Adam Buchanan took a risk when he turned to an untested mobile application called out of Boulder, to sell his Arvada home.
But the 31-year-old, a social media marketer and father of three, was comfortable trying new technology and not averse to rolling up his sleeves if it meant saving his family money.
His efforts were rewarded when he paid only $9,000 in commissions on the sale of his $300,000 home through SQFT versus the $16,000 to $18,000 that a more traditional deal might have cost.
“I was happy. We rolled that equity into a new house, and I paid off a ton of debt and started an online business,” he said, noting his home sold for $70,000 more than what he and his wife paid two years earlier.
SQFT charges sellers 1 percent for its services and will pay 2 percent to the buyer’s agent, a substantial reduction from the 2.8 percent more commonly charged. If a buyer shows up solo, a home could, in theory, sell for just a 1 percent commission.
Sellers earn the discount by drafting their own listings, which post directly from a desktop or mobile device onto the local multiple-listing service and more than 450 real estate sites.
Sellers handle showings, which they can schedule via texts. Licensed brokers offer a backstop and advice as needed. They step in more heavily when it comes time to draft a contract and close the sale.
“We are putting some of that work on home sellers,” said James Simpson, CEO and co-founder of SQFTx LLC, the parent company. “They get to own the process and be more involved in the selling of their own home.”
SQFTx tested a beta version of its application, currently available on Apple devices, starting in February and officially launched last month.
Simpson and his partners have focused more recently on recruiting licensed brokers in other states willing to team up with their platform and unbundle their offerings.
“Millennials are changing our business,” David Charron, CEO and president of MRIS, the multiple-listing service in the Baltimore and Washington, D.C., areas, told members of the National Association of Real Estate Editors last month in Miami.
Not only do younger adults prefer to transact business digitally, many resist the idea of paying traditional real estate commissions, which used to run 6 percent but are now averaging closer to 5.1 percent.
And while poor job prospects and heavy student debts have kept many young adults on the sidelines, expectations are they will become more active homebuyers in coming years.
Home listings and once closely guarded information such as comparable sales moved online last decade and reshaped how available homes are found and purchased.
Nearly half of home buyers now find a home on their own, often before they even approach an agent, said Steve Udelson, president of Owners.com, a for-sale-by-owner platform that relaunched as a national online brokerage last month.
Because buyers are told that sellers cover all commissions — when, in reality, those costs are reflected in the price they pay — they don’t push for discounts, Udelson said.
Some industry challengers such as what they consider a bloated and inefficient industry, but Simpson said his approach is more collaborative.
He acknowledges the value of the time and effort required to sell a home. Technology now makes it easier to shift certain tasks to sellers, who should reap the benefit.
Buchanan initially listed his Arvada home at $310,000, realizing it might be a stretch. Comments that it was priced too high, given the upgrades required, convinced him and his wife to reconsider.
“We pivoted within an hour,” said Buchanan, who was looking for a quick sale so he could return to his family, which had relocated to Utah. He dropped the price by $10,000 and soon had a deal.
“They have learned how to make it so efficient, and they have a viable business model,” he said of SQFT.
About the only hang-up came from the buyer’s agent, who wasn’t happy about getting a 2 percent commission rather than 2.8 percent, Buchanan said.
One by one, intermediaries in a variety of industries have fallen to the convenience and cost-efficiency of digital competitors. But the traditional real estate brokerage model has held fast, despite numerous predictions of its demise.
Steve Murray, president of Real Trends in Castle Rock, said a majority of people prefer the traditional approach. That reflects how infrequently people purchase a home, how complex a sale can be and the high costs involved if a mistake is made.
“The world has thrown hundreds of millions of dollars in the last 20 years at real estate technologies that will revolutionize our industry,” Murray said. “Consumers are not yet prone to bail on this system they have been using for so long.”
Murray predicts the next big innovation won’t be a digital application that replaces agents, bur rather a rating system that makes it easier for consumers to sort out and select the top performing “human” agents.
Buchanan disagrees, predicting his generation won’t accept paying such large commissions when technology allows them to handle much of the work themselves.
“This is a capitalist market we are in, a free market, and we have to think bigger about how we give the power back to the home seller and the homebuyer,” he said. “We have a lot more freedom than we think we do.”
Aldo Svaldi: 303-954-1410, asvaldi@denverpost.com or twitter.com/aldosvaldi
