T3 Insight

Brokerage and tech company consolidation, diversity's impact on business + real estate tech integrations

Articles in this Edition

In this edition of T3 Insight, T3 Sixty's latest monthly analysis of the residential real estate brokerage industry includes articles on Brokerage and tech company consolidation, diversity's impact on business + real estate tech integrations. Take a deep dive below.

Released August 18, 2021

Understanding real estate technology integrations

by: Travis Saxton

A business case for increasing diversity in real estate leadership

by: Kenya Burrell-VanWormer

Tracking real estate brokerage and technology brand consolidation

by: Paul Hagey

What We're Reading

In addition to the articles, here are a few items we are reading from across the internet.

Rocket Homes hiring in-house agents, launching iBuyer program

IBuying and its close relative iFunding have captured an increasingly amount of attention, financing and market share in recent years, and bigger players are beginning to take notice. Rocket Cos., the parent of the nation’s largest mortgage lender has now jumped in the game. Rocket Homes, licensed as a brokerage in all 50 states, will provide discounted remote brokerage services with in-house salaried agents for those clients interested and refer those who are not to partner agents beginning in the fourth quarter; in addition, it offers clients discounts for using bundled affiliate services. The firm also announced it would launch an iBuyer program – using third-party partners. This might be the beginning of trend if a second mortgage player follows, and that appears likely.

Inman

Permira funds acquires majority stake Engel & Völkers, German-based global real estate franchisor

The presence of private equity in real estate is growing more prevalent. Over the last several years, private equity firms have acquired major real estate brokerage technology platforms – Lone Wolf Technologies, MoxiWorks, Inside Real Estate – which has led to acquisitions and consolidations in that category. And now they’re also going after brokerages and real estate brands – this acquisition brings one of the nation’s largest franchise brands under a private equity company. A private equity-backed company acquired fast-growing brokerage and franchisor JP and Associates Realtors in May 2021, and the nation’s 11th largest brokerage and budding franchisor At World (@properties/Ansley Real Estate and Nest Realty) is the result of a 2018 private equity acquisition of @properties.

Private Equity Wire

DOJ intervenes in REX antitrust suit against NAR and Zillow

The U.S. Department of Justice formally submitted a “statement of interest” in the active antitrust lawsuit from real estate broker startup REX Real Estate against NAR and Zillow Group. The suit alleges that Zillow Group’s application of a NAR rule that listings from MLSs and other sources be kept separate in property search results violates antitrust laws as it disproportionately harms firms with listings not in the MLS. In a motion to dismiss the suit, NAR and Zillow Group say a 2008 consent decree between NAR and the DOJ shows that the DOJ approves the “commingling” rule by NAR. In this August statement, the DOJ formally makes clear that it had never explicitly approved the NAR commingling rule and that the court should not take that statement in the motion to dismiss the REX lawsuit into account when ruling.

Inman

Bright MLS study reveals MLS-marketed homes sell for more

Based on an analysis of single-family homes in its market sold on its MLS and those outside of it for 2019 and 2020, Bright MLS reveals that homes marketed on the MLS sold for a median of 16.98 percent higher than those not. The study also revealed that of the 442,829 sales identified in the market over the two-year time period, over a quarter (26 percent) were sold without MLS marketing. In addition to the price benefits sellers received when their homes were marketed through the MLS, the large percentage of off-MLS deals jumps out from this study. As iBuyers proliferate, they increase the number of homes sold outside the MLS as they often purchase homes from homeowners directly, and, in some cases, list the homes they have for sale through their networks. These, along with office exclusives – in which brokerages market listings internally instead of the MLS – has eroded the centrality of the MLS as a market’s complete source of listings. This study’s findings creates a powerful narrative as to the value of MLS.

Bright MLS

New Connecticut law limits real estate team naming

A new Connecticut law, which will take effect in January 2022, limits the naming conventions real estate teams can use in the state. In addition to registering with the state and paying an annual fee, teams must use naming that does not suggest they’re a “business entity.” For example, the law prohibits suffixes “Group,” “LLC,” and “company.” This ruling could have wider ramifications for the industry as the size and power of real estate teams proliferates across the country. In some cases, it’s difficult for consumers to tell the difference between a team and a brokerage, and this law is intended to clarify to consumers the company behind the transactions they engage in. If this becomes a trend for other states, teams will have to bear a new fee and potentially accept a less independent position in branding.

Inman

Opendoor launches agent referral program

Opendoor has launched a new referral program, Agent Access, in which the iBuyer will pay listing agents a referral fee equal to a 1 percent commission rate for sellers they refer to the company. To participate, agents make an Opendoor cash-offer request through the Agent Access portal and pay the referral when a sale closes. In addition, Opendoor incentivizes agents to participate by providing cash bonuses for the more listings (that lead to sales) they refer. A separate Opendoor referral program refers buyers and sellers to partner agents, who pay the iBuyer a 1 percent referral fee upon close. This new program represents another evolution in the iBuying business model as iBuyers look to expand their reach and revenue by partnering with agents to help expand their consumer base.

Opendoor

Inman News acquired by Beringer Capital

Inman News, the long-time leader of residential real estate industry news, has sold to private equity firm Beringer Capital. This is another sign of consolidation and corporatization of the residential real estate industry continues as yet another established industry entrepreneur sells a company. While he retains some equity through the deal, Inman News founder Brad Inman, who has been a leading source of industry insight and connection since founding his media company in 1996, undoubtedly now enters a more distant relationship with real estate coverage. Inman, and its growing competitor in the real estate media space, HousingWire, are now both owned by private equity.

Inman

Real estate’s second quarter earnings reveal

Real estate’s second quarter earnings season revealed a healthy housing market. Most companies outperformed expectations. Earnings highlights for some of the nation’s largest public real estate companies in the second quarter are as follows: • Compass: shrunk net loss from $84 million to $7.1 million in the same period 2020, grew agent count to over 10,600 agents, and 6.2 percent national market share. • EXp World Holdings: Revenue increased 183 percent to $1 billion in revenue and declared first cash dividend of $0.04 per share. Grew to 58,000 agents, an 87 percent year-over-year jump. • Realogy: Generated revenue of $2.3 billion, $149 million of net income with a 77 percent year-over-year EBITDA increase to $310 million. • Redfin: Nearly doubled first quarter revenue to $471 million, grew national market share by 24 basis points to 1.18 percent. • RE/MAX: $5.2 million of profit on $77.2 million in revenue with North American agent count growing 3 percent to over 85,000 agents. • Zillow Group: Beat analyst expectations on $1.3 billion in revenue, with $10 million in net revenue.