Since we started our weekly newsletter, The Dose, I’ve been writing this Friday Flash thing a lot less, maybe once a month or so.
But the internal dialogue that fueled that writing hasn’t slowed down. So I thought I’d share some half (or totally?) baked thoughts that have been rattling around my head lately.
Brokerage is getting cheaper and thinner. Has been for 15 years. We all know that. But the downturn has accelerated things. Agents are jumping to cheaper options, and brokers are slimming down operations.
Earlier this week, in The Dose, we imagined a future brokerage that was, vis-a-vis agents, nothing more than an AI with a certain state-sanctioned legal status. A deal doctor in the cloud, an assistant in your pocket, a marketing engine running in the background.
What eXp started, Real is building on, and you can see already that this notion isn’t crazy. Sprawling but slim brokers serving thousands upon thousands of agents. The trajectory is clear, and we’re kidding ourselves if we think it won’t continue.
Yes, there’s a counter-trend beneath that big trend. I know. As Side CEO Guy Gal says, “boutique is the future.” Yes, small is beautiful, and does allow for the kind of customer experience design that’s really, really hard in a large brokerage.
But Side itself is what I have called the “invisible brokerage” — a legal brokerage supporting hundreds of DBAs. They’re the ops and tech team behind hundreds of little brands that present to the world as brokerages.
So, what is a brokerage, anyway? Our labels don’t work well anymore. This week, eXp absorbed the Bean Group, an indie brokerage in New England that did $1.5 billion in volume last year. Here’s CEO Michael Bean’s quote from the press release:
“By joining eXp Realty, we get the best of both worlds… we can maintain our boutique culture, brand and heritage while adding the unparalleled scale and resources of eXp Realty.”
Who’s the broker? What’s a broker?
There will be 4 million existing home sales in the United States this year. That’s 8 million sides, and only about 20% off the long-term average.
The only reason this is a “problem” for the real estate industry is because we somehow have 1.5 million Realtors chasing those deals.
I sometimes think that it is not only stupid and self-harming that the industry allows this to be our reality, but also just wrong.
If we lived in a fantasy world where I was CEO of Anywhere, and actually had the brains and moxie to do such a job, I’d incubate a consumer business aimed at young buyers called BuyWise. It would be something like this:
Pay $5,000 for buyer representation, up front. So you’re vested and don’t waste our time. We refund 50% of the fee at closing if there’s a co-broke; we keep all of it if there isn’t. We’re good with whatever happens with buy-side commissions.
You find and tour your own homes. Because there are apps for that. And open houses. We’re not worried about losing you to some other agent, because you’ve already paid us.
We counsel on pricing, write offers, scrutinize disclosures and negotiate with the listing agent. In short, the heart of the agent value prop.
We attach on title and maybe mortgage. Because we like making money.
To start, we fire up a digital marketing campaign in a couple markets, and give the business to our affiliated agents. We let them keep 100% of the $5,000 for the pilot period. Because we don’t need political problems.
What we need to do is test some new stuff, fast
Then I get fired as CEO and buy a frozen yogurt franchise. Or something. Who knows.
I read this week that the average mortgage company retention rate is 20%. That’s horrible. Maybe mortgage wouldn’t be so boom-and-bust if lenders would stop losing 80% of their customers?
What’s odd is that I can’t tell you how many times I’ve heard the words “customer for life” or “portfolio retention” from mortgage executives. In fact, 1000watt has worked on a couple initiatives in this vein. People understand there’s a problem, but can’t solve it.
Legal and regulatory stuff weighs heavily on mortgage companies, and that’s part of the problem. But in my observation, most mortgage companies are sales organizations through and through. They don’t have the consumer experience DNA required to attack their loyalty problem. Rocket is trying hard right now, and doing lots of smart stuff, and newer companies like Tomo are coming at things with a consumer-first approach. Maybe Zillow will get this right. But, wow, 20%. Yeesh. Talk about an opportunity.
Of course, the retention rate for real estate brokers and agents is about 20% too. This is the greatest self-own in the history of business.
If agents didn’t lose 80% of their clients, Zillow wouldn’t exist.
And if the 10% of agents that do 80% of the business were better at retaining clients, we wouldn’t have 1.5 million Realtors now, would we?
Enjoy your weekend.