Are real estate agents legally required to represent your interests? Believe it or not, 25 states do not require brokers to adhere to traditional fiduciary responsibilities and all 50 states allow agents to work both ends of the same deal.
As a result, buyers are frequently pressured into deals that serve the self-interest of their agent. The agent is protecting their commission first and foremost, and a more expensive purchase results in a larger payday. The same is true in reverse when home sellers are encouraged to take low ball offers so their agent can move on to the next deal.
Consumers in the real estate industry are almost without recourse in these situations as they have no legal protection and few industry pressures to enforce good behavior. There are exceptions, of course. Brokers who do honest business work hard to build their reputations and are rewarded by referrals and happy customers.
The challenge for a real estate consumer is to find those agents, and that is not an easy task. In competitive markets like San Francisco, New York, and Miami where there is a feeding frenzy to get the most valuable listings, finding a reputable agent is imperative and yet nearly impossible.
Stepping into that arena is a new service called concierge real estate. These companies offer a litany of services, from matchmaking clients and realtors, to consumer education, and neutral third party consulting.
To learn more about how this emerging business model is impacting real estate, I spoke with Valeri Tsanev, CEO of City Raven, a startup concierge company operating in New York City.
What does "concierge" real estate mean and how does it work at City Raven?
Tsanev: Concierge real estate is a new industry and as such it is still being defined. But the central tenants of the service are matchmaking, vetting real estate agents, facilitating quality buyer / agent interaction, and neutral consultation. At its core it is a service that levels the playing field for consumers, making it less hostile territory and a more painless process from start to finish.
Many real estate agents are driven exclusively by their commissions and are not aligned with the interests of homebuyers. But the average homebuyer may not even recognize they are being underrepresented. After all, the agent is the expert and if they say, “This is the best price, we will not find another deal this good,” it takes a lot of confidence to say, “No!”
The role of a concierge service is to match buyers with quality agents who work with integrity, and also to be a sounding board of expert advice along with way. Services like that are possible today with the technology that we have available, and they are increasingly important.
What does your matchmaking process look like?
We have designed a matchmaking algorithm for homebuyers that takes into account their real estate preferences, personal interests, professional background, and household income. Based on that profile we are able to identify the type of agent they will need.
Our real estate agent profiles are a little more involved. We use public data, such as past sales, years of experience, customer satisfaction statistics, and neighborhood expertise, as well as information that we gather privately during our onboarding interview process, which focuses on customer service and what we call “crisis situation analysis” (i.e., a series of questions that we employ to determine how qualified each agent is to resolve complexities and moments of crisis during the process).
We apply a statistical model to find three real estate agent profiles who are the closest match for a specific homebuyer and highlight one of them as the best match.
How do you vet the real estate agents you work with?
A concierge company’s primary job is to curate the list of agents with whom they are pairing their clients. If they do not do that correctly, their value is zero. So we take the vetting process very seriously.
In order for a real estate agent to receive a call from us for an interview, the agent needs to have at least five years of full time experience, 100% positive client reviews in the public domain, must have done at least three sales transactions, must have represented a home buyer, and last but not least must have graduated from an accredited undergraduate university.
After pre-qualifying them on paper, we sit down with them in person and begin an in-depth interview process. The interview focuses on both quantitative and qualitative aspects of the job and we are looking for excellent answers. We developed our questions after we did a 6 month behavioral science analysis of the role of a real estate agent. We deny the applications of 80% of all the agents we interview. We currently have less than 100 real estate agents that have been handpicked from the 60,000 licensed real estate agents in New York City.
What do people usually get wrong when they look for a realtor?
Many homebuyers are not aware that it is relatively easy to become a realtor. There are very low barriers to entry in this industry, which has contributed to the low quality of real estate professionals. And that is problematic because the main job of the realtor, contrary to common belief, is not just to find the best home for the homebuyer and negotiate the best price; it is also to manage the whole process and all the people involved in it.
One of the main reasons buying a home is a very stressful process is because there are so many stakeholders involved. Most people will deal with a lawyer, a mortgage lender, a realtor and potentially a home inspector during a home buying process. A quality realtor should act as a buffer between the homebuyer and all the other stakeholders. A quality realtor should protect the time of the homebuyer and should involve the buyer in the process only when necessary. The cold hard truth is that there are very few quality realtors in New York City or anywhere else. That is the problem that concierge services are trying to solve.