The Ever-Evolving Landscape of Real Estate Transactions
The role of the traditional real estate agent has been questioned as technology has made the process of searching for and touring homes more accessible for individuals.
Traditionally, agents have received a 6% commission on home sales, but this practice is being challenged as outdated in the age of the internet. With buyers taking on much of the work in identifying a potential home, the role of the agent has shifted from what it used to be.
Real estate tech companies have attempted to disrupt this model, such as Redfin hiring agents as salaried employees. However, this approach hasn’t always been successful.
But it hasn’t stopped startups from trying to change the game. One such startup is Prevu (pronounced preview), based in New York. Unlike other companies, Prevu hires agents as salaried employees with benefits and retirement plans, with a focus on adapting to the changing role of a real estate agent.
“The role of an agent is changing,” states Prevu’s co-founder and CEO Thomas Kutzman, “It’s becoming much more of an advisor in an important transaction, more akin to wealth management.”
He adds, “The agent becomes an extension of a brand rather than running their own independent business.”
One unique aspect of Prevu’s business is their offering of a rebate to buyers who use their platform to purchase a home. This can be especially appealing in today’s market, with high interest rates and a shortage of available homes in most areas.
Since its launch in 2017, Prevu has helped over 1,200 home buyers purchase properties totaling over $1.5 billion. This includes a wide range of prices, from a $250,000 home to an $8 million apartment in New York City.
According to the company, they have saved consumers an average of $23,000 per home purchase through their rebate program.
Aside from their rebate, Prevu aims to modernize the customer experience by offering a fully digital platform for searching for homes, scheduling tours, making offers, and working with a dedicated agent. In fact, around 50% of their customers are ready to make an offer through the platform and seek guidance for more complex parts of the purchasing process.
“People come for the rebate but stay for the user experience,” says Kutzman. “Prevu offers an Amazon-like feel with real-time updates, such as text messages when a tour is confirmed. It’s what individuals are used to in every other aspect of their life, but haven’t received in real estate.”
Prevu recently announced a $6 million Series A funding round, with new investors such as Citi, Alpaca Ventures, Winklevoss Capital, RiverPark Ventures, Metropolis Ventures, Simplex Ventures, and Liebenthal Ventures. They join existing backers Alpaca VC, TYH Ventures, and Blue Ivy Ventures, who initially invested $2 million in Prevu’s seed round back in 2019. The startup’s annual revenue has grown nearly tenfold since then, according to Kutzman.
The company has expanded its reach from its initial market of New York City to 12 major metropolitan markets, including Boston, Philadelphia, Washington D.C., and San Francisco. With plans for further growth in markets such as Texas and Florida, Prevu aims to become a nationwide brand in the long-term.
Currently, Prevu generates revenue from a commission on each transaction, totaling 1% to 1.5% of the transaction value, minus the customer’s rebate. The commission for the buyer’s agent varies depending on what is offered by the seller. For instance, in a situation where the buyer’s agent has a 3% commission, the home buyer would receive up to 1.5% as a rebate, and Prevu would retain the other 1.5%. In addition to their salaries, Prevu agents also earn a small commission on each transaction.
Buyers receive the rebate via check after closing on their new home. In the future, Prevu plans to expand its services to include mortgage, title, and other services related to buying a home. In fact, they acquired mortgage technology from Reali, a now-defunct proptech company, in order to do so. Part of their recent funding will go towards this and accelerating growth, both in new and existing markets.
Making Home Buying More Attainable
So, what sets Prevu apart from its competition? Co-founder and co-CEO Chase Marsh points to their proprietary technology as a major factor.
“Many have tried to change the cost of the service, but they fail to innovate the technology behind it, which is essential for scaling efficiently,” he explains. “We offer a better consumer experience, but the real difference is how our platform facilitates collaboration between the consumer and the agent.”
The utilization of technology also allows Prevu to remain lean in terms of hiring. With only 25 employees, the majority being agents, Prevu has been able to expand into new markets without facing hiring bottlenecks like other competitors.
“If you look at traditional brokerages, their focus is on hiring more agents,” says Kutzman, “But our average agent handles 40 deals per year, compared to 5-8 per year for a top-tier brokerage. We have a higher level of efficiency, which allows us to work with a salary-based model.”
According to Marsh, buyers have utilized the commission rebate in various ways, including furnishing their new homes, winning bidding wars, and lowering their mortgage rates by purchasing points on their mortgage.
Jeff Meyers, a director at Citi who wrote a significant check in Prevu’s series A round, shared his thoughts on the startup via email, stating that he was drawn to their Smart Buyer commission rebate, which makes home buying more attainable for individuals.
Meyers also noted Prevu’s buyer-focused platform, which gives individuals more control and access to enhanced digital tools.
Daniel Fetner, a general partner at Alpaca VC, also reflected on their investment, mentioning their early investment in another real estate company, Compass, and observing the changing landscape of residential home buying over the years.
“We believe that Prevu’s value proposition is a no-brainer for today’s ‘smart buyer,’ who wants to use Prevu as a friend from the beginning to end of the transaction,” Fetner shared.
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