Interview: How Digital Real Estate Increases Efficiency While Cutting Costs
Reali CEO Amit Haller discusses how real estate is following in the travel industry's footsteps to serve a consumer empowered by information now freely available online
The need for middlemen in real estate transactions is on the decline as the availability of property information increases online. Rather than eliminating the need for agents, this trend has instead lead to new opportunities for digital property-related transactions.
Tech-focused real estate agency Reali has taken advantage of the industry's changing landscape, creating an efficient, largely digital service for estate transactions, cutting costs for buyers and sellers by charging them each a flat-rate fee. For a recent podcast on real estate startups, PSFK founder and editor-in-chief Piers Fawkes spoke to Amit Haller, the founder and CEO of Reali. In this extract from their conversation, the pair discuss the digitization of real estate processes and how Reali achieves transparency and efficiency with its app-based service.
Amit Haller: In the past eight to 10 years, since 2008 or so, the big revolution that disrupted this business was the knowledge and information about real estate that started to become democratized and public to buyers and sellers. With the help of companies like Zillow and Trulia, already educated buyers and sellers can learn a lot about the market, trends, historical prices and current inventory. More and more information is becoming fully accessible to the public, something that was not possible 10 years ago. That's a huge trend, and new technologies are going to build on this evolution in the next few years.
Piers: It reminds me a bit of what happened in the travel market. Maybe 15 years ago, we all used travel agents. Today, we have the tools and resources to book all the travel we want. I think you're hinting at the same thing happening in real estate.
Absolutely. Like with travel, the stock market and even stuff like Airbnb and Uber, consumers have been educated so that they don’t need middlemen anymore in order to conduct transactions safely and compare prices un-biasedly. The travel industry in particular can help us to understand that consumers can make as educated, professional choices as the people who used to be experts in this industry. The same thing is happening right now in real estate.
How is that going to manifest, and what's the service you provide?
It's bringing value to the consumer in two different ways. To me, the most important value proposition any company can offer is reducing the cost while increasing the quality of service. The way we do it is the following: Instead of having the traditional agents charging 2.5 to 3% on each side of the transaction (the seller agent and the buyer agent), we came up with a flat rate. We have a free-market flat rate, but I would say the U.S. average flat rate is about $5,000 on houses ranging between $250,000 and $750,000.
With this flat rate, either by representing the buyer or the seller, we actually eliminate this entire commission. Say on a $500,000 house, where the commissions are typically 3%, we'll kick back the buyer the entire 3%—$15,000, minus our $5,000 flat rate. The saving for the buyer is $10,000, which is pretty significant, particularly in relation to the down payment on a house like this. It could be 10 or 20%. Furthermore, this is not a discounted broker. This is actually a quality service broker.
We are a licensed broker. We are full-service broker house. We'll provide you the entire service you would expect from your broker and much more. We provide communication 12 hours a day, seven days a week. You can call, chat or email us. Most of our buyers, typically millennials, prefer chatting because it's convenient and non-intrusive for them, providing all the different information at the tip of their fingers.
Uploading documents can also be done via the app. We provide disclosures with an executive summary. We tell you everything we know and read through all the footnotes in order to make sure we understand the deal correctly. We will summarize it for you.
I think about broker fees as protecting me, because the broker's going to look at the paperwork and at least help me through that process. It sounds like you automated that process with the $5,000 fee.
We automated the process. Technology plays a very significant role here. We didn't reduce the price just because we are cheaper than others: We reduced the price by deploying a lot of technology and increasing our efficiency. We can transfer most or the entirety of the savings to the consumer and still be very profitable on the transaction.
With disclosures particularly, it's not just about the technology. It's also about respecting the liability. Most brokerage houses would not allow the agents to discuss disclosures because they don't want to take the liability to do with advising the consumer. To me this is unreasonable. If we are the brokers of your choice representing you in a deal, you expect us to be the best sounding board for you as far as what is right, what is wrong, what is reasonable risk and what is not. By advising you, yes, we take liability. We consider it part of our business and part of the quality of service that we are going to provide our customers.
Can you tell me about what happens in the home?
So far, we spoke about the buyer's experience. We also change the seller's experience and the quality of salesmanship. Again, technology plays a big role in it.
The first thing we do is create the idea staging—virtual staging in multiple styles of the house. The reason for this is that there's typically going to be a cultural gap or generation gap between sellers and buyers. Many sellers are actually selling the lifestyle and not necessarily the house. With this virtual staging, we give the buyer a very good idea about how the house is going to look so they can envision themselves living in this house per their particular style that they prefer. That's one very important service that we provide the sellers. By presenting the house targeted to the potential buyers, we are decreasing the selling time and potentially increasing the price of the house.
Furthermore, we are using more technologies, including instant scheduling—scheduling a visit in the house at the convenience of the buyer. We'll accommodate those different times, making it very easy to be done through the app.
It's the Uber of booking experience.
Exactly. It’s a self-guided tour, pointing out potential issues and potential upsides. We don't try to hide the issues. We adhere to the concept that upfront transparency serves both sides extremely well. That's how we can create the best win-win situation for both sellers and buyers.
Another very important part of the experience is the 12-hours-a-day, seven-days-a-week service. When you are viewing a property in the traditional way, the seller agent is not there. It's actually your buyer agent who is walking with you. Many times, it's the very first time they have seen the property—they don't really have any intimate knowledge and won't be able to answer questions. So many times I visited potential properties to acquire and no one could tell me when it was painted, where exactly the property line goes or what type of countertop it had.
The ability to chat live with the real expert, with the property itself, allows you to receive all answers virtually in real time, from the source, without any intermediates or middlemen.
How does that work?
Using the Reali app on your phone, you have the live chat support with the real estate agent who knows this house intimately and would be able to answer every question. Additionally, there is a guided tour at specific locations within the house itself. Depending on where you are, you can see different features and read about different functions. The listing pictures and information change once you are in the house. We try to make it not too techy or gimmicky, but rather functional and very transparent to the buyer.
What markets are you currently operating in?
We are operating right now in the vast majority of the northern California market—more particularly the Bay Area, Sacramento and the corridor between them. We're going to expand to the rest of California within the next few weeks. Later on this year we'll start to expand outside of California as well.
Listen to experts discuss the home buying experience on our PurpleList podcast episode ‘Real Estate Process Reconsidered.' More insights on the topic can be found in the PSFK research paper Streamlining The Real Estate Buying Experience.
Lead image: Reali via Facebook