The future of one-stop-shop brokerages

Matthew Blake: Hello, and welcome to a special fall break edition of the “Houses in Motion” podcast. I am Matthew Blake, senior real estate reporter with HousingWire. I’m actually off this week, but for our audience, I have recorded a special episode this week with Tracey Velt of RealTrends, who very nicely agreed to come on and discuss some of the biggest real estate issues happening right now. Tracey, thanks a lot. Welcome to the show.

Tracey Velt: Yeah. Thanks for having me on.

Matthew Blake: Tracey, of course, has her own podcast over RealTrends, where she interviews some of the biggest people in real estate today. And I recently was able to speak with Tracey at the HousingWire Annual, which was happening in Frisco, Texas last week or a couple of weeks ago from our recording right now. And Tracey moderated a panel on the future of real estate brokerage, which I thought was pretty interesting. And why don’t you actually just start maybe, Tracey, by talking a little bit about that because I thought you made a really good point that a lot of brokerages right now are saying that they want to be one-stop shops, but you mentioned this is an idea that Sears, Merrill Lynch had back in the 1970s. And so what are you observing right now about brokerages’ push for a one-stop-shop and what might be different today than say 50 years ago?

Tracey Velt: Well, regulatory issues were really what brought them down. Before the regulatory, it was not prepared to handle the one-stop-shop, and then with RESPA, they were able to get a better idea of how to regulate these companies. And I don’t know if that’s why Merrill Lynch and Sears failed, I honestly don’t know, you know, all of those details about it. But what I think is different today is that you’ve got so much more than mortgage and title. I think the new wave will be partnerships with companies like Knock and Ribbon, who are offering alternate financing for buyers and sellers. And I think you’re gonna see those become some core services that agents are offering. The iBuyer services as well. I know a lot of brokers are starting to partner with Opendoor and getting referral fees and listing those properties or selling those properties.

So I really think that’s what’s different is it’s going to expand out from mortgage title insurance, and you’re gonna find a whole new wave of partnerships happening between brokers and companies. No longer are these, you know, tech companies trying to disrupt the industry. I think there are still some of those, but I think that a lot of them are looking instead to really partner. And the reason they’re going to be successful, in my opinion, is that they offer something consumers want. They want to be able to not have the idea of a contingency where they have to sell their house to buy a house, you know, consumers want other options for financing. So I think that that’s gonna be the biggest change and I feel like that’s gonna be a wave that we’re gonna see. In fact, even when I interviewed Sean Black of Knock, which that’s a podcast that’ll be featured next week, next Monday, he had talked to, I guess, it’ll be…

Matthew Blake: It’ll be two days in the past, perhaps. But anyway, Sean Black, interesting person… But yeah, what did Sean say?

Tracey Velt: He says he feels like we’re going through this transaction revolution right now with consumers and that’s where the disruption is happening. It used to be the information kind of revolution and we’re moving into more of a transaction revolution where they’re focusing on, you know, making the transaction easier, all these companies are. And anything that makes the transaction easier for consumers, they want. So I think that real estate brokerages are smart to partner with some of these companies or to develop programs of their own if they’re larger to really serve their consumers.

Matthew Blake: Yeah. That’s interesting. That’s an interesting turn in terms of those partnerships. So with something like Knock, which I believe is basically a mortgage lender that gives a bridge loan to someone who’s looking to buy a new house but is nervous about, you know, having the capital to buy a new house and also finding a new house, especially in today’s market. That seems to make some sense, particularly in today’s low-inventory market from consumer perspective, but I’m wondering what it’s like for an agent perspective. And you also mentioned Opendoor, which is a company that has had, I would say, a pretty complicated relationship with real estate agents. Do you think that agents are sort of willing to enter these partnerships or might they feel like these kinds of new companies are undermining their core business?

Tracey Velt: No. I think that some are open to it, and I know a brokerage in Georgia that has an Opendoor partnership right now. So I’ll go through what they do. The Opendoor rep will find the homeowner and basically, they’ll say, I’ll give you such and such for your house after costs right now. But before you take that offer, I have an agent, a real estate agent who will let you know what it looks like on the open market. And then Opendoor will actually refer it to that brokerage. They’ll provide like a renovation budget to work with this brokerage, and then the brokerage then compensates Opendoor on the backend. So, I don’t have more specifics than that, but they have partnerships that will make sense for brokers. And I think that anything, again, that makes it easier for consumers given our current regulatory atmosphere is going to be desired. So, yeah.

Matthew Blake: Yeah, no. That’s interesting, for sure. Like, Opendoor’s definitely, I think proactively the past year done more of these partnerships. Yeah. You’ve mentioned the regulatory environment a couple of times, could you just elaborate a bit on that? What are you hearing in terms of concerns or opportunities agents or brokerages say right now about the current, like, federal regulation landscape?

Tracey Velt: I think that there’s reason to be concerned. This wave, to be honest with you, I think that in the past, you know, we had this past consent decree between NAR and the DOJ that was hammered out and, you know, seemed like all parties were happy. A new administration came in and decided to take another look and they seem to be a little more skeptical of the real estate industry, in general, that you have the DOJ kind of withdrawing from that consent decree. Then you have the Federal Trade Commission looking into things. And actually, I think we have a…President Biden was quoted saying he asked the FTC to look into the real estate industry and what could be done to create a more competitive environment. And so when Zillow and ShowingTime with that merger, what happened is the Federal Trade Commission always looks at mergers over a certain dollar amount. So that was a $500 million transaction. It was going to be looked at no matter what. But the FTC had given the go-ahead on that deal.

Then when they closed on it or maybe right before it closed, they changed their mind. And Lina Khan, who was a recent appointee from President Biden, she announced that Zillow could go forth, but the deal would be at their own peril because the FTC was going to review it again. And that’s highly for the Federal Trade Commission to do something like that. So I think when you’ve got all of these antitrust, you know, the REX lawsuits, you know, the FTC looking into the real estate industry, looking into some of the mergers and acquisitions, you’ve got the DOJ-NAR, you know, DOJ pretty much expanded their investigation of NAR. NAR did make some changes, but I think that this administration especially is gonna take a hard look at this industry. And I can’t predict what’s gonna happen. I have no idea. But there are a lot of signs that show that there might be some changes coming and I don’t know what those changes might be, but I do think it will be something that will make everything a lot more transparent. And there are a lot of arguments against that.

I mean, commissions have been going down over the past, you know, 10, 15, 20 years. There are more choices than ever for consumers between iBuyers, discount brokers, different brokerage, you know, business models, you know, for sale by owner, they’re not forced to use an agent. There are other ways to get information about properties now. So it’ll be interesting what happens. I’m not sure what’s gonna happen, but I do feel like this administration is serious about taking a look at what’s going on.

Matthew Blake: Yeah. I mean, it just seems to me like there’s a lot of different moving parts right now because it seems like, on the one hand, you have the Justice Department, as you say, you know, under the Trump administration, which actually had…you know, I know the Trump administration was known for kind of lax regulatory enforcement, but they had, you know, an antitrust division, that was not totally asleep at the wheel. And they made this consent decree, you know, with the National Association of REALTORS, like you mentioned that did try to address some of the transparency measures and did try to at least, you know, make consumers aware of, look, this is how a real estate transaction works. The buyer’s agent gets half the commission usually. And then, of course, the Biden administration revokes that and the Biden administration has, as you point out, used its powers to sort of, I don’t know what the word is, sort of make its presence known.

Like, hey, we’re here. And, like, the REX lawsuit, lawsuits concerning pocket listings that are happening in the Ninth Circuit court of appeals right now. They’re basically filing these briefs that are, like, not quite taking a stand on things, but basically being, “Hey, we’re watching this. We’re monitoring this.” And so that’s all one thing in its own kind of big ball of twine on one end of the table, but then on the other end of the table, we have Zillow. And what’s confusing to me, I mean, a lot of things are confusing to me about this, but one thing that is confusing to me right now is sort of how related and how unrelated the Justice Department and the Biden administration investigation into Zillow is with the investigation of National Association of REALTORS because they’re intervening in the REX lawsuit, which is a lawsuit against both NAR and Zillow. I don’t know if they’re intervening because they just wanted to intervene. You know, didn’t have anything to do on a Tuesday afternoon or because they really saw a problem with Zillow specifically, or really saw a problem with REX specifically.

And I think what I’m I guess confused about is sort of what is it that’s intertwined between Zillow and NAR and what is it that’s just Zillow you mentioned. And I guess my question for you is sort of, yeah, what do you think that they’re specifically interested in about Zillow? Because I think that the whole ShowingTime thing was interesting where the FTC was basically saying, look, we’ll approve this. You know, we had to look at this anyway, as you point out, because it’s a really big transaction, but you’re on watch Zillow. We still may investigate you. So what do you think they’re specifically looking at in regards to Zillow? What do you think their concern is with Zillow?

Tracey Velt: You know, competition, transparency. I think that they’re looking at them as, you know, watching what they’re doing because of all the murmurs of Zillow trying to control markets and things like that, which I don’t believe, I don’t believe that is true that Zillow is trying to control markets through their Zillow Offers program. But I think it’s just competition and with the MLS, it’s the pocket listings, it’s same, competition and also commission. And, you know, there are a lot of different thoughts around that, but I think that’s really what it boils down to is making things more transparent, making the industry more transparent. You know, the professionalism of the industry has always been in question as far as the low bar to entry and, you know, the NAR monopoly of MLS systems and that, but, you know, the MLS has been really good too. It’s not perfect, definitely not perfect. And I think that tweaking some things and I don’t really know what those things would be, but it would not be a bad thing, but I really think it’s all related to competition.

Matthew Blake: Yeah. I think that MLS stuff is really interesting. I had Sonia Gilbukh on a few weeks ago, she’s a real estate professor at Baruch College and we were gonna talk about…we did talk about her work on, like, multiple listing services. And I kind of thought it would be kind of us almost trashing the MLSs and just say, like, oh, it’s part of like the NAR’s monopoly. It’s part of, you know, this, you know, cabal that they’re running. And, you know, I think that we both kind of reached a point where it was like, well, actually, the MLSs are kind of great in a way in the sense that they do provide this inventory, you know, and an inventory that since, you know, partly because of DOJ intervention in the mid-2000s, this inventory that consumers now can see. I mean, in one way, the housing market, in terms of what houses that I can buy is like more transparent than perhaps other markets. Like, I don’t know, like, what cars I can buy as readily as perhaps what houses I can buy to give one, perhaps not perfect example.

But in terms of transparency, just anything more, like, you wanted to say about that? I mean, in your time covering real estate and being involved in real estate, is there anything that you’ve seen that’s changed in terms of transparency or that may still change?

Tracey Velt: I think it’s gotten more transparent to be honest with you. And then some of the new changes, you know, that they’re recommending about you can’t represent that your services are free and listing ads can’t be sorted or filtered based on the level of compensation or cooperating broker offers, that’s all happening now. And that’s part of the consent decree that they pulled out of, but NAR is still going through with the changes that they had planned to make. But also, you know, the compensation is a big thing. I mean, that is negotiable. And the fact that…I think that most consumers, in my opinion, do know that. If they’re looking for properties on the internet, they’re also looking up information on how to work with a realtor, whether to work with a realtor. And some of the consumer studies that we’ve done, that RealTrends has done with Harris Insights, the younger generation actually is more apt to work with a realtor than baby boomers, even.

Matthew Blake: Interesting. So I feel like these issues that we’re discussing, you know, they’re interesting because they’re sort of at this point of great uncertainty, where’s Zillow going next, where’s the Justice Department going next, and looking at NAR, where are these companies going next and how they’re trying to combine different aspects of the housing economy. What is maybe a topic that you hear agents talking about a lot that maybe I’m not covering as much, or maybe we’re not hearing about as much publicly?

Tracey Velt: You know, I don’t really know the answer to that one. I think we’re covering a lot of their issues. But one thing that I do think is that in this market with multiple offers and really having to work double-time to get your buyers a home, that elevates the industry in a way because they’re forced to, you know, work harder to serve the consumer. And, you know, this idea that it all goes back to the low bar to get into real estate. I feel like companies and brokerages have really stepped up education and stepped up how they’re training agents to handle these situations. And so I don’t think that’s talked about enough. I think that we still have…you know, you still have, of course, it is a low bar and you still have, you know, 10% of the agents doing all of the business, or maybe it’s 15%, 20%. I’m not sure.

But I feel like this market, especially has really forced them to learn a lot more about putting together an offer and figuring out ways to get it noticed, whether that’s through contingency waivers or, you know, taking care of the consumer through offering other services, like maybe you wanna consider an iBuyer or maybe you wanna consider a bridge loan. So, I think one thing that they do need more education about agents is how to use those services because I don’t think they completely understand what they are and what they offer. The initial reaction is always, “Oh, that’s competition for me,” when actually it could be a really good thing for them to offer.

Matthew Blake: That’s interesting. Yeah. And just one final note, I mean, are you seeing the brokerages…how are you seeing the brokerages maybe train agents differently now to sort of tell them, hey, maybe an iBuyer is your friend, for example?

Tracey Velt: I think that, well, first of all, there’s a lot more coaching going on, where it’s rather than having classes, they’re offering multiple options for classes. I think COVID really helped that, that more people are able to get online access to virtual classes or to a video library. And then I know several brokers who are doing one-on-one coaching where they take on a new agent and they put them through either a mentorship program or a coaching program. A lot more brokers are hiring business development and coaching, you know, coaches to train the agents. So I think more brokers are getting more involved in the individual agent business, their business and training them to build it as a business and teaching them how to do that so that it’s something that they might have some value to sell later on. Training them up on how to use the technology, whichever that might be, you know, how important it is to have a clean CRM with as much data as possible. And they’re also offering a lot more of those products and tools for the agents as well. So yeah.

Matthew Blake: Can the brokerage afford to do all this? It seems like they’re doing more with sort of less.

Tracey Velt: Yeah. I mean, they are doing…well, I don’t know if they’re doing more with less. I think it’s been a great market. So that’s been one thing. But you also have to remember that like the low-fee brokerages, not to be confused with discount brokerages. Discount brokerages offer a discount to the consumer, the low fee is more like a transaction fee that agents pay. A lot of them are building their own technology platforms so they’re not having to pay per agent per se with an outsourced program that charges per agent. They’re also cutting down on offices and marketing expenses to be able to do a lot of those things. So occupancy. You know, it’s why a lot of the low-fee brokers, it’s a combination of saving money with their own technology platform. There are also a lot of venture capital in real estate, which are coming on that side as well.

Matthew Blake: Yeah. Those are really good points. Yeah. Sometimes they don’t think about that as much, but yeah, the office costs, people are going to let leases expire, and marketing. You know, if you’re an agent in LA, you no longer have to take out a big ad in the LA Times that may cost thousands of dollars. Cool. Well, thanks so much. Is there anything else that maybe you wanted to mention, talk about?

Tracey Velt: No, just I would love to plug my “RealTrending” podcast.

Matthew Blake: Please. Yes.

Tracey Velt: We have “RealTrending.” It’s once a week. Every Monday we release new podcast interviews with some of the top leaders in real estate. And then we also have a trends podcast that talks about some of the trends in the industry and…Steve Murray, who is a senior advisor to RealTrends does that one. And then I do the interviews with real estate leaders talking about growth strategies and how they’re building their business.

Matthew Blake: Great. Yes. And everyone, obviously, should listen to that. You probably are if you’re listening to this, but please do. Tracey gets the biggest names in real estate to appear on that podcast, Tracey Velt, thank you so much for appearing on “Houses in Motion.” I really appreciate it.

Tracey Velt: Thanks, Matt. I appreciate it.