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This “paper brokerage” offers leads to agents for 1% in commission
Clever Real Estate attracts prospective home sellers by promising to pair them with an agent for a mere 1% listing fee
A startup called Clever Real Estate is attracting investors with its discount-driven model for pairing homeowners looking to sell with real estate agents.
The company on Wednesday announced that it raised equity capital in a $3.5 million Series A funding round, Inman reported. The round followed $1.5 million of seed-capital investment in Clever, a “paper brokerage” based in St. Louis, Missouri that began operating in May 2017. (A “paper brokerage” is a company that’s licensed as a brokerage in order to access listings feeds but doesn’t provide brokerage services to its clients.)
Clever promises prospective sellers a discount in commission fees and refers them to its allied agents for a 25 percent referral fee, which is payable only if a transaction closes.
Clever charges sellers a 1 percent listing fee or $3,000, whichever is lower, before referring them to an agent that’s partnered with Clever to represent them in the sale. The seller is still on the hook for the buyer’s agent’s commission, which is typically in the range of 2.5 to 3 percent. In total, sellers who use Clever only end up paying a commission of 3.5 to 4 percent, instead of the industry standard of 5.5 to 6 percent.
So far, Clever has delivered leads to 5,000 agents, said Ben Mizes, the founder of the company, which has relationships with brokers as well as individual agents. He said about 25 percent of the company’s customers are agents of Keller Williams Realty brokerages.
He also claimed that “we have agents doing $10,000 a month doing leads from Clever … in addition to normal business [with standard commissions].”
Mizes said agents partner with his company despite its discount commission structure because Clever feeds them high-quality leads most likely to result in transactions. Clever stops sending referrals to an agent if sellers report bad service.
Mizes’ competition includes online referral services like UpNext, Homelight and Opcity, which is owned by realtor.com. [Inman] – Mike Seemuth