One question we get asked a lot at BlueMatch is how are we able to make money by selling homes commission free in Denver. Our response is always the same. Are our services too cheap or has the Real Estate industry commissions not caught up with the new millennium?
Many years ago, believe it or not, housing inventory was not available through the click of a mouse. Touring the home, photo galleries, neighborhood data, schools, etc were all things you gathered from your Real Estate Agent. An agents job was very different 10 years ago. Marketing cost more, the sales cycle was probably much longer, documents weren’t easily accessible, email and text weren’t a primary means of communication, etc. It made a ton of sense that listing agents made more back then because the work involved was much greater than today.
But why are they still charging the same today as they were 10 years ago? This question is the driving force of why we started BlueMatch and why we decided to sell homes in Denver commission free. As you may recall from our previous post, The Golden Rule of Real Estate, we touched on some of the differences between representing the buy side and sell side. Representing buyers is very different than representing sellers. There is a reason BlueMatch strives to sell homes commission free on the seller side. When someone wants to sell a home (especially in the Denver market) the process is usually very predictable and seamless with little volatility. The buy side however can be incredibly exhausting, very little predictability, long, cumbersome, and extremely volatile.
The sell side is also less intensive work/time wise since technology has come such a long way. The MLS alone syndicates across hundreds of sites and is responsible for driving the VAST majority of all buyers in almost every market in the US. With sites like Zillow, Trulia, and Realtor creating beautiful interfaces using the MLS API, what use to be done via magazine publication or buying cheap television air time, is now done with a click of a mouse. This alone saves Real Estate Agents a significant amount of time and money.
The key for us at BlueMatch is efficiency. By leveraging technology, data, and best practices combined with segmenting each portion of the process and assigning it to a specialist, we are able to operate a highly efficient business. Our goal is to collect half the commission of a normal agent but operate at 20X the efficiency. A traditional Real Estate Agent in Denver has a tough job. They are responsible for juggling listings, buyers, negotiations, marketing, etc. Real Estate Agents also work for 100% commission which means money is not always guaranteed each month. With all these factors (along with others) combined, agents need to extract the maximum amount they can from each deal.
The unit economics for BlueMatch is simple. On a buy/sell transaction in Denver, the average commission of a $300,000 home is $16,800. This means if an agent sells your $300,000 home and helps you buy another home at the same price, he or she will earn $16,800. Not a bad pay day. With BlueMatch, the max we will make on an identical transaction is $8,400. So where does that other $8,400 go? Right back in our clients pocket. Because we can create better more efficient processes that are data driven, BlueMatch can still earn money while also saving our clients a significant amount of money. We personally believe that this is just the start of bringing the Real Estate Agent model into the new millennium. Selling homes in Denver commission free is what we hope all agents will adapt one day.