The fax machine changed the offer process, streamlining document transfer across the real estate industry. After that, eSignatures made it possible for buyers to get their offers out there even faster. Today’s guest, Mike Russo, is ushering in the next evolution of the offer process with SparkOffer – a new service that gives buyers unrivaled control, speed, and transparency when making offers. Listen and learn how SparkOffer could change the industry by ensuring buyers never miss out on the opportunity to make an offer again.
Listen to today’s show and learn:
- Mike’s brief bio [2:30]
- Why luxury homes are so hard to sell [4:28]
- How market shifts have impacted the luxury market [7:10]
- Australia’s offer process [12:17]
- Why Mike created SparkOffer [14:48]
- What SparkOffer is [17:58]
- Why texting is the future of communication [21:52]
- How the offer process has evolved over time [23:20]
- The future of real estate offers [24:13]
- Why consumers hire real estate agents [31:13]
- The biggest shift in today’s markets [34:58]
- How to break through your goals.
- Plus so much more.
With an extensive background in global luxury residential real estate, Mike Russo is an accomplished professional with two decades of industry experience, boasting quantifiable success closing record-setting transactions on an international scale. Most recently, Russo served as director of business development and COO of Concierge Auctions, a global real estate marketplace specializing in the auction sale of luxury homes, where he personally handled over 350 property sales across 20 states and in 15 countries. During his tenure, Russo spearheaded numerous sales and technology initiatives that helped Concierge grow to more than $1 billion in historical sales in just seven years. Prior to Concierge Auctions, Russo served as the Vice President of Realogy/Cendant, one of the largest real estate franchisors. In 2009, Russo created and founded Rezora, a digital marketing platform targeted towards the real estate industry. Through a culmination of his industry experience and entrepreneurial-savvy, Russo has now created SparkOffer.
Related Links and Resources:
- Grow Your Real Estate Profits with Our Agent Success Toolbox
- Get 6 Steps to 7 Figures by Pat Hiban for FREE
- Get Tribe of Millionaires by Pat Hiban and David Osborn for FREE
- Episode 470 with Barbara Corcoran
- Mike’s Facebook
- Mike’s LinkedIn
- Mike’s Twitter
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Read the Full Interview
Pat: All right, Rockstar Nation, I’ve got a great guest for you today coming out of the Boston, Massachusetts area, Mr. Mike Russo. Guys, this is going to be, there’s some things we’re going to talk about today that are controversial, but they’re things that you need to think about and you need to understand as to the future of real estate offers with real estate agents, and the way everyone is communicating today, and the way many feel buyers and sellers and agents are going to communicate in the future, and it’s going to change everything you do. Stay tuned for this. It’s going to be great.
Mike Russo, I’ll let him introduce himself, but basically, he was the founder and a CEO at Concierge Auction Services. We’re going to talk a little bit about why luxury properties and that sort of thing find it necessary to use auction services. Then he branched off of that and now he runs his own company SparkOffer. We’re going to talk a little bit about that as well. Without further ado, Mike, welcome to Real Estate Rockstars.
Mike Russo: Hi, Pat. Thanks for having me.
Pat: Why don’t you give me a little rundown on yourself, Mike?
Mike: Sure. I’ve been around luxury real estate for the last 15 years. I actually started my career at Corporate Sotheby’s International Realty, branched off and became one of the principal owners of Sotheby’s International Realty in Aspen, Colorado through the crash of the market which that was a lot of fun. I’ve always said since then that nobody needs to buy a home in Aspen. After that in 2010, I became one of the principal owners of Concierge Auctions. During my seven years there, I and my team auctioned over a billion dollars of luxury homes in 26 states and 15 countries, participating in properties ranging from two to over, actually, since I left, I represented a buyer at an auction for $42 million in Florida.
Really everything from that $2 million standard home on the mainline of Philly to literally one of a kind properties that are rarely found. About a year and a half ago, I left three years ago, a year and a half ago, I decided to found SparkOffer as a marketplace to help buyer, sellers and agents accelerate and transact on luxury properties in a more transparent fashion.
Pat: Well, let’s dig deep into this. First of all, like I said, I want to start off with the auction thing. You spent seven years there, and tons and tons of properties, tons. Why is it that someone selling a house for 42 million can’t sell it for the most part, the traditional methods by putting it on MLS? Why is it that all these luxury properties need to have an auction to move on?
Mike: First, I wouldn’t say it’s all these luxury properties when you look at–
Pat: Why is it popular there where it’s not you don’t see it a lot in the middle range, the medium price range?
Mike: Well, first of all, number one is that it’s rare a fair fight air in most cases depending on the marketplace. Forget the property for 42 million was on MLS and it was being traditionally marketed in Florida for a number of years for $167 million.
Pat: Wait a minute, wait a minute, wait a minute, slow this down. The $42 million property was marketed for $167 million?
Mike: Might’ve been $165, but it was–
Pat: [laughs] Good lord. Clearly, it didn’t work.
Mike: You’re looking for just an amazingly small buyer pool. Typically, the seller that goes to auction is not distressed. They’re simply ready to find a market that’s qualified to buy their home, and they’re tired of trying to guess at what that looks like. That’s essentially what you do when you list a property for a fixed price on the MLS is that you’re hoping for the agent to have the correct outreach. You’re hoping that somebody happens to be searching on the internet in your town, in your price range. That really works awesome when live in Boston and you’re trying to sell a place for 2 million to 3 million because there’s tons of people looking for that.
You go outside of that where you’re in a town that may not be where people are looking for that type of property, or a price range in any town where there’s not just a high buyer pool for that, the internet isn’t necessarily the best place.
Pat: Well, it’s interesting. You used the word distress, the seller’s generally not distressed. That’s an ambiguous word in the luxury market because of course, they could be a billionaire, which is a lot of money. They own a house that they think is worth $169, and they end up selling it for $42. You could say, they weren’t distressed. Well, that’s just because they had so much cash laying around. Someone would look at that and say, “Hell yes, that was a distressed sale” because they had $105 in it. What percentage of houses that you guys sold via auction do you think people had more improvements in than they actually sold for? You know what I mean? Like they had more money in it.
Mike: I know exactly what you mean and I don’t know that that’s necessarily just a luxury auction question. I think that by and large holds true for luxury properties in general. The market has just been shifting so much. For example, I sold a property in Darien, Connecticut at auction in 2011 for $6.6 million. I was recently just visiting with that agent and he told me in 2011, we thought that price was just a fire sale price. Today, I couldn’t sell that property for that much. I couldn’t get $6.6 million for it today.
Pat: Then the seller in 2011 was losing money on the deal.
Pat: I see that myself too. I’ve known some people that have had houses that they’ve had $5 million and they’ve completely over improved to personalize for themselves, which you tend to do. If you’ve got that sort of money, of course, why wouldn’t you? Then when it says, when the kids grow up and they move out and they’re like, “Well, let’s go a different direction or move somewhere,” they end up taking up a significant bath, 50% or more. Would it be safe to say, and I know it depends. You always hear about stuff in pockets like Beverly Hills or whatever, where Brittany Spears paid $9 million, then she sells it for $15 million, but it seems like more than not, I would guess 80%, do you think sell for less than they actually have in it?
Mike: I think it could be that high. I’m not sure it would be an educated guess, but the average I think most of these luxury homes, I’ve been around Greenwich a lot lately and Greenwich is, there are so many houses that see people either bought for much more even post the crash, or they’ve built since the crash and they’ll sell them for somewhere between 30% to 50% less in today’s market than they have in them.
Pat: I wonder how much of that is, first of all number one, that they have the money to lose, they’re like, okay. Number two, a personality style because if you have that much money, chances are you did something very aggressive that required a lot of action, and that type of personality really doesn’t have time to have their house on the market for three years. They’re going to be like, “Look, I need to get this sucker sold.”
Mike: It just depends.
I think the average person, no matter how wealthy you are, there’s this ingrained philosophical part of us here in the US that our real estate should be appreciating. I think that’s a pretty hard dynamic shift. You’re seeing that across all price points. For the most part, it just depends on demographic shift. We have, even in traditional price points, if you’re in the suburbs outside the city, the average millennial today, and then on top of it, the average baby boomer looking to retire is saying, “I want to live somewhere where I can walk to get my coffee, and I can walk to get the newspaper.”
In these other towns where they are great towns, predominantly upper middle class have great school systems. People aren’t necessarily choosing to live there.
Pat: Interesting. All right. Talk to me about like, generally you only see auctions and this is my opinion. I don’t know if it’s true or not, but in my world, I see auctions with investors. You see investors, you see auctions. I know a company in Baltimore where I’m from that just does nonstop auctions of these little things in Baltimore City under $100,000, say $200,000, and tons of people show up for the auctions, and investors are buying them generally because they require a 10% down payment and buyer premium, all this stuff.
The first-time buyers really can’t get involved in them, so it’s generally investor driven. I see it huge there, and I also see it in luxury. Do you think that in between, do you think it’ll bleed in between and one day in the future, it will all be auction-based?
Mike: No, I have a lot of people that you meet people, especially when I was in the auction business and say “We’re going to just be like Australia and everything’s going to be at auction.” First of all, about half of things are auctioned in Australia. It’s not all of it, and also their auction is just a more transparent, multiple offer process. When you see auctions in Australia, at least, and I’ve talked to a lot of people in Australia, is that the properties that are going to auction are properties that are in high demand, not in low demand. It’s a complete different ideological shift of when am I optioning a property? That’s just an absolute philosophical difference in why they’re auctioning more there, but they’re auctioning more their primary inventory.
Mike: If you don’t mind, that’s exactly why I created SparkOffer.
Pat: Let’s merge into that.
Mike: I created SparkOffer as largely a software platform that operates on a couple of different bases. One is one of the things that keeps people from either selling at auction or buying at auction is, either one of the things that you just said is if I’m a seller, I’ve got a fear that I’ve got to take this certain price. Or two, if I’m a buyer it’s outside the norm of what the agents and the buyers are used to doing, what’s customary in buying a piece of real estate. Meaning that I come to an agreement of price, I elect to probably get a mortgage and I do my inspections after all of that is agreed upon.
In the auction process, you have to figure all that out prior so that the minute you raise your hand and say, I’m bidding X, if the gavel goes down and you met the reserve or was a no reserve, whatever it is, you’re buying that property. The other thing is depending on the auction firm, whether it’s even a mass scale auction, like on auction.com, which is doing the distressed properties.
Pat: Yes, absolutely.
Mike: Or you’re doing like my old firm at Concierge Auctions, the buyer premium that’s tacked on, on top of that gavel price range is somewhere between 5%, like at auction.com to 12% at Concierge Auctions. It’s a pretty hefty premium, especially in a world where people are saying, “I want to fight over 5% or 6% commission.”
Pat: Psychologically they’re used to the seller paying the commission.
Mike: Correct. Correct. Every seller wants to get more than one offer. That’s the holy grail.
Pat: Yes, because it shows proof. It shows proof that, well, maybe it’s not worth what I thought it was. Or maybe, you know what I mean, better or worse it shows proof that that is the market.
Mike: Yes. In relation to SparkOffer what I say is we’ve created an auction-like process, meaning that it prompts people to make offers. It actually shows all parties that are following a property, how many offers have been made on the property, but it doesn’t disclose pricing. It doesn’t disclose terms and–
Pat: Right, because then that would be illegal. Doesn’t that go against some–
Mike: It’s not illegal on an auction. They show the prices.
Pat: Let’s think about this. Real estate agent, you can’t “shop an offer’’. You can’t go to one agent and go, well, you can, it’s called an escalation clause.
Mike: Yes, but escalation clause is still typically done in secret.
Pat: Yes, it is. It is. It is.
Mike: We’re not showing other people–
Pat: You’re not showing. Let’s dumb this down. Explain to me like a third-grader could understand what is SparkOffer.
Mike: Sure. SparkOffer is essentially a software platform that’s helping buyers, sellers and agents facilitate the offer process in a more transparent way. Offers come in, literally offers get submitted on the software, and those offers are then broadcast out to anyone that’s interested in the party of that an offer has been submitted and that’s it. If I’ve received three offers, everyone knows I’ve received three offers. Any person can go to our website and see that this house has three offers, but they don’t know what for, how much.
Pat: It lets other agents know whether an agent is lying because some agents bullshit, right? “Oh, I got four offers on this shit, better make it your best.”
Mike: That’s right.
Pat: It’s proof of that. That’s the bullshit the out of agents, but basically, agents lying.
Mike: The world’s done with that. They’re done with being played. There’s too much in our lives by having a phone on our person that’s 95% of the population or something over 18 keeps within arm’s distance, 24 hours a day. I can know everything I want about almost anything in two seconds. That’s the logic behind SparkOffer is like, it’s not right to tell somebody what one person is offering versus another, but let’s tell them that legitimately there an offer.
Pat: There is a real offer and then a real offer they have to jump through some hoops. There is a barrier entry. It can’t be just some guy texting saying, “I’ll give you this.” How do you have them put their money where their mouth is so that the other guy in the platform knows it’s a real offer?
Mike: They have to have whether it’s agent submitted or
buyer direct submitted, they have to sign a contract or a purchase offer if you will, that’s actually a signed document. If it’s the agent submitting, they’re putting a copy of an escrow check if that’s common in the market. They’re putting a proof of funds or a pre-approval letter that has been generated in that person’s name. If those three things were not attached to the offer when submitted to SparkOffer, it won’t actually go through.
Pat: Yes, there’s no reason they couldn’t. You get your money back anyway. Eventually, you would think they would be able to vend $1,000 bucks or whatever because you get it back. The paper check is certainly not as strong.
Mike: We actually have it in our roadmap that we’ll be able to take initial escrow deposits by phone. That’s coming next year.
Pat: Yes, and that means on a phone, on a screen. It doesn’t mean by calling it in. Then tell me about how all this communication then is on a phone and not via voice because I’ve had some experiences recently that’s shocked me at first, but then the more I thought about it, the more I said, “Should I go to this protocol?” The only reason I did it because my mom and dad called me on my phone and old-fashioned and leave messages, but I’ve called some people recently that just simply said, “I do not take voice messages, text me.” That’s what you’re trying to do with SparkOffer. Your belief structure is the future will not have voice in the negotiation process. Also, tell me about the benefit that everybody gets from this.
Mike: Sure, yes, I do strongly believe that the future does not have voice. SparkOffer is built as a mobile-first that communicates through the parties between texting primarily because it’s where most people are living today. One thing that became a big aha moment for me was two years ago, my college-age son was getting calls from whoever he rented his books from asking them to be returned, and then three months later we get an email saying, “We’ve been trying to reach so-and-so and they’ve not returned our calls, and you’re going to be assessed some higher fee.”
Come to find out he had been getting voicemails from this company, but he’s like, “I don’t check voicemail. I don’t look.” If it’s not an email or a text message to a college-age student, which is the next buyer and in our next 5 to 10 years, as far as they’re concerned, it didn’t exist.
Pat: It almost should be an option on a phone where you could just block every call. Like if a call comes through, they can’t leave a message. You know what I mean? It just makes some noise.
Mike: I think they do. You just don’t set up your voicemail.
Pat: Yes, you don’t set up a voicemail, or are you forward it to a fax machine and just go beep.
Mike: In my mind, actually the fax machines is a good segue. If you look at the major evolutions of the real estate offer process, the first one was the fax machine. Instead of trying to hand-deliver it or mail it we can have an offer fax from one office to the next. Then the next big evolution was e-signatures. Everybody’s e-signature at least the initial offers and maybe a first counteroffer, but after that, it’ll go to email. Some markets like New York City and Greenwich, Connecticut, they only work off of email. They’re not actually in many markets, what we’d consider a legitimate offer if you will, or certainly not a binding offer.
SparkOffer’s goal when we set out for this was to take this next step in the technology to say, “Let’s have people e-sign offers on their phone. Let’s have them negotiate via their phone. Let’s have everything that is in this device that is a personal tracking device, if you will, that we don’t leave without an arm distance of our body over a 24-hour period. Let’s use that device because that’s where people are. That’s where they’re living and we can speed up the transaction if we can live where they’re living.”
Pat: Right now, you have this in my opinion, you have an inefficiency of the buyer tells the agent, then the agent tells the other agent, then the other agent tells the seller. If all four were in the same room and someone said, “The roof leaks in the far-right corner.” The seller says, “That’s no problem. I’ll take care of it. It’s right there in the room. It’s like a slack room. It’s like a room, it’s there, it’s all together. That’s where everything’s going. You can easily find that, and it also ties into another interesting concept that I’m a big believer in. That is the philosophy of it is harder to hate up close. I repeat that it’s harder to hate up close.
Christie was the first one to say that because he always had his meetings and any issues where they were going to be controversial meetings, he would call them in a conference room, have them up close and they would always go so much smoother. I think the same thing applies. A lot of times agents get in the way and they ruin a transaction or they make it 10 times worse where if the buyer and seller just were in the same room, they wouldn’t be such jerks.
Mike: I probably wouldn’t have said that but now that you say that, it is a big part of the business today. I think the consumer, both the buyer and the seller are the ones that are feeling that the most where they’re saying– You hear all the time, actually. It’s like, if you could just let us talk, I think we can figure it out. I don’t think we need to have these artificial barriers. I think that’s ingrained in the real estate or realtor or agent personality from decades of being spread across the business to say, our job is we’ve got to play referee.
Pat: Here’s the thing. I think some of it falls into the agent’s need to feel like they’ve earned their money, which is another debate all in itself, but also the agents and the buyers or sellers may want the protection. That’s why they have an agent. They might not want to be face to face with the seller or the buyer, and that’s what they’re paying for.
Mike: Yes, I think across my career and some other great agents that I’ve known over the years and why do people really hire them? Do they hire them to market their property? Yes, to some degree. Do they hire them for the job to be done of selling my property? Yes. Amongst all that, it’s I’m looking for counsel. I’m looking for real advice on how to get the job done of selling my home, selling it the quickest and getting me the best price. That really is going to become more and more, evident in the future as everything that’s swirling around the industry starts to play itself out over the next five years.
I was having a conversation if you look at the major scramble and somebody was saying, “Hey, do you think agents are really going to use SparkOffer making offers on this technology platform?” I said, “Yes, I think they are and we’re early in the game.” Five years ago, Opendoor just came to life and between Opendoor and Zillow and Offerpad, it’s the most hot contested part of the agent sphere today in what is the eye buyer doing to the market and five years ago it didn’t exist.
Pat: I’ve always been a believer in that because I always thought that from the offer to the contract, there was zero in between. You had to fill out an 80-page document with wet signatures to make an offer. Yet if you go to commercial real estate, it’s all letter of intent. It’s all like, if you want to buy something or rent something with commercial real estate, you first, you just put a letter of intent. It’s like half a page. Then they just tell you whether they consider it or not, if not, then you haven’t wasted that much time. You haven’t had to read 80 pages. It’s just price, settlement, date any other pertinent terms.
I’ve always thought that real estate on the residential side should be much more of a letter of intent world, especially with investors doing low ball offers or really anybody. It also gives the seller some sense of satisfaction and that at least they could say they got an offer. How many sellers I’ve heard say, “Whoa, I’ve had 40 showings and I haven’t had a single offer.” Maybe if there was a letter of intent system, they say, “Well, we’ve had five offers, but they’ve all been low. Maybe I am over-priced. I’ve had five offers and they’re all low.” That would be considered ‘’market speaking to me.’’
Mike: There’s a lot of interesting points in that. One is, it just depends on what’s customary in your market. Like I said, some, they literally do offers via email at least with a buyer direct offer on SparkOffer, it’s a two page offer that covers the basics, price, inspections, mortgage, what you would generally see in offer. The market speaking part of like, “Hey, I’ve had 40 showings and I’ve had no offers,” that’s a whole different gambit that we’re trying to attack at SparkOffer, which is today when people see your house listed online for a specific price– I actually had this conversation with someone earlier today where they were saying, my seller says, I’m just telling them that just make me an offer, just make me an offer.
The buyer won’t waste their time if they think that where they’re at versus what the list price is, is too great. Either they’re afraid to insult the person either they just don’t want to waste their time. Whatever it is, if they think the gap is too great, they just won’t take the leap. That’s where the market has made a big fundamental shift. Gone are the days of making even a sub 15% offer if you’re not within that. We had an early property on SparkOffer that was listed at 524, had huge amount of showings over the weekend, had eight people following it from the showings over the weekend. I told the sellers, “Listen, you’ve got to lower the price to $499.”
They took that action, lowered it to $499 and they had three offers in 24 hours because the prompting was all happening through the Watchers and they got near full price at that $499.
Pat: Wait a minute. Did all the people that looked at it know about the offers or just the people that bidded?
Mike: The people that signed up to follow the property via SparkOffer.
Pat: When you make the showing, you could be like, follow this offer on SparkOffer?
Mike: Yes, exactly. Never lose out on the opportunity to make an offer again.
Pat: Interesting. Then it just says an offer has been made.
Pat: Then they’re like, okay, well we got to make a decision.
Mike: You got it.
Pat: I like that because a lot of people, again, it goes back to that word, social proof. They want that because as soon as one person says, “I want it,” it makes it okay. It makes it like, “I’m not making a dumb decision. Someone else sees what I see.”
Mike: Well, I read on your bio or what have you that Barbara Corcoran’s been on your show. She was our strategic advisor at Concierge. Barbara had a great saying, which is “Everybody wants what everybody wants and nobody wants what nobody wants.”
Pat: That’s the truth.
Mike: It’s complete truth.
Pat: Rightly or wrongly, but it’s true. Well, that’s really cool. Let’s talk about the white paper you wrote which by the way, we’re going to– guys if you’re driving, just keep listening because we’re going to use it as Mike’s free gift. Talk about that a little bit.
Mike: Sure. The white paper really walks through a little bit about what we talked about today, which is some data on where the market’s going in relation to people, more apt to use their phone than verbal. They’re moving away from talking to people all together and just texting, and then how we’re bridging that gap on bringing that experience to making an offer on a home.
Pat: I think you’re right. You can’t stop a generation because my kids are the same way. I don’t think I could leave him a message. It’d be like, why? They just don’t, they just don’t do messages and it’s getting to the point, they don’t do emails either. They might do emails like once in three weeks or something.
Mike: I have to text my kids to tell them to look at something I sent them on email.
Pat: Yes. I don’t think you could stop that wave. I don’t think anybody’s going to get in front of that. It’s just going to happen. It is what it is. There’s something about human nature that is causing us to simplify and be fast and be efficient and get to the point. I think that’s pretty much what SparkOffer is. It’s all those things. Yes.
Mike: It’s all those things.
Pat: Guys, what I’m going to do, I’m going to make this real easy. I’m going to put it at a hibandigital.com/sparkoffer. I’ll just do that. It’s easy to remember. S-P-AR-K O-F-F-E-R. That’s hibandigital.com/sparkoffer. I’m going to put all of Mike Russo’s contact information. I’m going to put any social media links he wants to share, and I’m going to put the white paper on this because I think it’s going to be fascinating for you guys to read. Also, of course, just like any free gift, I’m going to put it in the agent success toolbox, which could be found on hibandigital.com/toolbox, or just text the word toolbox to 444999 and get Mike’s white paper, plus all the other free gifts that all the other guests have brought.
Mike, listen, next time I’m in Boston, Massachusetts, I will definitely look you up and we’ll get together and talk about the future of real estate sales and agents, and everything else. I’d love to continue this conversation.
Mike: Thank you, Pat. I really enjoyed it.