Many consumers rely on recommendations from friends and family to find a trustworthy real estate agent, yet a small but growing share are making selections based on the numbers.
That’s a clear takeaway from the rise of agent-matching service HomeLight.
The company recently closed a $40 million Series B funding round after growing revenue sixfold since its last funding round (disclosed in April 2016), the company announced today.
In a world of inflated agent reviews and endless buyer leads, HomeLight is drumming up listing leads for agents by attracting homesellers seeking to list with professionals who are proven to outperform their peers.
“We’re basically … the only place you can go to find objective agent performance data online,” said HomeLight CEO Drew Uher.
The round brings HomeLight’s total funding to $55 million, making it one of the most well-funded real estate tech startups.
The company gauges the preferences and situations of homebuyers and sellers and then matches them with agents whose transaction data shows a strong and relevant track record.
To assess agents, HomeLight looks at data such as their sales success rate, the time they take to sell homes, the average difference between their list and sales prices and how often they reduce list prices.
If the data exists, it also factors in agents’ history of responsiveness to HomeLight leads and the quality of reviews they have received from past HomeLight customers.
Agents who have claimed HomeLight profiles — tens of thousands have — are more likely to be selected by its matching algorithm, Uher said.
HomeLight claims to have introduced over 117,000 buyers and sellers to “top local real estate agents.” Uher declined to disclose how many of those have converted into transactions, only saying that “we’ve closed billions of dollars in real estate transactions.”
After registering their contact information and filling out a questionnaire, consumers are presented with a handful of agent recommendations. Each includes agent performance highlights.
“Agents still cannot buy their way into search results,” Uher said.
Instead, HomeLight contacts agents flagged by its algorithms to ask if they want to receive a lead in exchange for a referral fee.
If the agent agrees, then HomeLight either signs a referral agreement with the agent or co-lists or co-represents the client with the agent. With broker licenses in dozens of states, HomeLight collects a typical referral fee if a lead converts into a transaction, Uher said.
HomeLight has focused on targeting homesellers over buyers in the last year — though it serves both.
In addition to agent recommendations, registered sellers get access to a portal that includes content, like staging tips and listing agreement no-nos, as well as recommendations for other service providers, like moving and title companies.
“Our goal with this round is to basically build the world’s best destination for homesellers,” Uher said.
HomeLight is considering whether that could mean adding transaction-management tools for sellers and agents to its platform, according to Uher.
HomeLight has put sellers in its crosshairs because they are generally more methodical when it comes to selecting agents than homebuyers, according to Uher. In contrast to many buyers, sellers often sign an exclusive agent agreement early on and directly pay a commission, Uher noted.
But only 18 percent of homesellers find their agent online, according to Zillow Group.
Homebuyers are easier to snag with digital marketing, such as through contact forms that appear on listings across many property search sites. But tech companies have had limited success with generating listing leads for sellers.
Zillow Instant Offers, which provides homesellers with a comparative market analysis (CMA) alongside offers from investors, marked a new attempt to connect agents with prospective seller clients and the introduction of a potential new home-sales method.
HomeLight may have found a way to fill the seller lead void, moving along a path where others have stumbled.
Agent Ace, a startup that raised considerable cash to match agents based on transaction data, has been deactivated since the assets of its parent company, OpenHouse, were acquired by Quicken Loans’ agent referral service, In-House Realty.
Building the technology and “normalizing and cleansing” the data necessary for agent-matching has taken a great deal of work, Uher said. Founded in 2012, HomeLight took years to hit its stride, he said.
In a world where you would be hard-pressed to find an agent on a major listing portal with a less-than 4.5 out of 5 stars rating, HomeLight appeals to consumers looking for another way to identify standout agents.
“We think that reviews are really great as well,” Uher said. But “objective transactional data … keeps the recommendations honest.”
In its early days, HomeLight’s use of transaction data sparked pushback from some multiple listing services (MLSs).
While HomeLight declined to comment on its data sources, Uher said one of HomeLight’s strengths is that it has figured out how to “coexist peacefully with the industry.”
HomeLight will use its new funding to boost its marketing and expand its team, with plans to double its headcount in the first quarter of 2018, Uher said.
“We’ve found that our value proposition is quite compelling for potential homesellers: Get a better outcome by using an agent who’s proven to sell their listings faster and for more money,” Uher said. “Our main challenge is simply to get the word out — to educate consumers that there’s this better way to sell a home.”
Menlo Ventures led HomeLight’s funding round with participation from new investor Citi Ventures, and existing investors Zeev Ventures, SGVC, Crosslink Capital and Innovation Endeavors.
As part of the deal, Tyler Sosin of Menlo Ventures will join HomeLight’s board of directors, while Venky Ganesan of Menlo Ventures and Dovi Frances of SGVC will join HomeLight’s board as observers.