Startup Firm Faira Promises More than it Delivers
Seattle is Ground Zero for innovation in the real estate industry. Zillow, Redfin, and of course RobotAgent.com all offer consumers an improvement on the traditional experience (whether cost, or service, or both). And many other alternative models have come and gone over the last decade or two (such as Quill Realty and Rebls).
The most promising model today seems to be Faira. With ads on buses and in the media, and multiple rounds of funding, Faira is getting some traction. It is also getting news coverage, such as this piece from KIRO 7. And why not? Faira’s marketing pitch is remarkable:
Wait. “Free” is an option? Yes, free. F-R-E-E. Nada. Zilch. Nothin’. You pay them zero and Faira helps you sell your home, including an MLS listing. Dig deeper and you’ll learn they get all their money, a “platform fee,” from the buyer and out of the sale price. Wow. That is a really good deal. Honestly, it sounds too good to be true.
Which is of course right. There is no such thing as a free lunch. And a Faira listing most definitely isn’t “free” to the seller.
Sellers pay for Faira’s services. So how does it really work? Faira doesn’t give away its “secret sauce recipe” easily. The Faira Listing Agreement is convoluted and confusing, but two parts really stand out.
Faira Services are FREE to the Seller!
OK, simple enough. Not too wordy, gets the message across nicely.
Except They Aren’t. Seller Pays a Half Percent
“List Price of the Property: There can be two separate list prices on the Faira platform, one for the buyers who are not represented by the agents, therefore saving the Seller(s) from paying the buyer’s agent fees, and the other for the buyers who utilize the buyer’s agents. Seller(s) understand that this can be perceived that the buyers are effectively paying for their own agent. Further, Seller(s) agree to include Faira fees in both the list prices. The actual purchase price of the property is 99.5% of the agreed offer between the Buyer(s) and the Seller(s).”
Whoa. That was hard to understand — but what was that last part again???
“The actual purchase price of the property is 99.5% of the agreed offer between the Buyers and the Sellers.”
So the buyer and the seller agree on the price, and then .5% of that amount is paid to Faira. That isn’t “free” to the seller. Obviously Faira charges the seller a half percent. A fact that isn’t changed by a poorly written paragraph of “legalese.”
Or more accurately, if this is free, then EVERY real estate broker is free to the seller. Hire Windermere? It’s FREE – you get 94% of the sale price. Redfin? Yup, it’s free too, you get 96% of the sale price. Amazing what can be achieved with rhetorical gymnastics. Something is reduced to nothing….
And Seller Pays Another 3% On Top of That!!
But that’s not even the worst of it. To get on the MLS, a seller must — an iron-clad rule — simply must offer a buyer’s agent commission. For the last hundred years, that commission has been about 3% (notwithstanding the intervening invention of the internet). Faira, like the vast majority of MLS real estate firms, will not offer less than 3% (or not much less, perhaps 2.5%) on any of its listings.
So FREE to the seller? Ah, no. More like 3% or so of the sale price must be paid by the seller to Faira, with 2-3% of that then going to the buyer’s agent. Or on an average Seattle home, about $20 grand. NOT free.
Technology will change real estate eventually. No pricing gimmicks (or flat-out misrepresentations) needed.