The home-selling season is upon us — and will be for the next several months. Roughly 40 percent of the homes sold in the U.S. sell between March and August each year, and, by early April, the market is beginning its big, annual ramp-up.
The year 2019 has been no exception, Homelight COO Sumant Sridharan told Karen Webster in the latest Matchmakers podcast. That’s doubly good news for the real estate marketplace this year — since, as of late 2018, things in the market were looking a bit “uncertain.”
Interest rates are down and prices are stabilizing across the board, though there will always be outlier markets, such as the San Francisco Bay Area.
A good year in real estate is, by nature, a good year for Homelight — a digital platform that uses data to pair consumers looking to buy or sell a house with a fully vetted, professional real estate agent to help them make the transaction happen. The company was born out of an especially bad experience by the firm’s CEO as he was trying to buy a house, realizing that he was undertaking the most expensive purchase of his life guided by an agent whose quality he had absolutely no way of evaluating.
In the year since Webster last checked in with Homelight, the company has seen its platform expand quite a bit — it now covers 85 percent of the U.S. It has been actively opening up in New York City, a real estate market that is famously difficult to penetrate, and adding considerably to its agent roster — and, on the whole, is “feeling really good about the business.”
Good, he noted, but still like there’s much more to do. That is why, as of last month, Homelight opened an entirely new dimension to its platform.
The Simple Sale Expansion
Homelight’s Simple Sale feature lets sellers list their homes on the marketplace, accept or reject cash offers (to be paid within seven days) and wrap up the entire process — without using a real estate agent.
That feature, he noted, is supported by a network of iBuyers that Homelight has recruited thus far — and will continue to recruit until it has achieved nationwide coverage. The Simple Sale service lets potential buyers see the most competitive offers from multiple buyers, and compares those offers with the price a seller could expect, then they can decide what they want to do.
Now, Sridharan and Homelight both firmly believe that consumers are best served by working with agents. A house, he noted, is a consumer’s largest lifetime purchase (and asset to monetize), which means they absolutely want to maximize its value in nine out of 10 cases — and a good real estate agent is the best way to do that. However, he added, there is that one out of the 10 cases.
“There are cases where a consumer values the ease and certainty of selling their house to a cash buyer, and getting paid in seven days. This is the person who is maybe selling a parent’s house from out-of-state — they don’t have time to fly home multiple times or try to manage the process. And, in those cases, they might be willing to say they want to take 20 percent off fair market value to just be done with it,” Sridharan explained.
This might look like a tool that competes with Homelight's agents, he noted. However, those agents largely use this as an arrow in the quiver when they are talking with customers about the best ways to sell their homes.
“It lets the agents be part of the iBuyer trend,” Sridharan told Webster, and while there are agents who may hold out and refuse to even look at this tool, he doesn’t think that is the right business move. The agent's job is being transformed by the digital age, and the ones who will succeed, he said, are the ones who will make the transition to be advisors of the sales process, who lay out all the options and help the customers make the best final decision.
It’s a big job, he noted, but Homelight remains committed to recruiting good agents.
Building The Platform For The Future
The good news about the agent end of the platform, he noted, is that Homelight doesn’t have trouble recruiting because it is a channel for sales without a lot of downside. Homelight often establishes if the potential buyer or seller is serious and in a position to make a deal, and the better they perform, the more referrals they get. Agents don’t pay a fee for the service, but pay only when a transaction happens, as is industry standard in broker referral fees.
The bigger problem, he noted, often involves turning folks away because they won’t be able to get traction in their areas, due to so many highly rated agents on the platform. While the company is highly satisfied with the agents it is recruiting, the algorithm still needs tweaking. Right now, it does well in picking out the best among established agents.
However, it is not easy for newcomers who don’t have the years of sales experience, or enough transactions, to generate referrals.
“We are taking steps algorithmically to identify up-and-coming agents. They are folks [who] have recently [picked up] a lot of transaction[s] and are performing well, but don’t have 400 transactions over five years. We want to be able to look at them as serious entrants to the market,” he said.
The firm fundamentally believes, Sridharan said, that the “the agent is the quarterback of the transaction” and, as in football, a good one is the difference between a great home-buying experience and something that ends up on a list of real estate horror stories on Buzzfeed. That means, from Homelight's perspective, the big-picture question to answer is how to support and enhance the agent’s work across the various areas ripe for optimization that litter real estate, especially when it is done in a logical way that helps the consumer — who, at the end of the day, is the party Homelight is thinking about.
“Our real mission is to help sellers and buyers make better decisions. This is one of life’s more stressful choices, because this is a huge financial asset with big consequences. We look at our job, and we are an advisor that wants to connect the consumer to the best outcome. Whatever mechanisms we can do that by, we are committed to building the products that help,” he said.