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Clever Real Estate negotiates lower commission rates – St. Louis Public Radio

Four years ago, Clever Real Estate launched with an ambitious goal: to shake up the way Americans hire real estate agents — and how much they pay them.

It’s making headway. To date, the St. Louis startup boasts that it’s saved customers $80 million in fees. It’s on pace to help people sell 6,000 homes in 2021 alone.

Last month, Clever announced $8 million in Series B funding, with plans to expand from 75 to 200 employees in 2022. Its total funding now sits at $13.5 million.

The execution is relatively simple. Using an algorithm along with “concierge” staffers, Clever matches homeowners with agents who have experience in their price range and neighborhood. But the key change is how those agents are compensated: Rather than taking the typical 3%, agents in Clever’s database have already committed to set fees. If your home sells for less than $350,000, you pay a flat fee of $3,000. Pricier homes mean a payment of just 1% of the sale.

That said, sellers still need to pay the buyers’ agent, which adds another 3% to the tally. “It comes down to 3, 3.5% total for people who sell a home with us,” Babich said. That still provides some big savings: “Typically it’s not a 6% total, it’s a 3-4%.”

Co-founder Luke Babich said the company has a team of 10 full-time employees working to enlist new real estate agents. He acknowledged that many agents initially accuse them of trying to destroy the industry — but many are also signing up, and they’re from big-name firms.

“They see that discount commissions are coming for the industry,” Babich explained on Thursday’s St. Louis on the Air. “Real estate transactions have gotten a lot more efficient. It’s a matter of time before there’s price pressure, and they have to start bringing these rates down. What Clever gives them is a way to tap into discount, to grow their business with a dependable supply of customers, a series of introductions every month that they can count on — and no one is going to know that they’re offering these discount rates. We become their best-kept secret.”

“There’s certain realities about living in the Midwest that make it easier to take a few risks.”

Some agents remain skeptical. John Heger is an agent with Coldwell Banker based just outside Wildwood. He said he can’t understand why anyone would be willing to work for such low rates — and questions whether customers are getting what they truly need.

“If I was selling my home and hiring this company, my questions would be what tools are they offering, and what should I expect in terms of service when the home is being inspected and negotiating and things of that nature. I don’t know of any experienced agent who would agree to take a $300,000 listing for 3%.”
Babich said plenty of experienced agents are doing just that. Of the platform’s 12,000 agents, he said, more than 10% come from Keller Williams. Another 6% come from Coldwell Banker. “We focus on finding the agents who are going to do a really good job taking care of the customer,” he said.

A University City native, Babich returned home after graduating from Stanford, where he studied political science. He ran unsuccessfully for University City’s City Council at 22. Only after that did he turn to real estate investment — which he credits for leading him eventually to the idea behind Clever Real Estate.

“I got to see how real estate shaped things at a very local level,” he said. “And also, one of the main objections you get as a 22-year-old running for public office is, ‘How are you going to make decisions about my property taxes when you don’t pay any?’ So, I might have had a chip on my shoulder, too, saying, ‘I’ll be back! I’ll be paying plenty of property taxes next time I’m on your ballot!’”

Clever is now based on the Delmar Loop. Babich said he sees St. Louis as the perfect place to build the business.

“There’s certain realities about living in the Midwest that make it easier to take a few risks, to get started building something,” he said.

Looking ahead, Clever plans to get to work hiring in 2022 (anywhere from one-fourth to one-half of the 200 employees it hopes to have by year’s end are likely to be in St. Louis). It’s working on getting into the mortgage side of home sales. And in three years, Babich and co-founder Ben Mizes hope to take the company public.

“There’s absolutely nothing holding us back from building that experience headquartered in St. Louis,” he said.

St. Louis on the Air” brings you the stories of St. Louis and the people who live, work and create in our region. The show is hosted by Sarah Fenske and produced by Alex Heuer, Emily Woodbury, Evie Hemphill, Lara Hamdan and Kayla Drake. Jane Mather-Glass is our production assistant. The audio engineer is Aaron Doerr.

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