Key Details:
- Last week, TechCrunch broke the story about Josh Sitzer (of Sitzer/Burnett) co-founding Landian—a startup giving consumers the option of paying a flat fee for the services of a licensed real estate agent.
- This week, TechCrunch published a response from Redfin to Landian’s flat-fee model.
- While Redfin refers to Landian as a “brother in arms,” its spokesperson explained why Redfin’s experiment with flat-fee services didn’t pan out and what the company has learned from it.
Last Thursday, TechCrunch broke the story of Josh Sitzer—the same Sitzer of the Sitzer/Burnett lawsuit—co-founding a startup to offer consumers the option of paying a flat fee for the services of a licensed real estate agent, rather than paying commissions.
Sitzer made no secret of his reasons for co-founding Landian. He felt pressured into paying 3% of his home’s sale price to the buyer agent.
Now that listing agents are no longer required to offer buyer agent compensation, he states he wants buyers as well as sellers to have more options. The best agents out there are already making sure consumers fully understand all their options.
Sitzer is now leveraging his position as the name behind the landmark lawsuit that brought NAR to heel and changed the way agents are compensated for their services.
That said, the flat-fee model is not totally new to the industry. Cue Redfin.
Redfin’s response to Landian
The day after TechCrunch published the news on Sitzer’s startup, Redfin responded on the same platform, describing Landian as a “brother in arms” while at the same time pointing out the flaws in the flat-fee model—which were learned from its own trial and error.
A spokesperson for Redfin offered the following explanation for why their similar model didn’t work:
“When we tried this before in a fiercely competitive housing market, we struggled to win on behalf of customers the offer-writing agent hadn’t met, for listings that agent hadn’t seen. We also learned that when customers want to call on the expertise of one person, morning, noon, and night, you have to pay that person very, very well.
“For now, we believe we can offer homebuyers the best value by using Redfin.com to eliminate the single largest cost of being an agent, which is finding customers, and by pairing the industry’s best agents with lending and title services.”
Pivoting to a different model has paid off. Redfin pointed out in the TechCrunch article, it charges commission rates as low as 1% to home sellers and as low as 2% to homebuyers, saving them a reported $1.6 billion in fees.
Unlike Landian, we don’t charge for tours or require customers to hire an agent sight unseen.
Speaking on behalf of the company, the spokesperson said Redfin “may experiment again” with a flat-fee itemized service. But it’s learned to be wary of the model.
Real talk from The Real Word
Byron Lazine and Nicole White discussed the new Sitzer startup, as well as Redfin’s response to it, in this week’s episode of The Real Word.
Byron made the point that Sitzer’s co-founders Bryce Galen and Neal Batra both have experience in creating and later exiting a successful tech startup, which could at least give Landian an edge.
It’s early days, but there are plenty of reasons for agents and brokerages to be cautious (if not overtly skeptical) about signing up to work with Landian as a flat-fee real estate service provider.
This is a very opportunistic approach, here, from Sitzer. And the opportunistic viewpoint from him goes back to when they filed this…Whether you agree or disagree with the case, Ketchmark and Sitzer saw an opportunity that ‘a jury is going to see it our way.’ And that’s exactly what happened… And I think he’s taking the opportunity right now to the next level.
I guess I’m not surprised, though, because his argument all along was he was bullied in, and there was no other option. So, here’s his opportunity, too, to show, potentially, that this other option can be successful—and that this is what buyers and sellers truly want.
In the months ahead, it will be interesting to see whether Sitzer gets to personally witness the drawbacks in the flat-fee service model—and how he and his co-founders will pivot in response.
Let’s just break this down, Landian: …A broker has to sign off on this relationship with you…because there’s commission, there’s compensation, there’s flat fees being exchanged. A licensed real estate agent can’t exchange fees; it’s the broker. So, what broker is going to say, ‘Yeah, I want 20%/10%/5%/25% of $49. Let’s say 80/20. I want $9 to take on all the liability.
Landian doesn’t take on that liability. Something goes on in that state, and there’s a lawsuit, that’s going to be on the broker who’s rendering the real estate services. Landian says it themself: they’re a platform. They’re scheduling. They have an AI tool that’ll help you fill out an e-signature for $99. If you need to pay $99 to fill out an e-signature, maybe you shouldn’t be buying a home…
Tune in below to enjoy the full conversation.
