Running an online real estate aggregation tool is a tricky business. There are already several well-established players in the market (Realtor, Zillow (NASDAQ: Z)) and any new company that wants to snatch market share from them will have to possess special qualities. New kid on the block, Xome promises such an experience.
Xome is a new offering from Solutionstar, a subsidiary of Nationstar Mortgage Holdings (NYSE: NSM). So what is Xome's ace in the hole? The company has promised to feed leads to real estate agents who give 1% of the home value back to the customer. Jay Bray, Nationstar CEO, says that there are many real estate search engines online, but the major flaw with these search engines is that they are not designed to help customers transact. Another big flaw is that they are not fee based.
In short, their value is limited to providing real estate catalogs with support from advertising. It does not make a lot of money for the company that provides the services. Xome hopes to reverse this anomaly.
Is there a losing side to this deal?
Xome hopes its 1% deal will attract more customers to list their properties or search for properties on Xome. For example, if you want to buy or sell a property worth $400,000 and if you use Xome, you will save $4000, which is 1% of the transaction. $4000 is not a small amount. For most US customers, it is more than a month's salary.
On the other hand, the agents are not amused. They say real estate agents are already burdened with a number of fees and if they pay 1% back to the consumer, they won't be left with much for their troubles. When this happens, they might begin to compromise on their service, seeing how it doesn't pay. Agents work long hours, sacrifice personal vacations and also take occasional hit in their fees to make a sale. So Xome's model will hit them hard.
Xome model will hit their stomach hard say agents
Xome claims to be the world's first fully integrated real estate aggregation portal. But brokers think otherwise. They say the Xome model is not new. Many companies are already using it.
The way we see it, brokers have every reason to be angry. On top of the 1% the broker must give to the buyer or seller, he/she also has to pay Xome referral fees (for using the Xome Agent Network). Xome will also encourage affiliated services on the site, which means the agents will have more competition for the leads. Moreover, the leads will be sent to three agents and the agents can vie between themselves to offer higher rebates (than the 1% they are obliged to bear). It will further reduce their profits from the sale. Now we have to wait and watch how Xome counters these drawbacks.