I’ve been exploring my next startup idea, and in that process have been avoiding B2C real estate and related because of the understanding that Modern Realty failed. But why did it fail?
Ultimately, it came down to leads. With 3 million realtors in the USA, the IRL element of the CAC was insurmountable. When we were funded by YC, we thought that the SCOTUS ruling would change how buyer agents were compensated and that buyer agent compensation would go to zero, since it was no longer guaranteed. However, this did not end up happening. And so, buyer agent commissions weren’t guaranteed, but they were still given >98% of the time by sellers.
Talking to Abhijeet from YC W18, he had a rent-to-own company called ZeroDown, which generated incredible deals off of billboards only.
The thing that we learned was that clients who connected with us at Zillow were able to believe that we were a real service due to Zillow’s introduction of us as a “trusted Zillow Premier agent.” If someone got our IG or Facebook ad, they needed to meet us IRL to believe that we were a real service.
In this way, the “IRL CAC” was kind of insurmountable.
All of the stuff related to the AI being able to robo-text people and show them homes via scheduling tours by paying other realtors to do that by the hour, do market research, and write offers—that part actually wasn’t that hard to do accurately.
Meeting the CEO of Redfin, Glenn Kelman, was helpful. In late 2024, he said they started auto-texting for their worst ~10% of realtors. So we were confident we could rival the median realtor. But the main issue is that realtors who could bring in a good volume of leads want a 90% cut.