Money in the Middle EP 4: The Real Estate Machine: Who’s Making Money From Your House?

Hi and welcome to this Rethink Open House series titled Money in the Middle. This is Episode 4 The Real Estate Machine: Who’s Making Money From Your House?
Here’s something I want you to think about. You decide to sell your house. You hire a real estate agent, the agent puts your property in the Multiple Listing Service, and before long your house is appearing on websites all over the internet. Sounds pretty good, doesn’t it? Lots of exposure. But have you ever wondered how all those websites and businesses make money from your house being for sale? Because there’s a lot more going on than simply helping somebody find a place to live. And all that money in the middle? It’s not free.
Let’s start with the MLS. The Multiple Listing Service brings property listings together so participating real estate professionals can find and share information about homes for sale. Having that inventory in one place makes it easier to find properties. But it’s also the foundation of an enormous business system that’s developed around those listings.
Think about companies like Zillow and Realtor.com. They attract buyers by displaying houses for sale. And those buyers are valuable. They may need real estate agents, lenders, and other services. So the websites have developed businesses around advertising, generating leads, connecting consumers with professionals, and collecting referral fees.
Now, think about what happens when you find a house on one of these websites. You click a button that says Contact Agent. Who are you contacting? You might think it’s the agent representing the seller. But depending on the website and the particular listing, you may be connected with somebody entirely different. Somebody participating in that website’s advertising or referral business.
Here’s a real example. Zillow has a program called Zillow Preferred. Participating agents can receive buyer connections through Zillow, and when a qualifying transaction closes, the agent pays Zillow a referral fee. According to Zillow, that fee can range from fifteen to forty percent of the agent’s commission. Think about that. The homeowner’s property attracted the buyer, and now a company that isn’t selling that particular house can collect a substantial portion of the commission generated by the transaction.
But let’s follow that money a little further. Suppose you’re the buyer. You like the house, and you agree to work with the agent who contacted you. In many cases, before that agent takes you to see properties, you’ll need to sign a buyer-broker agreement. Nothing wrong with an agreement. But it also establishes what that agent is going to be paid. And suppose that amount is three percent. That’s something you should be negotiating and understanding before you sign.
Let’s say you offer five hundred thousand dollars for the house, and you ask the seller to pay your agent’s three percent commission. That’s fifteen thousand dollars coming out of the seller’s proceeds. Now, what if another buyer comes along without a buyer agent and offers four hundred ninety-five thousand dollars? Assuming everything else is equal, the first offer leaves the seller four hundred eighty-five thousand dollars after that buyer-agent commission. The second leaves four hundred ninety-five thousand. The lower offer puts ten thousand dollars more in the seller’s pocket.
And the second buyer is purchasing the house for less money. If the first buyer is financing the purchase, a higher negotiated price can also mean financing more money and paying interest on that difference for years. The seller may be writing the commission check at closing, but that doesn’t make the commission free to the buyer. It’s all part of the economics of the transaction.
Am I suggesting that buyers shouldn’t hire agents? No. An experienced buyer agent can help evaluate properties, negotiate, and avoid expensive mistakes. But shouldn’t the buyer understand what that service costs? And shouldn’t the seller understand how those costs affect the offers they’re receiving?
Now, there’s another part of this machine that I think deserves attention. The traditional listing business has historically been built around relationships. Make friends, post photos. That’s a simplified description, but think about it. A listing agent develops relationships, gets a listing, puts it in the MLS, and the system takes over much of the exposure. Buyer agents arrange showings, work with buyers and lenders, and other professionals handle their parts of the transaction. Lockboxes make it possible for buyer agents to show properties without the listing agent even being there.
I’m not suggesting every listing agent operates that way. Some agents put tremendous effort into pricing, presentation, marketing, negotiations, and closing transactions. But the system makes it possible to market a house with relatively little more than photographs and an MLS entry. So if you’re paying a substantial listing commission, shouldn’t you ask what that agent is actually doing for you beyond placing your property into the system?
And here’s another question. When buyers look at your house on a major portal, whose business is being promoted? Your agent’s? Or the website’s? Your property is drawing the attention, but the portal is building its brand, its audience, and potentially another customer relationship around it.
That’s where Rethink Open House approaches things differently. We believe the property presentation should do much more of the work. Professional photographs, a real walkthrough video, and useful information let prospective buyers experience the house before scheduling a physical showing. We call it the First Showing Online. The objective is fewer unnecessary visits and more informed buyers.
And when someone is interested, Rethink Open House lets them connect directly with the participating property owner or professional. We’re not selling that inquiry to somebody else. We’re not charging a referral fee just because a buyer wants to contact someone about a property. And if an agent is representing the house, their branding, introduction video, professional profile, and contact information can be part of that experience.
The homeowner supplies the property. The agents and media professionals supply their work. But the traditional system has created an enormous number of businesses around controlling the inventory, attracting the buyers, and monetizing the connections between them.
And here’s what I want you to remember. The money doesn’t come from nowhere. Commissions, referral fees, advertising, technology fees, and other expenses are supported by the money flowing through this industry. Not every one of those charges appears separately on a buyer’s or seller’s closing statement. But the cost of supporting the system doesn’t simply disappear.
So maybe it’s time to ask a different question. Instead of asking how many businesses can make money from selling a house, shouldn’t we be asking how much of that money actually needs to be spent to sell it?
That’s the difference between supporting the real estate machine and rethinking how we sell houses. And that’s why I created Rethink Open House.

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