For sale by owner, but with help

11 / 23 / 11

By: Elaine Pofeldt

The company: RealDirect

What it does: It offers home sellers who want to save on commission costs a middle ground between selling a home themselves using a no-frills site, such as ForSaleByOwner.com, and hiring a full-service broker.

How it’s doing: The company, launched in January, reports that monthly sales so far put it on track to bring in $1 million on an annualized basis. It expects to be profitable in 2012.

Having bought and sold several apartments, Doug Perlson knew there were few options between paying a full-service broker a traditional commission and taking on the time-consuming work of selling a home on one’s own. But as a former real estate lawyer and the co-founder and CEO of TargetSpot, an Internet radio advertising company, Mr. Perlson was in the position to create an online alternative himself. In January, he unveiled RealDirect, an online Manhattan-based marketplace for real estate, which he beta tested last year.

The company, a licensed real estate brokerage, lets home sellers in Brooklyn and Manhattan list apartments and houses for sale, offering varying degrees of assistance with selling them and differing levels of payment, based on how much help is needed. So far, the site is off to a healthy start, with many home sellers looking for ways to make up for the beating they’ve taken in the real estate market the past few years by at least saving on commissions. Mr. Perlson said 26 properties listed on the site have sold so far and seven more are under contract.

RealDirect enables home sellers to get free advice on pricing their homes by entering detailed data and photographs, which are reviewed by consulting brokers who suggest what to charge.

Sellers can then select one of two options for their property: They can list it as “owner managed” and do the work of showing it themselves, for either $395 a month or a 1% commission at close. Or, if they want more help and own a property in Manhattan, they can list it as “agent managed” and pay RealDirect a 2% commission to manage the process of selling it, such as showing the apartment. They can select the commission they will pay the buyer’s brokers.

“In two-thirds of our transactions, there are buyers’ brokers involved,” said Mr. Perlson.

RealDirect right now has about 30 active listings, with most under $3 million. The average Manhattan property on the site—reflecting the average price of a Manhattan apartment—lists at about $800,000, according to Mr. Perlson. In Brooklyn, the average listing price is in the “mid-fives,” he said.

Until now, clients have ended up paying between $395 and $2,000, in contrast to the traditional 4% to 6% commissions split between the seller’s agent and buyer’s agent. So, for instance, if a seller lists an $800,000 apartment on RealDirect and finds a taker within a month, he would pay the site $395 in a best-case scenario. If a buyer’s broker is involved in the transaction, he would also pay a commission to that broker of, say, 3% or $24,000. On the other hand, if he uses a traditional seller’s broker charging a 6% commission, he would pay $48,000 in commission charges, in lieu of the $395.

Mr. Perlson secured $2 million in venture capital funding this summer from GSA Venture Partners, as well as Bendigo Partners, High Peaks Venture Partners and other investors. Private investors include Barry Silbert, founder and CEO of SecondMarket, a marketplace for alternative assets, and Jacob Pechenik, co-founder and president of financial tech firm Yellow Jacket Software.

The big challenge, Mr. Perlson acknowledges, is winning converts. “We’re a new concept,” he said. “We’re asking people to change their behavior.”

The site offers some extras to help entice them. Using a cloud-based “dashboard,” for instance, RealDirect keeps in touch with those who list their properties, alerting them if property values have changed enough to make it important to alter their pricing. It also offers a robust calculator to determine the net proceeds of a sale.

“There are so many ways that your equity is going to get eroded when you are buying and selling that most people don’t realize what they’re going to walk away with when they sell their home,” said Mr. Perlson.

Brian Hirsch, co-founder and managing partner of Tribeca Venture Partners—which bought GSA—and a RealDirect board member, said he is confident that the site will appeal to the do-it-yourself crowd, just as programs like TurboTax appeal to those who want to save on tax preparation. “There’s a certain person that, if you give them the tools, they will come to you,” Mr. Hirsch said.

But he acknowledges that to become more valuable to customers, the site needs to gather more proprietary data on the marketplace. Right now, it relies heavily on third-party data to shape recommendations on pricing, for example. “We’d rather have our own data to drive intelligence to the platform,” he noted.

RealDirect already has some passionate advocates among its early adopters, according to Mr. Hirsch. “A number of the customers early on said they wanted to invest in the company,” he said. So far, RealDirect has turned them away.

The bottom line: With many home sellers dissatisfied with the returns on their investments in real estate, RealDirect is likely to attract interest from people looking to save on commission costs.

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