Maybe like Vanguard you could do a sliding scale as the home price goes up? That is, instead of doing 50% off at all points (and I know you're focused on CA, but bear with me) you could increase the discount at higher price points. That way a $2.5M home on OpenListings is suddenly really attractive to the high end, while you'd still be the best option at the lower end (your pricing comparison to Redfin is genius, since I believed they did a 50/50 split).
Did different portions of California respond differently to your pricing? I'm seriously sad that people buying a home wouldn't do the math to see that your flat fee was drastically lower than any percentage.
> Did different portions of California respond differently to your pricing?
As a young startup the sample size was pretty small, but I didn't see a regional difference. I'd say the mentality split was more experienced vs first time homebuyers. Experienced deal seekers understood commissions and were already looking for hacks around using a full-price agent (e.g. getting their own license, going direct to the seller), but the FTHBs often thought it was an additional fee. However, our product naturally attracted more of the latter group and as a team it's just easier to get excited about helping young families become homeowners than helping millionaires save 100k. That said, we didn't really see a dip in the deal seeker audience when we switched the pricing (it's still very competitive).
I realize now that my assumption is likely wrong: selling lots of expensive homes at a lower commission doesn't generate nearly enough additional revenue. That is, there are only X000 units per year that trade hands at that price point, so unless you get a drastic change in behavior that doesn't move the needle. Interesting challenge!
I was also going to say that from an economic standpoint, agents tend to make a rather low median income even if the commission is really high, simply because the realtor job is very accessible. (There is a tight correlation, if not simple causality, between home prices variations and the variations of the amount of realtors)
Acquisition becomes proportionally harder the bigger the commission is because of the amount of people it attracts.
Conversely, if you reduced the commission by law to half, you would lose a lot of realtors, which could reduce liquidity and thus the value of the homes.
Unless you plan to be in business for the next 7-10 years and instead invest heavily in building a brand around your value proposition. So short term you make less, however long term when you have made the other guys irrelevant you own most of entire market.
This is going to sound condescending, but you honestly do not know much about the business you're in.
I'm not by any means saying agents are lazy, I maybe phrased that poorly. Just that if you're looking at the hourly rate the agent is making for the ~10 hours they're spending from offer to close, it's kind of wacky compared to most other types of high skill work (e.g. 10 hours on a 500k home with the typical 2.5% commission is $1,250/hour).
First, it was very hard to communicate the value prop to customers. We went to market with something like "we refund the buyer's commission minus our flat fee". This brought up all kinds of questions and often buyers thought we were more expensive than realtors. Saying that we're 50% the price of a traditional realtor ended up being a more compelling message even though there's less savings in many cases.
Second, when we're acquiring customers we compete with all of the people charging a much fatter commission. If a realtor is making a 50k commission, they can afford to spend 10k on acquiring a single customer. Assuming an efficient market (which the acquisition side kind of is), a flat fee kind of caps your addressable market because you can only compete with ads at a certain price point (buyers at <400k price points in CA for instance). In some ways this is counteracted by the fact that you can save $1M buyers way more money with the flat fee, but only if you can communicate that message effectively.
That said, it looks like redfin found that there's more price elasticity on the sell side. The seller has likely been through the process before, seen how little work agents do, and feels the full agent fee more viscerally at the time of listing. For the buyer, the agent fee is this murky thing that your agent will tell you is paid for by the seller... first time buyers usually don't find out how much it is until they sign the final closing docs. The other difficulty is that the typical 2.5% being offered to the buyer's agent is essentially an advertising cost... in the existing market agents will often steer clients away from low commission listings (not ethical but it happens).