One of the men who successfully sued the National Association of Realtors (NAR) for changes to real estate commissions has become a co-founder of a new real estate startup.
It all started when Josh Sitzer and his wife put their Kansas City home on the market in 2017. The couple was unhappy with the fact that they had to pay a 3 percent commission to a buyer's agent.
“Before the lawsuit, the anti-competitive structure of the industry effectively forced me, as a seller, to pay a buyer's agent 3% of the sale price of my home in order to successfully complete the sale,” he told TechCrunch. “While hiring an agent is a choice for many people, I don't believe anyone should be forced to pay for services they don't want because of unfair industry practices,” he added.
Sitzer confided his frustrations to a neighbor who happened to be an attorney familiar with the issue. By 2019, he and other homeowners had filed a class action lawsuit against the NAR (Mr. Moir et al. v. National Association of Realtors et al.). They received a verdict last year and reached a settlement earlier this year that will fundamentally change the way residential real estate is sold.
The National Association of Realtors agreed to pay $418 million in damages to settle the lawsuit. The association also agreed to eliminate the “participation rule,” which required sellers to make compensation offers to buyers. This and other agreed-upon rule changes are expected to significantly change the real estate market.
“It wasn't something I expected to do at the start. It's been a years-long battle with ups and downs, but I felt confident enough in my position to make a move,” Sitzer said.
To take advantage of this new situation, Sitzer teamed up with Bryce Galen and Neil Batra to found a startup called Randian, which aims to help homebuyers take advantage of the resulting rule changes by offering an on-demand, flat-fee real estate agent. The name Randian is a combination of “Land” and “Guardian.”
The startup came out of stealth today with a beta launch, first reported by TechCrunch. The founders say the site allows users to import listings from any real estate site, book home tours and prepare offers with local licensed real estate agents without paying any fees.
The model in which a buyer's agent earns a 3% commission is considered outdated by many, as technological advances from a few years ago made it easier for home buyers to find the properties they want to see or buy. Some buyers argue that it's unfair for them to pay such a high commission when their agent did most of the homework themselves.
Buyers have the option to pay a la carte for the services Randian provides: $49 for each home tour and $199 for an offer preparation session. If they want more in-depth help, they can agree to pay a flat fee of $1,799, which includes up to five home tours and two offer preparation sessions. Additional services are available a la carte, but payment is only made at the time of closing. So if you don't buy a home through Randian and agree to the deal, you won't have to pay anything, Galen said.
“Using Randian protects homebuyers from the new reality of paying exorbitant fees out of their own pocket that eat into the cost of closing,” said Galen, who previously founded fintech company Zero, which was acquired by Avant in 2021. “People don't have to use a buyer's agent in the same way.”
In Galen's view, many of the industry's incumbents, such as Redfin and Zillow, have no incentive to change their pricing models.
“Zillows and Redfins and these old-school real estate tech companies have thrived and grown in a world where buyer-side agents get 3% so they're not leading the change here,” Galen told TechCrunch. “We expect it's going to be a new wave of startups like Landian that are going to lead the change.”
Batra agrees.
“After the settlement with NAR, I expect most real estate agents will shift from their traditional model based solely on speculation and high commissions to one that incorporates Randian's flat-fee model,” he said.
The New York-based startup has not yet raised any outside funding and has so far been funded by friends and family, and is currently in the process of raising a pre-seed round.