A home is probably the biggest thing you’ll ever buy –– or sell. Unfortunately, the process of doing either is notoriously stressful, fragmented, and clunky. So we rely on brokers to navigate it –– for a hefty commission. Is this industry ripe for disruption?
Kyle Stoner thinks so.
With a background in investment banking, lean manufacturing and launching startups, he’s ready to take on the next frontier: real estate.
Kyle and his co-founder Carson Junginger launched Abode last year with a simple plan: develop tech that makes it easy and affordable to buy or sell a house.
Abode offers an all-inclusive approach, with a platform that connects consumers directly to the tools formerly available only to brokers, while matching them to the professionals they might need: lenders, attorneys, inspectors, movers, and more.
Here’s an excerpt from the conversation with Kyle on how Abode is breaking through a largely analog ecosystem –– no hard sell required.
What attracted you to the real estate market and what continues to, particularly now?
It happened organically. Carson and I started a company called Alpha Lead, focused on matching people with disabilities with attorneys who can help them get disability benefits. So it was a kind of traditional, two-sided marketplace. As we were doing that, both of us were buying and selling real estate. We realized it was a very manual process. We were shocked by the lack of software tools for consumers to use.
At first we were joking around, saying we could probably just use what we’ve already built at Alpha Lead –– but matching consumers to real estate agents, mortgage companies, et cetera, allowing them to collaborate on one platform. But the more we looked at it, we realized that real estate is unique. It’s its own beast in a lot of ways. We became sort of obsessed with the idea, though. So we applied to Techstars and the rest happened from there.
Walk me through how it works if I’m selling or buying a house. What’s the value proposition?
Our main business right now is serving home sellers. If you want to sell your home and don’t want to pay a 6 percent commission rate, you can list with us for as low as $35, up to $2,400, depending on the features you want.
We list your house, we put it on the MLS [Multiple Listing Service, each state’s master database of property for sale]. We syndicate it out to all the major websites: Zillow, Trulia, et cetera. If you need a yard sign, we send you one. But it’s really a flat fee home listing service.
We also partner with about 9,000 real estate agents around the country. If, as you’re selling your house, you need more –– better pictures, staging, whatever, you can connect to a full service agent at that point. We algorithmically match you to an existing brokerage. We’re not anti-broker.
How are you making your money? Is it the broker partnerships, the fees, or is there an advertising platform?
We make money from flat fees, for listing. We’re going to be launching some other products that I can’t talk about today, but they’re in line with exactly what you would think –– all the different services you need when you sell a home. But our main bread and butter right now is fees. There are no ads on the platform.
When a broker does a transaction with one of our customers, we receive 25 percent of the broker’s commission.
What does success look like for you as a company? We don’t need brokers the way we used to, and their support doesn’t warrant 6 percent, in my opinion, except in certain circumstances. When I look at the market, I think 60 to 70 percent of sellers probably don’t need brokers anymore. But they also don’t have all the tools. So you consolidate that.
I’ll tell you how we look at it. We think great analogs for us are companies like Robin Hood for stock brokerage, Expedia for travel, and maybe even Stripe for credit cards. All of these companies have created very low cost, clean interfaces that give consumers access to legacy infrastructure. Look at Expedia –– on the back end, it’s just the same travel agent software they’ve been using forever. They put a very clean interface over it and made it free. Now you can search for the same deals that only a travel agent used to get.
Sellers are going to look for anything they can to sell the house. What is the volume lever you need to pull to make this thing pop? It is it attracting more buyers?
We went from [launching at] zero in 2017 to doing over $1 billion in home sales in 2018. We’re seeing that number continue to accelerate through 2019. What we found is that the low-cost MLS listing is the tip of the spear.
You can, of course, offer consumers many other things once they’re signed up. But the listings are what’s pushing so much volume for us. People say, “wait, I can get on the MLS, Zillow, Redfin, and everything else in 5-10 minutes and it’s only $150 up front?”
That is the thing that’s really popping for us. There are other things we’re doing too, but it’s really about having a low-cost entry point and a clean user interface. Trustpilot reviews say things like, “this is so easy and I saved $10,000.” It’s tangible savings.
It seems like this is the best time for you, because you’ve never had fewer people our age who’ve never bought a home before, and you’ve never had more Boomer-generation people trying to get the hell out of a home. On one end, users aren’t savvy, and on the other, they don’t have time to set all this stuff up. And you can say, we’ll save you thousands –– that’s a fact.
In 2018 we acquired a USRealty.com, and it opened up a whole world to us. We had been charging users a flat fee on our own at a higher price point and it was doing OK, but US Realty had a really cool, low-cost price plan.
For the people you’re describing, it’s like, ‘Eureka –– I can, just enter my credit card and be on the MLS?’
We’re pretty much national at this point. And every MLS has its own paperwork, its own sort of steps to go through. We’ve digitized all of that. So it doesn’t matter where you are in the states. We get you the right documents, the order they need to be filled out, and then we’re creating a listing for you that’s fully legit, rather than just putting it on Zillow or something like that.
It’s a crowded landscape, though. How do you see yourself fitting in?
People often say Abode sounds a little bit like Redfin, and that they’ve already done this. Well, Redfin has, maybe, 2 percent market share. So there’s a lot of space for new entrants to disrupt and innovate.
Compass is another great example. They’re a huge player that came out of nowhere. But they still charge 6 percent. So you can understand that if people have the right technology and the right teams, they can come into the space and steal share from what’s already there.