posted last week and sort of chuckled (asking where the start ups are) because it's not the technology that's the problem, it's the industry and the market itself... Why?

As the author states, brokers live and die by their commission (my father happens to be one as well), and trying to get them to adopt a new technology can be harder than pulling teeth... And in a lot of ways it's completely fair! Not many tools actually do anything that improve ROI, if anything they're time and money pits.

Furthermore, Realtors don't often trust people who aren't because they don't "get" the problems they're facing. Our CEO is a broker of 27 years, and I will say, without his insight into the industry we would be missing a big portion of the problems they face. Engineering isn't the hard part, problem recognition is...

Real Estate is really for people already in the industry who are aware of what problem's its facing. Its extremely hard to get any footing with no experience. Plus, why bother now that Househappy is out and about anyway ;-) (sorry, can't help but shamelessly plug one last time-- we're also hiring!)

[beat]

Good on you for having a CEO with real-world experience in your field. :) That makes all the difference.

So if your target market is the brokers, the trick is providing value to them. That means more commissions, or more profit per commission. There might be a market for painkillers and making it less stressful, but that will be a much smaller market than getting a piece of that commission cash flow.

And for pricing, either you charge a LOT for service, or you get paid per commission as a percentage, which puts you in the land of state-by-state regulatory and is hard.

To me, this feels a lot more like the enterprise software market than the consumer app markets that seem to attract so many startups. I keep seeing people talk about a B2C approach, and I just don't see how you make a lot of money at that.

[philipdlang]

Spot on there. Selling to the broker franchises in a B2B play is much easier than selling to individual agents in a B2C play. You have to prove to brokers that they are going to make more commissions and it is extremely hard to prove that ROI.

The paid per commission model has been tried by very few companies. It would expose a company to a significant amount of market risk (housing drops like 2008 and your SAAS play is now dead), but could make sense. The issue there is tracking closed deals. There are so many complications during the close that are out of the hands of the software.

[beat]

Yeah. I remember closing on our house (the only time I've ever bought property) and it was so ridiculously complex for even a straightforward transaction. I can't imagine trying to skim from that on a state-by-state legal basis and getting enough to justify the cost. I mean, getting $100 out of it would not be worth it. But getting $1000 out of it would start eating seriously into the margins of other players - how would you bring enough value to make it worth letting you participate, especially in the kind of hands-off way that makes software solutions scale?

[graham1776]

I also think what a lot of real estate startups are missing is that real estate is not just single family houmes for sale. There are massive opportunities to sell software to real estate investors and developers, who actually have the funds to invest in software solutions.

[davidwalker20]

There is definitely a strong argument for the value of experience when disrupting an old industry. The main reason real estate has thwarted off technology for so long is that regulation and entrenched practices are set up to keep super-disruptive technology at bay.

This is why I think it is going to take a company with both human agents and software developers to make any real change. It has to be disrupted from the inside out, making experience all the more important.