September 14, 2017
Another 2018 Update: In December 2018, Streeteasy announced its rental fees would increase from $3/day to $4.50/day. Surprisingly, this increase generated a virtually unnoticeable reaction from the brokerage community despite the hefty 50% increase. For the moment at least, Streeteasy seems to have all the power.
2018 Update: It’s been a little over a year since we initially posted this article. We thought it was a good time to check in and see how it all played out. Brokers and agents were talking a big game last year. How many are still refusing to pay $3/day to list their rentals on Streeteasy?
Yoreevo found over 86% of rental listings were published on Streeteasy (where the listing agent is paying $3/day). As a reminder, this is only for rentals. Thankfully for buyers and ethics in general, brokers are no longer holding their for sale listings hostage and virtually all sale listings are available on Streeteasy.
While brokers made a lot of noise last year, in the end, Streeteasy won. Tenants and especially buyers, can use Streeteasy and know it is one of the most comprehensive sources of apartment listings in NYC.
Recently, there has been a lot of press about Streeteasy, its decision to charge for rental listings and the reactions from various brokers. NYC buyers may be wondering how the changes are impacting the for sale market.
We mentioned previously how Streeteasy has dramatically improved access to information over the last decade. Brokers fostered its growth by sending Streeteasy their listings directly. This led to much more accurate listing data, paving the way for Streeteasy to become the number one public facing real estate website in NYC.
In 2013, Streeteasy was acquired by Zillow for $50 million. When you consider Streeteasy’s position in the most valuable real estate market in the country, it was a very good purchase. In Manhattan alone, over $23 billion of transactions are done each year1. You don’t need to get a large cut of that to make a good return on $50 million (and that’s ignoring the rental market).
Earlier this year, Streeteasy launched Premier Agents. This shouldn’t have been a surprise because this is how Zillow generates over 70% of its revenue2. In the Premier Agents program, an agent buys a zip code and appears next to listings in that zip code. Some agents spend over $5,000 per month for this placement3.
Think about that for a second – brokers are making so much money off your transaction that they’ll spend $5,000 per month to advertise in one zip code. When we talk about the industry getting fat and happy off high commissions, this is another example.
Listing agents hated Premier Agents because leads that would otherwise have gone to them are now going to the highest bidder. While they may not like it, Premier Agents is here to stay – Zillow has been dealing with angry agents for years.
In July, Zillow furthered its monetization of Streeteasy by charging $3 per day for rental listings and brokers went berserk. To put $3 per day in perspective, the median rent in Manhattan is about $3,4504. If we assume a 7.5 percent commission (likely low but there isn’t any good data), the average rental commission would be $3,100.
How long should it take to rent an apartment? A few weeks? Even if we assume a month, payments to Streeteasy would be 3% of commissions and yet brokers were happy to flip out in the press. Here’s one of our favorite quotes –
“[The agent] said she was withholding her rental listings on ethical grounds. ‘I don’t feel that one player in a market should have the power to decide what a consumer is going to see and what a consumer is not going to see.’”
Streeteasy never claimed to be a comprehensive snapshot into NYC rental listings, it was just the best snapshot. If Streeteasy really had “the power to decide what a consumer is going to see and what a consumer is not going to see” brokers would be paying a lot more than $3 per day. Agents may not like it but there’s absolutely nothing “unethical” going on.
If it’s unethical for Streeteasy to charge for their services, what about brokers pulling their listings from Streeteasy? The owner of an apartment expects their broker to market the listing and find a tenant. They lose money every day the apartment sits vacant. If you hired a broker to rent your apartment and they called to say they pulled it from Streeteasy because of the $3 per day charge, what would you say? We’re guessing not many of those calls were made.
Brokers helped Streeteasy become an extremely valuable asset and now that Zillow is capturing some of that value, brokers are panicking.
So what impact is this having on the for sale market? In theory, there shouldn’t be any – sales listings are still free on Streeteasy. However, a large brokerage recently reported the number of sales listings on Streetasy has declined 50% since July 31st (inquire for details).
When you hire someone to sell your home, New York State “prohibits your agent from advancing any interests adverse to yours”5. We struggle to understand what the justification could be for pulling a free listing from a website that many buyers visit every day. Let’s just say that in our opinion, this gets much closer to “unethical” behavior than Streeteasy charging for their services.
With Streeteasy’s listings down dramatically, brokers have taken every opportunity to tell potential clients they need someone with access to the comprehensive REBNY Listing Service (RLS). Since only brokers have access to the RLS, they’re essentially saying everyone needs a broker. Well that was convenient…
While we can’t argue with that, it’s important to know that every member of REBNY has access to the RLS and therefore they all have the exact same listings. No broker can differentiate themselves on access to inventory.
Yoreevo is a fully licensed broker and member of REBNY. By working with us, you have access to the RLS just like any other REBNY member. Unlike traditional brokers, Yoreevo provides a commission rebate at closing. Slowly but surely, firms like Streeteasy and Yoreevo are showing traditional brokers don’t provide the value they once did. Next time you see a broker complaining about Streeteasy, consider why. You generally don’t see confident industries disparaging a critical business partner in the media.
1 – Miller Samuel