Shaking Up Toronto Real Estate with Disruptive Technology

06 November 2018
Joshua Chisvin

Every dollar counts in the increasingly pricey Greater Toronto Area housing market. That goes for both the buyer and the seller.

With land values and speculation driving home prices ever higher, brokerage commission fees are usually overlooked as a factor in just how much a purchaser pays or a seller receives for their home. The typical commission paid to agents of both buyers and sellers? It averages at 2.5%, typically totalling 5% of the home's selling price, while adding thousands of dollars to the cost for both parties.

Disruptive technologies like Uber and Airbnb are already shaking up the transportation and hospitality industries by innovating to make lower-cost alternatives available to their markets.

This is the same approach being taken by Justo.

It’s a new Toronto brokerage that utilizes technology to streamline the transaction process while cutting commission costs in half. In short, where a traditional brokerage would keep the entire commission, Justo splits the commission with the buyer, each taking an even 1.25% of the purchase price.

With the halved fees, a home priced at $600,000 could save a seller up to $10,500, with the purchaser saving as much as $9,000. And homes priced at a million dollars could save sellers up to $16,500 and buyers up to $14,000.

How does Justo accomplish this? Well, by generating leads, allowing agents to operate on a volume basis and manage the reduced commission by making more deals than most realtors.

Since launching earlier in 2018, the company has been offering everything one would expect from a brokerage. This includes staging, professional photography, 3D virtual tours, floor plans and property marketing, with the benefit of major cost savings.

Justo’s CEO asserts the standard brokerage model hasn't kept up with the growing influence of technology in the real estate business.

She might have a point. With the housing boom over the past decade and longer, today, agents are making multiple times the commissions for half of the work. Yes, there is still a lot of expertise provided by agents — like myself and my fine colleagues at PSR — but still, Justo felt there was a need for some adjustment to the current norms.

Simply put, they don’t believe it should cost someone the equivalent of a year’s salary to sell their home.

While that’s a debate we can have on another day, I’d have to agree that because the total sum of commission fees paid over the last couple of years registers in the billions, it gives disruptive innovations like Justo the ability to have a far-reaching impact in the real estate business.

In fact, based on data from the past two years, if Justo handled every real estate deal in the GTA, they would save buyers and sellers over $2,000,000,000 in fees and commissions.

Again, it’s a debate we can have another day, but it’s clear that Justo is providing an option that’s perhaps desperately needed in Toronto’s current overzealous market. And the more people encouraged to enter the market because of alternatives like Justo, the better.

I happen to be of the mind that a rising tide lifts all ships, after all.

SOURCE: Urban Toronto

  Real Estate