Of all the industries that have been upended by the Internet, one major segment of the economy has remained relatively immune to the Web’s disruptive economics.
While companies such as Zillow and Trulia have changed the way people search for and evaluate homes, the vast majority of residential real estate transactions still involve the hiring of a real estate agent and the paying of a 3 percent commission on the completion of a sale.
A new alternative to that model has emerged in Durham, where a startup, SOLOpro, has created a marketplace that connects buyers with real estate agents offering specific one-off services.
Buyers can hire an agent to get a showing of a specific listing, make an offer on a home or complete a closing.
“Both buyers and agents shouldn’t be forced to only do the 3 percent bundled service offering,” said Tommy Sowers, SOLOpro’s 39-year-old CEO. “By unbundling what an agent does we kind of meet buyers where they are in the process.”
This week SOLOpro announced it had raised $1.1 million in funding from a group of investors led by Oxpoint Investments and Buchanan Ventures. The four-person company plans to use the money to test out several revenue models, develop a mobile app for the service and focus on the type of customers its marketplace most appeals to.
SOLOpro, which operates out of American Underground in Durham, launched a pilot version of its marketplace in the Triangle four months ago. Sowers said the company has signed up about 150 real estate agents nationwide, including a few dozen in the Triangle.
Agents who join the marketplace set the prices for their services and the times when they are available. Although prices are still being established, the average cost of a showing so far, Sowers said, is about $50 while making an offer and taking it through closing can cost anywhere from $500 to $750.
The most frequent question Sowers gets asked is why an agent would give up a 3 percent commission to join SOLOpro’s marketplace.
“The average agent makes $33,000 a year, and the average first-time agent makes $8,000 or $9,000 a year,” he said. “This is a way for them, like almost any other profession, to get paid for the services they provide instead of hoping to one day get paid on the transaction.”
Still, it’s unclear whether large brokerage companies will be eager to have their agents participate.
Sowers said SOLOpro isn’t trying to compete with Zillow and Trulia – it expects the buyers using its marketplace will know how to find listings. He also insists that company’s aim is to empower both buyers and agents.
“This is trying to make an agent’s time much more efficient and have them be compensated for what they do,” he said.
Sowers got an undergraduate degree from Duke University and earned a master’s degree and a PhD from the London School of Economics before teaching stints at West Point and Duke. He founded SOLOpro with his cousin, Shayne Sowers, a real estate agent, and Narayan Krishnan, the company’s chief technology officer.
SOLOpro’s success will – like real estate startups before it – depend on its ability to get both buyers and agents to embrace a novel approach to buying a home.
But there are reasons the 3 percent model has remained dominant this long.
Buying a house is the largest purchase many people will ever make, which makes them less willing to take matters into their own hands. Some buyers may not be eager to pay $50 for a showing, preferring instead to pay a lump sum for the entire transaction.
Sowers said so far SOLOpro has been able to attract agents with a variety of experience. That will likely be crucial. If most of the agents on SOLOpro’s marketplace are inexperienced and just starting out, it will severely limit the type of buyers it attracts.
Sowers said SOLOpro doesn’t expect to the 3 percent model to go away, but he believes the industry is ready for an alternative way to pay for the services agents offer.
“We believe agents provide huge value but they don’t all provide the same value,” he said. “So why do we pay the exact same price whether an agent does one or 50 things for you.”
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