Location, location, location: It’s the mantra of real estate.
And in the digital age, the ideal location for, well, finding the ideal location has become an online platform. Zillow springs to mind, of course, along with others. The idea is that home buying, traditionally rooted in face-to-face interactions and legwork, in trekking back and forth across town (and back) to see listings, can be re-made in eCommerce fashion.
Consider it a big-ticket version of ordering online – and picking up on-site (literally).
With cash back.
Traditional homebuying is a time-consuming, high-touch process that brings buyers, sellers and agents on both sides of that equation together for months at a stretch. At times, it may feel more like an art than a science, with a bit of guesswork – at least for the buyers, who may see dozens of properties before finding the one that fits.
And in the end, it’s hardly cheap – not just in terms of the purchase price, but the commissions paid, too.
Sellers pay a commission that can average 6 percent, which gets split between the agents representing the buyers and the sellers.
Prevu, an online real estate broker, is seeking to shift the process to the buyer, bringing the agent into the fold only when necessary – and in the process, through the platform model, saving buyers money and even helping agents earn a stable paycheck (along with healthcare and other employee benefits).
In an interview with Karen Webster, Prevu Co-founder Thomas Kutzman said the introduction of the platform model helps leverage market-level data and change the contours of an age-old service model, to the benefit of everyone involved.
The Guided Experience
As Kutzman explained it, the homebuying process is due for a makeover, as consumers’ expectations are changing. Digitally-savvy millennials are now the largest portion of first-time homebuyers, and the largest pool of buyers overall in the United States.
And amid that demographic shift, he said, consumers are used to having more control, where transparency is inherent to the process. And, he continued, it’s not necessarily the case that real estate transactions, in the digital age, have to be a self-service process.
Think of the optimal homebuying experience – the largest transaction many individuals or families will ever make – as a guided experience, Kutzman said.
There’s a mismatch in the way it’s traditionally been done. As Kutzman noted, 99 percent of buyers begin their search for a home online. “But the average agent in America spends about 70 to 80 percent of their time focused on finding the customer – and only about 20 to 30 percent of their time actually providing a service to the customer,” he told Webster.
“This guided experience is driven by technology,” he continued, “by bringing the consumer online to buy a home. It allows a better collaboration with your agent, at the ‘right parts’ of the process at the right time.”
The agent remains a crucial part of the equation, but in the later stages of the homebuying process – and the agent’s very role is transformed.
The data-driven process behind the platform model helps increase efficiency across the board. Kutzman noted that the average real estate agent may do four to five deals a year, while the average Prevu agent does 36 deals annually, he said.
Kutzman added that brokers do not reach out, though buyers can opt to interact with them at any point early in their homebuying journey. Introducing the agent later in the process helps to, in Kutzman’s words, “foster the growth of the ‘transaction consultant’ as opposed to the million-dollar listing caricatures of people you see on television.”
The idea of adding a consultant to the mix stands the agent’s traditional part of the process on its head.
Prevu’s agents are full-time employees of the firm. As Kutzman related to Webster, much of the traditional real estate field is populated with part-time agents. When agents are engaged in the process as a full-time pursuit – with more experience, deals and resources in hand – Kutzman said the end customer benefits from the true expertise.
The Rebate Factor
As the buyer’s broker, Prevu collects the 3 percent commission and then offers a rebate to its customers. Prevu customers get up to two-thirds back, or the equivalent of 2 percent of a home’s purchase price. The company has estimated that buyers save as much as $23,000.
Of the rebates, Kutzman said, “there’s been this democratization of data and listings available online, but there’s been no unlocking of the savings. There’s been no compression of the commission over time … the only people who have benefited from the technology over the past decade are the agents, not the consumers.”
Because the platform itself digitally acquires the customers – who are driven by the prospect of getting 2 percent back on their home price – and matches buyers and agents together, the agent can focus on customer service.
In terms of mechanics, a potential buyer starts by browsing properties (and can opt into real-time alerts) via customized search on Prevu’s site. During the browsing process, the rebates are displayed. Upon choosing a property to explore, the buyer can schedule a private showing, and can contact agents directly to ask questions about the property or even submit offers.
“Once you’re assigned an agent for a tour or for your offer, they can immediately be brought into that chat,” said Kutzman. “We think of ourselves as friends in the early miles and experts in the last mile.”
The guidance from the agent-as-consultant comes into play once it comes time to make an offer, said Kutzman. The agents prepare comparable analyses for the customers – and, as Kutzman explained, they have geographic expertise due to the full-time nature of their jobs.
In September, Prevu raised $2 million in a seed funding round led by venture capital firm Corigin Ventures. Funding is being earmarked in part to expand beyond the current markets of the New York metropolitan area and Connecticut, to boost marketing spend and to hire engineering staff.
As Kutzman told Webster: “We don’t envision a world where the agents go away … we just think the ability for an agent to be more efficient and to create a better customer experience is possible.”