Many agents complain about marketing costs and effectiveness. What if there was a place that had sellers lined up searching for a realtor, instead of you searching for the sellers? That’s exactly what Simon created, and taking out the marketing is only part of what UpNest does for you.
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Simon Ru Real Estate Background:
-Founder and CEO of UpNest, a realtor marketplace where top local agents compete for home buyers and sellers’ business.
-Facilitated over $1B worth of home listings since launch and delivered over $10M in commission savings to sellers.
-Five thousand top realtors actively competing on the platform
-Many are celebrity realtors that are ranked on Wall Street Journal or featured in TV shows such as HouseHunter & Million Dollar Listings.
-Serial entrepreneur, ex-PayPal, sold business to PlaySpan/Visa.
-Based in San Francisco, California
-Say hi to him at www.upnest.com
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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Simon Ru. How are you doing, my friend?
Simon Ru: Good.
Joe Fairless: That’s good to hear, and nice to have you on the show. A little bit about Simon – he is the founder and CEO of Upnest, which is a realtor marketplace where top local agents compete for home buyers and sellers business. He’s facilitated over one billion – yes, that’s with a “b” – dollars worth of home listings since launch, and delivered over ten million dollars in commission savings to sellers (that’s a whole bunch of money). He’s talked on all the major media outlets that you’ve heard of – Wall-Street Journal etc. He’s based in San Francisco, California. With that being said, Simon, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Simon Ru: Sure. Upnest is a realtor marketplace where we bring top local agents who compete for home buyers and sellers business; [unintelligible [00:03:19].22] personalized proposal that details your commission rates, rebates and service offerings and Q&A and a personalized pitch. Our value prop is to deliver consumers a selection of top agents. These are agents that you will hire in your neighborhoods and we bring them to compete for your business… Transparency when it comes to what services they’re gonna offer and how much they’re gonna charge, and because it’s a very competitive environment, you get savings. We have this far delivered over 10 million dollars in commission savings to home sellers.
Joe Fairless: This makes so much sense. You know it’s a good idea if the thought is “Why the heck didn’t this exist before?” I think about Uber all the time; I thank my lucky stars that Uber exists because of the whole atrocious taxi experience.
What are the terms that typically win a buyer or seller’s business?
Simon Ru: We’ve been around for almost four years and we have 5,000 top realtors actively compete on our platform now… Many a celebrity realtors, we’ve got [unintelligible [00:04:23].19] on the Wall-Street Journal, we were featured on TV shows such as House Hunters and Million Dollar Listings…
We obviously have a lot of success with top agents, and I think part of the reason is our revenue model is very similar to other marketplaces like Uber and Airbnb – that’s strictly performance-based. If the agent can’t win the listings or can’t sell the homes for the X amount and quick, we don’t make any money.
We spend a lot of time coaching our agents, and for a lot of the top producers – they know they own the neighborhoods, and if we can put them in front of the seller, they have no problem winning the listing.
Over time we weed out weak agents and the cream floats to the top. We’re really lucky to have some of the really top agents around the country to be actively participating on our platform. Some of them are actually your guests.
Joe Fairless: Oh, I’m sure, yeah. I’ve talked to over 1,000 people, so I’m sure there’s some of the guests who are on your platform. You said the top producers are the ones who win the listings; if you’re not a top producer, then how do you win listings?
Simon Ru: Basically, what we did was we leveled the playing field. We all know in real estate that 20% of the top producers win 80% of the business, and they are [unintelligible [00:05:44].07] the average age of a realtor is 55ish, but the agents that are very successful on our platforms are [unintelligible [00:05:51].29] technology, they have a really good web presence, they are hungry, they are up and comers. These agents in this industry are kind of moving into a team type of structure; they work in a team environment and they also have a fixed cause.
If you think traditionally how an agent gets their leads is they buy zip codes on Trulia and Zillow and then they get a bunch of phone numbers and e-mails which they have to spend a lot of time to nurture and scrub these leads…
When I was doing my research as I started this business, I’d do a lot of custom developments; when I’d come to these agents and ask them “I can bring an in-market seller who’s ready to list, but the only catch is that you may have to come down on your commission a little bit… Would you do it?” A lot of these agents were telling me like “Look, I’m spending a lot of money on these other marketing channels as it is, print marketing and all that”, and a lot of them are non-trackable. You don’t know whether these fliers that you mailed out were effective or not. Even with some of the online portals, it’s a huge time suck. You have to nurture these relationships and it’s six months out or nine months out before you see any deals signed.
So they were like, “Hey, if you have a seller that’s ready to list, I just need to go in and do a pitch. I’m all for it” – that’s the segment where we have a lot of success, because without platforms, the agent submits a proposal that basically lays out everything that they do. It’s like a manual – what fee they’re gonna charge, and we have a series of Q&A that’s tailor-made for the seller based on the information that they provide. By the time the seller wants to talk to an agent, wants to interview an agent, the seller will already like the agent. It’s like a slam dunk at that point.
We don’t talk that many things upfront, so effectively they ship their fixed cost into like a marginal cost, and they have no problem paying us when all is sorted out. So it’s win/win/win all around. We just basically make the process more efficient.
Joe Fairless: When the agents fill out the proposal, I’m sure that your team has identified the most important aspects that need to be included, and that’s how you came up with information that they fill in. Regardless of if it’s your platform or just in general, what are some of the aspects that your team has found are most relevant to people who choose an agent?
Simon Ru: Definitely the top of mind question is “How much are you gonna charge?” but our team does a good job in educating the consumer that the commission is not the biggest determining factor in selling your home successfully. There are a lot of aspects to look at. If a top agent can sell your home for 2%, 3% more, it kind of more than covers that differential in listing commissions.
You’re welcome to come to our website and there’s a screenshot of what a proposal looks like. We break down the commissions… There are also services. When negotiating with an agent, don’t just negotiate on the commission, but also pay attention on what type of service are you offering. Things like free stagings – the agent can offer that; or fliers, postcards that they’re gonna mail out, a landscaping service – if those are a part of the package…
In the Bay Area some of the expensive listings have drones that fly over and do an aerial shot. Those are pretty popular. 3D virtual tours… Those are expensive packages. If you can convince an agent to [unintelligible [00:09:20].08] in that platform, everything’s laid out. Those are part of the cost factor, and more than that, you have to look at the agent’s stats. We also have those laid out.
Basically, what’s more important is how do they come up with a price, because price and marketing are the most important factors in determining whether a home gets sold or not. So what’s the thought process in coming up with a price and then what’s the pricing strategy? All those are laid out, and those are some of the questions that we ask our agents to answer in the proposal.
Joe Fairless: What’s a bad pricing strategy and what’s an exceptional pricing strategy?
Simon Ru: It kind of really depends on the neighborhoods and how hot the market is. We have agents that have a lot of success in pricing a home 15% markets and trying to [unintelligible [00:10:09].23] and also it depends on the season, too; it depends on whether it’s winter time or summer time. Especially in the winter time I know the property is gonna sit on the market for a while, so I’m gonna set a realistic price and this is it, I’m not gonna budge. When it’s summer time, we may adjust it later.
So it really depends on the market and how confident the agent is, given the market conditions.
Joe Fairless: What’s been the most challenging part that you didn’t expect when building Upnest?
Simon Ru: Because of the user demographic that we’re going after, we tend to attract of for-sale-by-owner folks, and being able to convince them that — my philosophy if you ask me to talk about the top three ways to save money when hiring a realtor, my philosophy has always been “You save money by making less mistakes. One common mistake that sellers make is trying to save that 6% commission and trying to sell the home by themselves. I’m sure that probably crossed your mind too, like “I’ve got this. Why should I pay the realtor 60k?”
In the beginning we kind of struggle with convincing these for-sale-by-owner guys that “Hey, what you don’t realize is you can really never save 6% because you still have to pay 2.5% or 2% to the buyer’s agent.” Otherwise, the buyer’s agent will just badmouth your house and steer the buyers away. For that reason, more than 90% of the homes in the United States are purchased with an agent.
So we’re really talking about a maximum saving if like 2.5%, and if you’re [unintelligible [00:11:47].15] you have to take on the liability of getting sued by the buyers, and we live in a very litigious society, and we’re talking about a really big purchase here. You have to understand there’s a lot of paperwork, and all it takes is missing one [unintelligible [00:12:02].00] Then you also have to negotiate with a professional who does this for a living. And keep in mind that the buyer doesn’t expect you to keep all that commission savings (the 2.5%, or whatever). When they see [unintelligible [00:12:18].21] listing they see distress, and they expect deals, and they want a piece of that 2.5% commission saving, if not all of it.
That’s why [unintelligible [00:12:29].10] they always get low-ball offers, and research after research has shown that. They sit on the market longer and they sell for significantly less if they’re not represented by a realtor.
We’ve honed our message for certain segments of our users and became really good at convincing these users to use our platform. One advice to the home seller is “Don’t be penny wise and pound foolish and try to sell the home by yourself.” Again, if a top agent can sell your home for just 2%, 3% more, you can make more money.
And after that, now that you decided to use an agent, how to get the best deal – I talk a little bit about that. Fundamentally, it’s just like selling a home, or everything in life, for that matter… It’s creating a bidding war for your listing; the old-school way is you call a few agents, get the excited about your property, then tell them like “Hey, John at ABC Brokers down the street is offering me 5%. Can you do better?” It’s just like a flea market.
You may rub the agent the wrong way [unintelligible [00:13:29].07] is a bad way to start a relationship with someone who’s gonna represent you, gonna know your family, your finances… It’s a very important transaction.
What we do at Upnest is we turn our table around. Instead of needing to haggle with the agents, the agents are coming to your with the proposal, talk a little bit about the proposal… If you’re a buyer, we get you all the rebates from [unintelligible [00:13:53].08]
Joe Fairless: Who’s your primary audience? Is it agents, or is it people who are looking to buy and sell?
Simon Ru: It’s a two-sided marketplace. Definitely, we need to be careful not to create like a race-to-bottom situations and attract a bunch of discount agents, because that may not serve the best interest of home buyers or sellers. We put a lot of focus on bringing in some really good agents that deliver a really good customer experience and sell the home successfully. On the consumer side, we first launched as a seller-focused marketplace. [unintelligible [00:14:31].13] was actually less than 6%, and then about a year and a half ago we decided to go after home buyers as well, and we rebranded to Upnest.
Right now we have a very vibrant buyer and seller demographic and agents are very active on our platform.
Joe Fairless: Do you have a marketing budget?
Simon Ru: We do.
Joe Fairless: Let me just ask a follow-up question. So you have a marketing budget. 100% of it is the whole pie, obviously. What percent goes to attracting agents, what percent goes to attracting sellers and what percent goes to attracting buyers?
Simon Ru: 100% of marketing budget goes to attracting sellers, because really a seller is the long pole, especially in the market that we are in. It’s still very much a seller’s market. Agents – there are a lot realtors in the United States and a lot of them are actually looking for a platform like ours. They definitely feel the pressure from [unintelligible [00:15:23].01], so when we come to them with our pricing, they like it and they give us a try and they’re like “Wow, actually this is real. I get to sit in front of the–
Joe Fairless: Right.
Simon Ru: …and close deals.”
Joe Fairless: So 100% of the marketing budget goes to attracting sellers… What do you spend your money on to attract those sellers?
Simon Ru: Just the whole gamut, kind [unintelligible [00:15:56].00] social network; we spend a lot of energy on organic marketing as well. On our sites we publish a lot of the commission data, so if you’re looking to sell a home, you can go on there and look at “Okay, for California what’s the average savings? For San Francisco what’s the average savings? How many open houses do San Francisco agents really offer?” – things like that. [unintelligible [00:16:21].16] they have a bell curve that shows what other people are paying for the car, and we aspire to offer that experience to home sellers who are in the process of making that decision.
Joe Fairless: What is your best advice ever for real estate investors?
Simon Ru: Create a bidding war in every situation that you can think of, and when negotiating with an agent don’t just think about that one transaction, because after you sell your property, you’re probably gonna take that money and buy some other property. If you submit a request on our website, put that in there and chances are that you will probably get a better offer.
Don’t forget the little things, as an agent to throw in: free postcard mailings, free stagings and things like that. [unintelligible [00:17:06].10] make that comparison easy.
Joe Fairless: And how do you get compensated and what’s that compensation look like?
Simon Ru: Our platform is free to consumers. As a buyer and a seller it should be a no-brainer; there’s no reason not to give us a try. We charge a platform fee – just like other portals like Uber or Airbnb – when the home is sold. That money come from the agent. Basically, they shift their upfront marketing into a backend platform – they pay us.
Joe Fairless: Okay. And what was that fee?
Simon Ru: It really varies, and it depends on markets… Anywhere between 20%-30%.
Joe Fairless: Of what they receive?
Simon Ru: Of whatever they make.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Simon Ru: Sure! I know some of your questions… Man, I’m so busy, I don’t really have that much time to read books.
Joe Fairless: Well, don’t start answering the questions before I ask them… So just a second. First, a quick word from our Best Ever partners.
Break: [00:18:02].07] to [00:18:58].12]
Joe Fairless: Alright, Simon, you don’t read books… I’m gonna skip that question. What is the best ever business idea that you haven’t pursued?
Simon Ru: Upnest – my brain is all about Upnest.
Joe Fairless: I said “that you haven’t pursued” – best ever business model you have not pursued yet?
Simon Ru: I’ve probably pursued it, so maybe next question… [laughs]
Joe Fairless: Okay, got it. Best ever way you like to give back?
Simon Ru: I’ve recently started a non-profit called 5000 Orphans. [unintelligible [00:19:27].04] talked about this and we’ve decided whatever proceeds that we get from any situation, we’re gonna set aside 20%-30% for that cause.
Joe Fairless: How can the Best Ever listeners either get in touch with you or your business?
Simon Ru: Check out Upnest.com. My e-mail is email@example.com. Shoot me an e-mail. What I learned over the years is you just have to keep on iterating. [unintelligible [00:19:50].16] you just keep trying. We’ve been trying for the last four years. The first year was tough, the second year got better, and I think finally we’ve figured this out and hopefully we’ve built a marketplace that is just the way in the next couple years how people find realtors.
There’s a big shift in consumers’ mindset coming from like “Oh, I called the guy that sent me the postcard” to coming to a marketplace and have agents compete for your business. But I think this is really the most efficient way to do this, and they save money on both sides… And we pass on the savings to consumers.
Joe Fairless: Well, Simon, thank you for being on the show. This is a model that makes a whole lot of sense, and I’m glad that you’re spearheading it because it’s needed, that’s for sure. As you said, create a bidding war in any situation you can think of, and your business model is based on that… And some of the negotiation tips that you have (or points) would be putting in free stagings, fliers, postcards, landscaping service, commission, maybe even have a drone or something, do virtual tours… So what else in addition to the commission is the agent bringing to the table, and that’s something that we can all take away from, whether we use your platform or we don’t.
So I really appreciate the advice, thanks for being on the show… I hope you have a best ever day, Simon, and we’ll talk to you soon.
Simon Ru: Thank you, Joe. I appreciate it.
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