The Future of Brokerage

Exciting? Scary? Or Both

2019 REImagine
September 25, 2019
Joel Singer
Chief Executive Officer
California Association of REALTORS®
What has changed?
The Internet took over
Internet users per 100 Inhabitants

page
SOURCE: International Telecommunications Union 3
How We Shop: Amazon, Apple Pay, Google Pay, etc.

Series: U.S. Retail Sales page

SOURCE: U.S. Census, Statista 4
How We Meet:
On-Line Dating
Takes Over

SOURCE: Proceedings of the National Academy of Sciences page

Volume 116, issue 36 5
 How we watch movies: Whatever Whenever

Saturday night at the Cable, Netflix

movies Chromecast,
DVD
Hulu, Amazon,
1960s 1990s VUDU

1950s 1970s 2000s

Movie Theater VHS Streaming/Downloading/
Wifi/Smartphone

page
CALIFORNIA ASSOCIATION OF REALTORS®
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How We Eat: On-Line Food Delivery Takes Hold

Food Delivery Market Growth

SOURCE: McKinsey & Co, The changing market for food page
delivery, global six-month study covering 16 countries 7
What industries have been
disrupted by the internet?

page
CALIFORNIA ASSOCIATION OF REALTORS®
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❖ Music

❖Travel

❖Cable TV
MM

❖Music

❖Transport

❖Retail

page
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Whew!
What about us?
 Industry Timeline
Sheds
Corporate Capital
Brokerage infusion
America
Sears
(Merrill
2012
Lynch) 1985
steps in
1970 1980 1990 2000 2010

1960 Sears SSSSS 1996

Major
Independents The Internet
& Franchising
take hold Homestore
Realtor.com IPO

page
CALIFORNIA ASSOCIATION OF REALTORS®
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 Industry Timeline: 2012 - 2016
UpStream
Compass raises $75M hatched
at $1B valuation LeadGen
Zillow
Re/MAX IPO explodes
IPO
2013 2015

2012 2014 2016

Realogy IPO News Corp OpenDoor raises
buys MOVE $210M on $1B
valuation
Realogy buys
ZipRealty
page
CALIFORNIA ASSOCIATION OF REALTORS®
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 Industry Timeline: 2017 - present
Compass Compass raises
$370M, reaching
raises $450M $6.4B valuation
at $2.2B eXp hits on total capital
Zillow passes Zillow raised of $1.5B
Redfin valuation 10,000 agents
$1B in Offers
IPO revenue launches

2017 HSA Buys 2018 Softbank 2019

Long & invests
Foster $800M in Compass
RedfinNow Compass Compass & buys Alain
launches buys Pacific Open Door Pinel Realtors
Union
page
CALIFORNIA ASSOCIATION OF REALTORS®
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What hasn’t changed?
In 2019, an estimated 91%
of all residential sales were
assisted by a real estate
licensee
Top U.S. Real Estate Companies
By Sales Volume
2009 2018
NRT 1 NRT

HomeServices 2 HomeServices

Long & Foster 3 Compass

Prudential Douglas Elliman 4 Douglas Elliman

Prudential Fox & Roach 5 eXp

CALIFORNIA ASSOCIATION OF REALTORS®

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Our View: “We have a long
history of innovation and
change.”

page
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 The typical member spent $2,000 on technology
in the last year
How much money did you spend
on technology for your real estate 22% Median:
business in the last 12 months? $2,000
(n=520)
17%
15%
12%
11%
10%

6% 6%

Less than $100- $999 $1,000- $2,000- $3,000- $4,000- $5,000- $7,000 +
$100 $1,999 $2,999 $3,999 $4,999 $6,999

SERIES: 2019 Technology Survey page

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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Use of mobile technology
Please select the statement that best describes the use of
mobile technology in your real estate business.
(n=551)
43%
34%

20%

3%

My business is I am getting there My office is more I am not yet mobile

completely mobile I use a tablet, office-based I only use a
I only use a laptop, smart I use a desktop desktop and
tablet, laptop phone and/or computer and regular cellular
and/or smart desktop a smart phone phone
phone computer page
SERIES: 2019 Technology Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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REALTORS® most looking for technology to
improve communication and information access
What objective(s) are you trying to achieve by incorporating
technology/tech tools into your business?
(n=551)

More effective communication with clients/… 75%

Improve the ability to access information… 72%
Simplify the transaction process 69%
Manage clients more easily 65%
More effective marketing 49%
Generate more leads 38%
Protect my data and enhance security 34%
Cost cutting 26%
Other 6% SERIES: 2019 Technology Survey page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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86% of REALTORS® use
social media in their business
Which social media platforms do you employ in your business?
(n=510)

86% 79% 53% 44% 28%

25% 13% 10% 1%

Other 4%

SERIES: 2019 Technology Survey page

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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 REALTORS® use social media for
relationships and promotion
What is the primary reason for using social media in your real estate business?
(n=446)

Build/maintain relationship with existing clients 30%

To promote listings 22%
Promote my brand 22%
Find new prospects 8%
Stay informed on latest real estate news… 7%
Get leads 6%
Network with other real estate pros 4%
Other 3%
SERIES: 2019 Technology Survey page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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Over half say their company
provides a real estate platform
Does your company provide a real estate Do you use the real estate platform that
platform? (n=526) your broker provides? (n=303)

72% use the

Yes, 58% provided
platform

SERIES: 2019 Technology Survey page

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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2 in 5 think they use a real estate platform

Do you use a real estate platform that integrates software applications to manage your
day-to-day activities in real estate?
(n=520)
“Google”
“Zap” “CRM”

“Skyslope”
“Wise Agent” “Moxi”

“Realvolve” “Contactually”
Yes, 39% “ZipForm”

“Compass” “CINC”
“Microsoft Office”
“Folio”
“Top Producer”
“KW Command”
SERIES: 2019 Technology Survey page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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“Real estate is now a technology
industry that sells homes.”

Creed Smith - Inman

CALIFORNIA ASSOCIATION OF REALTORS®

But did we really change
enough?

(Have we changed fast

enough?)
The ultimate dis

“The ultimate disruptor is an

unhappy customer.”

Pam O’Connor
 The process is still far from easy…
+/-10 days +/-20 days

loan loan condition

process removal

move
buyer find
agent
financial
qualification
market
education
obtain
necessary
inspections +
conditions
in

+ view property removal,

property negotiation of inspections increase deposit
terms
loan
open
funding,
purchase offer accepted escrow,
disclosure, title closing title record
presented to sales deposit
inspections search procedures at city hall,
seller contract earnest
utilities
money +/-10 days on/off

market/ open inspection

provide facilitate
seller sales
analysis
establish
price and
houses
and
property
disclosures
property
inspections
and
conditions
receive
cash
list removal
by showings proceeds,
property
agent rent back
+/-15 days or move
multiple
listing,
advertising
CALIFORNIA ASSOCIATION OF REALTORS®
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Which of the Following Best Describes Your
Home-Buying Experience? Series 1

26%

20%
18% 18%

14%

9%
7%

Too costly Took too Rough ride Inefficient Smooth as Fantastic N/A
long silk

SERIES: 2019 Google Consumer Poll page

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 30
 Which part(s) of the home buying
process needs the most improvement?
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Mortgage financing 42%

Appraisal 18%

Escrow/closing 17%

Agent search 12%

Home search 9%

Other 4%

SERIES: 2019 Google Consumer Poll page

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 31
Buyers’ Pain Points

• Loan approval

• Outbid by other offers

• Home appraisal too low

• Paperwork

• Contract negotiation

CALIFORNIA ASSOCIATION OF REALTORS®

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14% of buyers say it was difficult to obtain financing

2%
12% 1 Extremely Difficult
26%
Please rate how easy Somewhat Difficult
2
or difficult it was to
obtain financing. Mean: Neither Easy Nor
22% 3
(n=993) 3.72
Difficult
4 Somewhat Easy

5 Extremely Easy
38%

SERIES: 2019 Consumer Survey page

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 33
1 in 5 experienced difficulty with their
home appraisal

Did you experience any

difficulty with your home
appraising at a value Yes,
equal to or below the 18%
final sale price?
(n=1,005)

SERIES: 2019 Consumer Survey page

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 34
Sellers’ Pain Points

• Agents charging too much

• Sales fell through due to buyers’ inability to secure a loan

• Home inspection

• Paperwork

• Contract negotiation

CALIFORNIA ASSOCIATION OF REALTORS®

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Price top concern of sellers

What was your biggest concern as a home seller?

(n=958)

Getting a good price 43%

Selling quickly 20%

Selling the house 15%

Finding a qualified buyer 12%

Finding a new house to buy 8%

Other 1% SERIES: 2019 Consumer Survey page

SOURCE: NATIONAL ASSOCIATION OF REALTORS®
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23% had challenges in the closing process

Did you encounter any

challenges in the Yes,
closing process? 23%
(n=989)

SERIES: 2019 Consumer Survey page

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 37
Most still want to use an agent
because of their professionalism
80% said they prefer to use a 80% said that buying or selling
real estate agent because a home is a stressful process
they are professional

73% said that the agent’s
educational background was
either extremely import, very
important or important
47% agreed that the services
provided by agents are less
valuable now that the Internet
has all housing information
available

SERIES: 2018 REALTRENDS Consumer Survey page

Source: CALIFORNIA ASSOCIATION OF REALTORS®
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The industry has seen new internal
models…
Shift of power: broker to agent
Technology is the driving vehicle

Broker-centric Agent-centric

1980s-1990s
1960s-1970s Personal computers
Main frame Agents have more
computer information access
Broker has all the
information
CALIFORNIA ASSOCIATION OF REALTORS®
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And there are teams

Q: Are you currently working as a member of a real estate team? (n=4,031)

80% 81%
74%

26%
20% 19%

Yes No
2017 2018 2019

SERIES: 2019 Membership Survey page

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 41
 The next shift: agent to consumer???

Consumer-centric
Agent-centric

1980s-1990s
Personal computers 2000s – 2010s
Agents have more Internet and mobile
information access Consumers have all
the information

CALIFORNIA ASSOCIATION OF REALTORS®

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 How do the venture
capitalists see us?

What are the ramifications of

having so much $$$ flowing
into the real estate industry?

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 VC capital changing the rules of the game

Real estate tech financing trend

$4,500 400
374 335
$4,000 350
$3,500 326
300
$3,000 283
250
$2,500 211 200
$2,000 $3,945
$3,419 150
$1,500 128 $2,893
$1,000 $2,117 100
$500 $1,225 50
$519
$0 0
2013 2014 2015 2016 2017 2018 (thru
Dollars ($M) Deals 10/18/18)

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SOURCE: CB INSIGHTS 44
All truth passes through three stages:

1. First, it is ridiculed.
2. Second, it is violently opposed.
3. Third, it is accepted as being self-evident.

Arthur Schopenhauer - philosopher

CALIFORNIA ASSOCIATION OF REALTORS®

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Why they didn’t see it coming…

Dismissive
Arrogant
Distracted
CALIFORNIA ASSOCIATION OF REALTORS®
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Disruption is all around us…

car movie brick &

service rentals mortar

music hotels checks gas vs.

vs. ePay electric cars

CALIFORNIA ASSOCIATION OF REALTORS®

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Disruptors, innovators and failures
in the R.E. brokerage industry…

CALIFORNIA ASSOCIATION OF REALTORS®

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Residential Real Estate Technology Landscape

SOURCE: Thomvest Ventures

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Last updated: July 2018 49
Real estate industry: We have a long
history of innovation and change.

Consumers:

Is that how they see it?

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 iBuyer:
a niche, a real threat or
an opportunity?

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Traditional transaction vs iBuyers – The hype

Traditional transaction iBuyer

annoying speed

painful convenience

uncertain certainty

“iBuyers will have 20% market “iBuyers will have 60% market
share by the end of 2019.” share by the end of 2024.”
-Brad -Rob

CALIFORNIA ASSOCIATION OF REALTORS®

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How iBuying Works:

01 02
Seller fills out online questionnaire iBuyer uses algorithms and technology
about their home to determine offer price

03 04
iBuyer presents seller with a nonbinding iBuyer sends inspectors to verify value
offer (typically within 2 days) and assess any needed repairs

CALIFORNIA ASSOCIATION OF REALTORS®

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How iBuying Works:

05 06
Transaction closes and iBuyer takes iBuyer renovates for resale
ownership and charges fee (6-8%)

07 08
iBuyer lists home Offer is received, enters into
closing process

CALIFORNIA ASSOCIATION OF REALTORS®

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iBuyers’ Target: Largest Segment of Home Transactions

74% of Home
Transactions
2039 2028

606
386
220 209

$0-$100k $100k-$250k $250k-$500k $500k-$750k $750k-$1m $1m+

Axis Title

Source: NAR, Morgan Stanley Research

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 19
Where iBuyers Operate Austin, TX
Jacksonville, FL
Portland, OR
Tucson, AZ
Phoenix, AZ
Future Markets 12
Dallas, TX
Las Vegas, NV
Atlanta, GA
Boston, MA
Current Markets 9 Chicago, IL
Orlando, FL
Raleigh, NC
Denver, Co San Antonio, TX
Dallas, TX Los Angeles, CA
Charlotte, NC
Tucson, AZ Phoenix, AZ Nashville, TN
Phoenix, AZ Salt Lake City, UT
Tampa, Fl
San Diego, CA
4 4 Tampa, FL
Dallas, TX
Minneapolis,
3 3 Orlando, FL MN
Dallas, TX Phoenix, AZ Atlanta, GA Tampa, FL Houston, TX
Austin, TX Wayne Co., MI Inland Empire, CA Las Vegas, NV Las Vegas, NV Atlanta, GA Sacramento,
Dallas, TX Knox Co., TN San Diego, CA Atlanta, GA Charlotte, NC Charlotte, NC CA
San Antonio, TX Nashville, TN Orange Co., CA Denver, CO Salt Lake City, UT Raleigh, NC Denver, CO

Source: CBInsights
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Impact of iBuyers on Residential Real Estate

“The iBuying Market

could reach ~3% total
transaction penetration
by 2030, the equivalent
of ~175k homes.”
(Morgan Stanley)

iBuying Homes (000s) % Total Homes

Source: Morgan Stanley Research

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Growing Quickly

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 The cost of
convenience:
traditional sales
net more

Source: Collateral Analytiics

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 The cost of
convenience

Source: Collateral Analytiics

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page
063
 Where could this lead? iBuyer
is a viable alternative for those focused
on convenience & certainty AND
sets a floor for home prices.
What beats a zestimate? A real offer
from an iBuyer.
Majority of buyers and sellers used an agent

18-34 91%

90% 35-44 94%

used an

Age
agent
45-54 85%

55 and up 81%
-Up 5% from 2014
-Up 9% from 2001 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Yes No

SERIES: 2018 REALTRENDS Consumer Survey page

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 65
 Over half of buyers needed help with negotiating terms
of sale and price
In which part of the transaction did you need the most
assistance from your agent? (n=949)

Negotiating terms of sale 29%

Finding the right home 24%

Negotiating price 22%

Mortgage financing 13%

Help with legal issues 9%

Other 3%
SERIES: 2019 Consumer Survey page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 66
Sellers needed assistance with a variety of things
during the sale
With which part(s) of the sale did you need assistance from your agent?
(n=942)

Negotiating price or terms of sale 59%

Determining listing price/strategy 59%

Advice about selling 44%

Timing or sequencing the sale 34%

Help with legal issues 32%

Home staging 29%

Other 5%

SERIES: 2019 Consumer Survey page

SOURCE: NATIONAL ASSOCIATION OF REALTORS®
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Change is inevitable,
Growth is optional
John Maxwell – leadership expert
How to adapt?
Embrace technology

It is not going away, whether you like it or not.

• Understand it

• Invest in it

• Take advantage of it

CALIFORNIA ASSOCIATION OF REALTORS®

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True stars will be those who adapt,
and they will dominate the future

• There will be fewer agents overall

• Fewer agents working part-time

• Productivity will trend upwards

• Professional sports analogy: stars prosper

CALIFORNIA ASSOCIATION OF REALTORS®

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The Industry will continue to evolve…

CALIFORNIA ASSOCIATION OF REALTORS®

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 Thank You
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