Property Grunt

Monday, February 09, 2009

I told you so.

They are just two, but soon there will be many.

Way back in the day I did two entries on the outsourcing of rental brokers.

Outsourcing rental brokers

Outsourcing brokers: It's here

Well it appears it is starting to kick into over drive.

Getting the Agent Without the Fee

YOU’VE heard of no-fee apartments, but no-fee brokers?

It’s a counterintuitive idea for New York real estate, but then again, these are counterintuitive times. And Lee Lin and Lawrence Zhou, young Wall Street types with degrees from M.I.T. and Wharton School on their walls, think they can make it work.

Last August, the pair founded, a Web site that provides free access to no-fee apartment listings throughout New York City. Each listing includes the name, telephone number and Web address of the landlord or management company — all the information an apartment hunter needs to sidestep brokers and their usual 15 percent fee of the annual rent.

But the site will also allow users to schedule an appointment with an agent — namely, Mr. Lin, 28, or Mr. Zhou, 26. (Mr. Lin recently received his sales license; Mr. Zhou plans to take his real estate exam this month.) They plan on showing apartments on weekends, in between their day jobs at hedge funds.

“If people use our site and directly contact landlords, more power to them,” Mr. Lin said the other day in Mr. Zhou’s 500-square-foot Midtown studio, where the two friends logged about 200 hours over evenings and weekends designing the site. (A beta version is online, but several features, including the ability to schedule a showing with the brokers, have yet to be completed.)

Rental agents are starving right now and to see these two meat heads providing a more enticing option for renters in this market is going make them very sore. Honestly, if I were these guys, I would never have revealed my face because there are a lot of psychos in the ranks of the real estate brokers who will make make their grievances known.

As for showing apartments on the weekends, these two are going to find out very quickly that it might be in their best interests to hire some agents because if they are successful, the traffic will be unbelievable.

But this is a good back up when, not if, they lose their hedge fund jobs.

This business model of using no-fee listings to draw advertisers is not new, I know this because I thought of a similar model myself and was considering doing something like this myself. Why have I not done it? Because there is no barrier to entry for this type of business. What makes this particular model valuable is the content which is the listings. Those can be easily acquired through online searches, cold calls or good old fashion shoe leather. Apartment Ratings is a version of this already

That is why even if these guys fail, there will be others right behind them. That is why I have chosen not to pursue this direction because eventually there will be millions of these types of sites popping up online.

Rental deals will eventually close online if they haven't started already. This is not far fetched. We can get a mortgage online, buy products and services through paypal. Renting an apartment is no different. In fact Craigslist could probably wipe out the entire New York City rental broker industry simply by offering to do these transactions through Craigslist for free or for a fraction of the cost of using a rental broker.

Right now these guys are publishing no-fee apartments, but any rental broker worth their salt knows that the better listings are the ones that require a fee. Whether it is these guys or another party, someone will throw the gauntlet down and start publishing online all the rental listings in Manhattan. And if a broker has an exclusive listing they lose because of this site or others it will be all out war. I am not joking about. Brokers will go bats**t crazy if this happens and will use every means, legal or otherwise to get restitution.

Buckle up boys. You are in for a wild ride.