Introduction

Kyle Stoner: Hello, my name is Kyle Soner of the Unrealest, and today we're gonna talk about commissions. If you ever wanted to know about how you can sell your home, or buy your home but especially if you wanna sell your home without paying that traditional 6% commission this is the day! This is when we're gonna really kind of dive in.

And I brought on Derek Morgan. He's our, essentially, Guru, OG, head of brokerage for unrealestate.com. I'll tell you a little bit more about him in a second, but there's no one else better prepared to delve into this subject. 

Unreal Stat of the Day

First I wanna talk about the unreal stat of the day and this one is one of the most important because it's actually why we started the company. The unreal stat of the day is that the commission to sell a home in the United States ranges somewhere between 5 and 6% on average. I just wanna pause for a second. Five to six percent. That's nuts to me.

That is crazy to me. But that is what it usually is, right? On over 90% of the transactions. So why is that important? Why does it matter? I wanna walk through an example of that for a second. The average home in the United States right now is around $400,000. So imagine this is for the average person, the biggest thing that you own.

You saved for it, you labored over it. Your family's in it, whatever it is, right? It's $400,000, which is a fortune to the average person, but typically you don't own the whole thing. Most people have a mortgage. So for this example, I just want you to imagine you've really worked hard, you've saved, you've put money down, and it's time to sell.

And you own 25% of this home. So of the $400,000. Really, your equity is $100,000, right? And you go to sell it and the commission- they're telling you- is gonna be 6%. Well, that 6% is of the $400,000. So you're talking close to $24,000 on average. But remember, you only own $100,000 of the $400,000.

So that 6% actually just became close to 25% for you. It's a quarter of your money that's going out to fees. And when we started this company, to me that was just sort of offensive. When I go to the atm they don't charge me even 6% for that, or certainly not 25%.

And my first company Pangea Money Transfer, we were, we were going after Western Union and Money Transfer and we used to have all these slides that showed it would cost you 13% to send your money back to Mexico. That's insane. Now that's only 13%. And that's just one little money transfer.

It could be $100 you're sending. This is a $400,000 transaction. You're telling me you're gonna pay 25%? That's nuts to me, so that's how we started this company. 

Introducing Derek Morgan

So I say all that to say: that's what we're gonna talk about today, in general. Derek Morgan, as I mentioned before, absolute OG in the flat fee MLS selling space.

He has over 20 years of experience. He's done, himself, more than 10,000 transactions. Sometimes we post stuff online about this and people will say, " You can't really sell your house without coming to whatever brokerage." And we always try to be polite and go back to, "No, we've done 36,000 of these."

We know what we're doing. But Derek's done thousands on his own. If you looked at the number of houses the average person has bought or sold as an agent, it'd be easy to say, Derek would probably be in the 0.1%. 

You can check this on Real Trends. It's a third party that's out there. But Derek has a ton of experience. He's done this for ForSaleByOwner.com for Tribune Digital. A lot of people don't know that tribune used to be in real estate. They're no longer, I don't think that they're heavy player's in it.

But Derek was a leader there. He was the lead guy at USRealty.com when we acquired it. We were lucky and fortunate that he saw our vision, shared it, and, and joined us at UnrealEstate.com. So welcome to the pod Derek! 

Derek Morgan: Thanks, Kyle! Glad to be on it. 

Kyle Stoner: Awesome. Thank you for joining.

I know you're a busy guy with all these transactions. I often say to people that are on our team, that are on this podcast, I can see the Slack channel going, so I know how busy you are. I'm going to try to be quick and let you get back to helping our customers. First things first.

You've done so many of this flat-fee, low-cost transactions for folks. I would love to hear some of the war stories from your two decades of experience in the trenches. Do you have any good war stories from the brokerage? 

Derek Morgan: I would say that for a lot of transactions... the truth is that from full service, or even discount, flat fee, MLS side of real estate, it's the same process.

The stories get kind of exciting from exploding houses to helping the previous third base coach of the Chicago Cubs sell their property. We've helped everybody. Investors, first-time home buyers, first-time home sellers the fix and flip types, you name it. 

As far as war stories, I've seen it all. If you start going down a direction, I'll have several to tell you. I think the most common story that I'd like to emphasize for people is that "honey-do" list that everyone has in their house. You really wanna tighten it up to make a clear list of how much each item costs.

Because I would frequently do this for people and my experience is that the spouse says something that they would get done in like 30 days before selling. It took 'em 10 years. In 10 years, they would get it done in 30 days. But there's a lot of value there. 

Kyle Stoner: Got it. Got it. That's helpful.

The Brokerage: Pre & Post COVID-19

Kyle Stoner: So let's talk about the old way brokerage used to work, the new way that it works nowadays. What's different? What sort of techniques are surviving and thriving. I think a good point to think of it timing wise is when Covid came in. 

Derek Morgan: Absolutely, Kyle. When Covid came, brokers that survived had to learn to thrive by working remotely, just like the home sellers that they were assisting were doing.

Working from home has been a common thread during Covid, but brokers have found that not only can they be a able to do their work remotely, but they could be more available even to more sellers, quicker, by being remote. The discovery is that if I was gonna help you or help a friend sell their house, the thing I'm gonna try to do is give them the family discount.

Let them list with 0% list fee. I'm gonna help them remotely so they can skip all the difficult sale, and awkward sales meetings in the house. Then I'm gonna get them the best marketing so they can get their home sold quickly. What we wanna do on Unreal Estate is give you the opportunity to have a friend hook you up with all the inside discounts. 

Kyle Stoner: But do it remotely. It's funny you describe it that way. When we started the company, I hadn't sold enough homes to have that perspective, but it's sort of where we ended up. We are sort of like somebody that's your friend that's not gonna take advantage of you.

Not that every realtor takes advantage, but we're simply cutting out the fees. We're here remotely, but all the BS of "get the coffee" and "let's sit down..." we don't really do any of that. So it's interesting that that's where you went with it because that's not how I thought of it, but it's exactly where we ended up.

Predicting New Trends in the Era of Digital Real Estate

Kyle Stoner: What do you think is coming in the next decade or so that people should prepare for in residential real estate, and how does Unreal Estate fit into that? 

Derek Morgan: Yeah, I think that we've really been prepared and primed to look at real estate in a new way. How to do real estate in a new way. The opportunities of already going remote and focusing on the next generation of sellers and buyers that haven't grown up with paper at all.

Like a lot of people don't even know why do you even purchase a printer anymore? Yeah. So everything's digital and the idea that you're gonna have the old experience of selling the way your grandmother sold- it doesn't make a lot of sense. So the question is if there's more availability, if there's more access to a home seller?

Home buyers are finding their houses on their own now. Home sellers are looking for a way to sell on their own as well. There's a wall for broker marketing that's between the average person and the broker. And so we break down that wall and we give access to the public to be able to market the way of broker markets.

Kyle Stoner: It's funny. I think people often think of us as being "anti broker" or "anti realtor," and we're really not. We are brokers as we're a nationally licensed brokerage, and we put every home on the multiple listing service which I think is pretty unique for a firm like ours.

I think that you hit on it though. There's a wall there. There's a gatekeeping aspect to this business where the average consumer wants to simply get their home in front of as many people as possible. And the way to do that is to put it on the MLS. You put on the MLS, it goes on Zillow, it goes on our site, it goes on Trulia, Redfin, everywhere.

But the average user's like, "Well, I can't get there without going to a real estate agent. So I kind of have to do that." When people figure out that they can use a digital platform to get onto the MLS without paying the 6%, what have you seen as the first question or the biggest taboo or feeling holding them back from that?

Derek Morgan: I think the real surprise people have is that they think that they have to sign up and be salespeople. They're not sure what to expect. They realize that all they're doing is taking an opportunity to take a physical object in the world and make a digital product of it.

Getting some professional photography, a floor plan, and putting that in a digital space where buyers are already doing a hundred percent of their shopping in a digital space. If you don't participate in that, you're really not even "for sale" and there's no sales involved. We've already seen a lot of car dealers say, "let's get away from the car dealerships. Let's get away from haggling for pricing. Let's just make it simple for people. Give 'em a digital picture, give 'em a price, let them purchase it." And that's where we're headed. 

Kyle Stoner: Yeah. The last car I bought, it was during the pandemic, so I got it completely online. And it was transformative for me. I was like, "I'm never going to a dealership again!" That's what it felt like at the time. I might still be on that tip, but I don't know. To me, this is similar in a lot of ways.

So let's be real with people. It's like, "Oh, that sounds too good to be true. You're telling me before I was gonna pay 6%. Now I'm gonna pay something like 2.5%." It's their choice within that. And all that goes to the buy side agent.

What are they missing out on? We have agents, they're remote. We've got the yard signs, and the lock boxes, and we'll do the photos and all that stuff we do. But for someone that's considering doing it this way, whether it's with us or anybody else, what are they missing out on?

Derek Morgan: I think it's the in-person visit at the kitchen table. Where the agent is uncomfortably asking you to drop your sales price so that he can get a faster commission. You're just looking at the difference between selling it your way or selling it the agent's way.

The Evolution in Real Estate regarding Agents

Derek Morgan: I'll tell you the little story. When I first got my license back in 2000, the question was "How many agents last in the business?" And it was one out of three agents that get their license, and keep their license. And it was kind of an amazing stat.

They teach you how to get a license about what to do for compliance, but they don't necessarily teach you how to sell a house. So when you first go into an office, your first question is, "How do I sell a house? Somebody tell me. What is the secret? I'm finally in the brokerage. I'm on the inside. So you can go ahead and tell me what the secret is."

And the first thing that they tell you is, "Put it on the MLS and it'll happen." 

Kyle Stoner: What's funny about that to me is - so you're saying this is back in like 2000 right?

And this is pre-Zillow, right? So now that's even more true because you put something on the MLS, it gets blasted out. Everybody's searching the internet first for real estate. These stats are out there, saying 99% of people [first start searching on the internet.] You start your home search before you're even really searching.

You're kind of just playing around typically on these browsing websites. And then at some point you get serious, but you're finding the home online. And this is one of our key insights when we started the company. Because we saw people were like, "Yeah, I do need some guidance. but I don't know that I need to do it the way that my parents did it where I go to this agent's office first."

A lot of times, people are finding the house on their own without even using an agent. The agent doesn't come in until the negotiations happen, or you wanna do the inspections, or whatever it is. It's funny that even before the internet was so widely used for this, it was the same trick: "Put the home on the MLS." 

Derek Morgan: Exactly. I think that you make a really good point that buyers are not looking at fees at all. They're not looking at what commissions agents get. They're not even thinking about "what agent's gonna help me to buy a property?" Buyers are just looking at "What style of property do I like? How much space do I think I need?" They're thinking about the product and once they find that product, they're just looking to get inside that product to take a look at it. So tapping an agent to set up a showing or looking for a way to just schedule a showing directly with the seller is completely fine with them.

Whether or not you're offering a buyer commission as a seller, a high commission, a low commission, or a bonus for the agent to come to show your property. You see home sellers that, as soon as they list their house, they're trying to send out emails and messages on social media saying [to] agents, "I'll give you an extra thousand dollars. Come show my property." And the truth is: [to the] agency, that is spam. They ignore it. It's just the buyers finding what they like. 

Flat-Fee Listings & Savings

Kyle Stoner: All right. So I wanna switch gears real quick here. We talked a lot about the sell side. A lot of what we do every day is putting homes on the multiple listing service.

I think we typically sell three times faster than the average. We're saving over $11,000, I think, on average, for people selling their homes on our platform. If you're listening to this podcast, my guess is you have a passion for just that. And knowing it is a pretty specific thing.

People don't wanna pay the 6%. I wanna talk about the buy side a little bit. What we've seen growing on our site a lot has been condos for sale mobile homes for sale, and even land for sale. People are really going after those categories., statistically. We've seen-for whatever reason, maybe because of high-interest rates-people are thinking, "Oh, maybe I'll get something smaller like a condo or a mobile home."

Maybe people are planning to build something to save some money with the land? I can't really tell for sure yet. Usually, we can still help people remotely with our agents for the buy side. We can also refer them to an agent that's full service. I think people will understand how a full-service agent works, but we'd love to hear you talk briefly about what that remote, buy-side experience is like for people on our platform. 

Derek Morgan: Yeah, that's an interesting question, Kyle. Ultimately, I think it's already been pointed out by the Department of Justice, looking at the real estate industry as a whole and saying that sellers are on the sell side to compare with contrast with the buy side. On the sell side, sellers deserve the right to choose how much service they want and how much they wanna pay. It shouldn't have to be one size fits all. The way that my grandfather did it is the way I have to do it. There's a new opportunity and there are new business models that make it, more advantageous to try to sell in a different way.

And the same thing's true on the buy side. On the buy side, if you know you want a property, you really don't have to go down the path of a meeting, a buyer's meeting, doing a showing... When I looked at my first property, I was handed a li a list of properties and was told to drive [through] neighborhoods and, and look at lots of properties to get a feel for the whole area so I wouldn't waste the agent's time.

Now it's very easy to find a property. You've looked online, just like buying, a car. "Give me that vehicle and let's make an offer. Let's get this done." The idea that you wanna do this remotely is a normal thing.

We could set up a showing, get you in the house, write an offer for you, and get you to closing in a much faster way. And that was kind of a new concept pre covid, but now that COVID's hit, there are agents that have done 100% of their business all year long, remotely with buyers and sellers. And it's, been the busiest year of their lives.

Kyle Stoner: Yeah, I've seen that. In some ways, that's annoying to me. We were already doing it because that was our business before Covid hit, and we were charging what we were charging. And then essentially everybody started doing the same thing and then charging three times as much. I was like, "Damn it, how did we not take advantage of this?" So I'm glad you said that. 

Recap

I'm gonna do a quick recap. We've talked about the ability to sell your home with remote help and the ease of doing that, and the fact that, culturally, people have gotten so used to that. Certainly, the savings are gigantic. We've talked about the buy side opportunities for people to buy the same way with remote help and how it's become very normal.

We've talked about one of the only missing things in that experience is not having that person come to your kitchen table and sell you on what you have to price it at, et cetera. We didn't really talk about the tech of how we price the homes and all that but today I really wanted to just talk about that personal experience. I think we did a good coverage of that.