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Could the Carmax Model Work For Real Estate?

real estate no haggle pricingTwo years ago I was exposed to the Carmax no haggle pricing model when I purchased my 6000 mile old Prius and I thought it was a brilliant marketing angle.  In a car market that had become over complicated for car buyers that didn’t really ever know if the price was really the price, this model become a huge hit.  Could this work in real estate?

I recently launched a new Long Island NY MLS portal for real estate buyers in both Suffolk and Nassau County along with two local partners there.  I have been doing a lot of thinking about what we can do to shake up the industry and do something different that would be well received for the public.

That has led me to think back to the Carmax no haggle pricing model and wonder if the same concept could work in residential real estate sales.  Imagine a real estate market place where buyers know and trust the fact that your advertised price is the only price that will be considered.  Would that work?  Could it be done?

One objection could be that it would be near impossible to sway the entire market to function this way.  However, if you think about it, Carmax didn’t sway the whole used car market either.  It just established a brand that stands for something, and the public has learned to respect and appreciate the simplicity of it, despite the fact that they may be able to haggle the price down a few bucks on a similar car elsewhere.  The American public has made it clear that they are willing to trade that possibility for the convenience and transparency of the process.

Should Long Island NYRE take this kind of chance?  Could the model be used to gain publicity, clients, and strong, yet fair prices for home sellers?  Could a real estate company and their clients stick to the promise that the price is the price?  It is yet to be seen but it would sure be interesting to find out.

About Daniel Beer

Daniel is a San Diego real estate agent focusing on Santaluz homes for sale. He also has a passion for helping people moving to San Diego and introducing them to the city he loves.

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  • Intriguing. The thing is, Carmax can control an inventory of hundred if cars, thus commanding significant share of the used car market in a given town. It would be difficult for an upstart brokerage to launch such a concept without a substantial inventory. The publicity from such a novel system could indeed help you gain inventory, if sellers perceive the no-haggle model as one that provides them some degree of certainly of their eventual net. Of course, you would have to be dead-on with your CMA’s. Imagine a home that hasn’t sold in 90 days and the seller gets an offer for 95% of list price. Will they really turn that down? Not likely, IMHO.

  • I love the idea of carmax, but it’s a different market. Cars are basically a commodity, you have 200 of the same model. Even with different options, there are 10 of a kind on your lot. You can set a price because you know your sunk costs. Homes are basically all unique, and sellers’ invested costs vary widely.

    Sellers would agree to the idea upfront, because they believe they will get the price they want. As Mike said, after 60-90 days, they will break the model and want to change the price.

    • Daniel Beer

      No question that you bring up some fair points and I think they touch on why it hasn’t been done. In an ideal world I would like to think that listing agent with enough inventory could maybe do the same. It is actually not far from what new home communities do on my market.

      • Yes, new construction is the perfect market for this kind of a tool. Lot prices, upgrade options, and models would easily be integrated into a pricing tool. No haggle. It would better be used on a builder or builder’s rep site than a resale site.

  • I guess I am a little confused; how does your LINY website deliver on the non-haggle value proposition? Personally I think menu of services, which has been tested and tried (and sometimes worked and other times failed) in many markets across the US will come of age. CarMax is successful for process and better pricing. THAT is what real estate consumers want.

    • Daniel Beer

      The current site doesn’t follow this model at all. The post states the thought of doing this as spmething to consider or think about. It did not say I am doing it (though a part of me really wants to).

  • Brad Yzermans

    I’m not sure about the Carmax model for real estate, but it works in lending. I never haggle on rate or fee…..to charge less or make less than what us loan originators set our compensation at would mean being out of compliance and subject to fines and penalties……….but some lenders still do it.

    I seem to give greater transparency into rates and fees than most lenders by showing them actual rate sheets from my bank as well as other wholesale lenders and let them choose the one they want. No matter what rate, fee, or lender they chose, I make the same amount and they

    Borrowers appreciate this information and it seems to build more trust and eliminates the unknown factor of some other lender claiming they can get a .125% lower rate……which can’t be guaranteed unless they were to lock the rate that very minute with them. .

  • I’m
    not sure about the Carmax model for real estate, but it works in
    lending. I never haggle on rate or fee…..to charge less or make less
    than what us loan originators set our compensation at would mean being
    out of compliance and subject to fines and penalties……….but some
    lenders still do it.

    I seem to give greater transparency into rates and fees than most
    lenders by showing them actual rate sheets from my bank as well as other
    wholesale lenders and let them choose the one they want. No matter
    what rate, fee, or lender they chose, I make the same amount and they

    Borrowers appreciate this information and it seems to build more
    trust and eliminates the unknown factor of some other lender claiming
    they can get a .125% lower rate……which can’t be guaranteed unless
    they were to lock the rate that very minute with them. .

  • Todd Turcotte

    Todd Turcotte is an expert in Norwalk Real Estate. Todd can help guide you in your real estate search no matter what your goals are.

  • Interesting idea. The previous commentors hit on a few of the reasons it might be difficult. One, houses are much less commoditized than cars. Even if you had two homes that were exactly the same, their location would be slightly different. That difference, along with many others makes pricing much less predictable, which is why flexibility is useful. Two, as brokers we don’t control how our clients consider offers, we can only advise them. Carmax owns the cars, so they are in complete control over how they are priced, marketed and sold. Where this might be possible is with the inventories of homes in the control of large institutions, such as the large banks, Fannie Mae and more and more the large hedge funds, like Blackstone, which bought over 4% of the homes sold in Sacramento last year. They control enough of the inventory that they could choose to market the homes that way. I’m not sure it would be to their benefit, but it would definately be worth considering.

  • Rob McCance

    Today I sat in the living room of a 70 year old couple and talked about selling their current home, finding their next home, financing options and everything else you can think of.

    No CarMax model is going to touch any of that…

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