Second Podcast: “High commissions are so 2017”
We just launched our next podcast: “High commissions are so 2017”, our guests from Deedcoin discuss their ambitious plan to bring down real estate commissions from 6% to 1% by going around entrenched industry interests. You can check it out on iTunes and Google Play! Highlights below:
Origin
Charles Wismer, co-founder of Deedcoin, has a few years of real estate investments under his belt at Momentum Realty, a small investment brokerage in Melbourne, Florida. This is where he met the other co-founder. When he explored blockchain applications for real estate, he saw the extent to which legacy technologies like the fax machine are still prevalent.
Phil Mrzyglocki — Deedcoin’s media man, comes from a real estate family. He has stage presence thanks to his previous life as a political comedian who built a huge social media following. When he got involved in crypto, he found that his social media base also shared similar interests due to the theme surrounding tech and activism.
What made them create Deedcoin?
It solves deep-seated industry problems by decentralizing controls in the real estate business. They point out two key forces that cause customer pain points: National Association of Realtors (NAR) and marketing companies. The NAR acts like a lobbying entity that uses its power to push the standard 6% commissions for consumers. It runs on a union fee-based model, meaning their marketing machine is dependent on the large volume of active agents who contribute membership dues.
To get business leads, realtors must register with organizations at various levels, racking up roughly $800 annually, which goes to lobbyists and unions. The biggest price tag for realtors is getting access to the Multiple List Service (MLS) — a marketing database that shows structured data about properties listed for sale. Data feeds are sourced from the agent who takes photos to set up the contracts, then posts those pictures and specs onto this system.
Data is then syndicated out — transferred elsewhere away from customers — to marketing companies. A large beneficiary is Zillow who structures the data into a clean version for customers to view. Zillow charges agents who bid to get their profile picture featured alongside the property. This acquisition lead model is expensive for agents.
Odd incentives drive high prices and customer pains
So there’s a good chance that the realtor who lists the house isn’t the one linking up with customers. This customer acquisition model puts the billing on the agent side, which helps justify higher commission levels.
This bloated model explains the common customer complaint to realtors: the 6% commission is too high. This is a problem since most buying starts with an Internet search so real estate is ripe for digital disruption. Deedcoin aims to address that power control and connect the two points: customers and agents.
How do they differentiate from competitors in real estate?
There are no competitors that have figured out how to use blockchain for the overall industry. It’s a tall order to rewire economic framework, bridge connections between agents and customers, and fix the pricing model against incumbents who don’t have an incentive to change the pricing model.
Deedcoin also plans to build a much better MLS that’ll be on the blockchain, secured and tamper proof. It’ll give customer free access, takes away marketing power from other players like Zillow. They want to build an ecosystem to solve a host of industry areas — not just one solution.
Describe your token economics:
Deedcoin is designed to buy down commissions. This is a SEC-fully compliant usable token. Every coin is 1/10 of a commission point. That means every 10 Deedcoin will eliminate 1 percent of a property’s price commission. It’s based on percentages, so the rate can cut down to 1% with 50 Deedcoins — regardless of property price. The market drives the token cost, which means people set commissions for agents. With Deedcoin, the goal is that anybody can interact with the property and save money.
Why is your team able to pull this off?
The team has to align with the mission and what the token represents. All their team members have a real estate license and are expected to adhere to ethical standards. They want to lead by example. The ICO market needs a major cleanup; right now it’s burdened by scammers and the majority of ICOs are securities but not asset-backed, whose value are driven by hype and speculation. With proper self-regulation, they want to bring this technology to the rest of the people and avoid excessive regulations.
A lot of brokers have expressed interest in Deedcoin’s vision to fix this unfairness. Their network is national — brokers were a vital part in launching it. Unlike some other ICO projects that tend to be theoretical or has long development roadmaps, they believe Deedcoin is directly useable on a live network.
5–10 years down the road, what does this look like?
They offer some eye popping numbers. There are $15 trillion in privately own land. If Deedcoin gives back 5%-6% of equity in the house, that could total up to $750 billion. Deedcoin has massively scaling potential. Suppose in 2019 , there’s a 75% national adoption rate, that translates to $12 trillion in real estate used with Deedcoin.
The network building capabilities of Deedcoin can extend to other countries, given there are other nations with relatively high commissions. It’ll require building out legal structure, setting up overseas headquarter, and tapping into broker network and marketing. In 10 years, the team would like Deedcoin to be used to buy or sell a house anywhere.
What do you think crypto will be like in 2018?
There’ll be growing pains facing this market as a result of the huge run-up in exuberance. It also means more stability in 2018 as people tame their risk appetite, with more due diligence, to filter out good projects from bad ones. Expect higher ethical standards, which is crucial for system to mature and disrupt large incumbents. Deedcoin wants to be a leader in the ethical evolution that will shape this market.
The team’s long vision includes generation 3 MLS stored on a blockchain. Historical accuracy is important. This allows users to find defects and detect hidden features in deed or other disclosures. But their priority now is marketing and building social base. Thankfully they have the technical aspects mostly figured out, so they just like to get the word out. This will rest on old fashion word of mouth from Deedcoin users!
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Disclosure: the host of this episode is an advisor for Deedcoin
