Four MLSs – ACTRIS (Austin, Texas), First MLS (Atlanta), Heartland MLS (Kansas City) and Miami Realtors MLS (Miami) – created a joint venture in MLS Technology Holdings LLC to acquire MLS technology provider Remine. Remine had developed some innovative MLS technology products, but had dealt with reports of unprofessional conduct of leadership and had stumbled in recent months. The move by these MLSs reflects the desire of MLSs to take their future into their own hands and begin owning some of the technology infrastructure they rely on to provide services to brokers and agents.
In August, a record 4.3 million Americans left their jobs, a growing trend that some are calling “The Great Resignation.” The pandemic has forced many to confront their lives on a deep level, and experts suggest this has contributed to professionals reevaluating their careers and making decisions to pursue opportunities and jobs they want now, rather than putting those feelings off.
Housing starts stumble into Autumn In September, home starts fell by 1.6 percent from the previous month while the gap between completed homes and those under construction was the largest on record, according to the U.S. Commerce Department. The drop in starts is unexpected as demand for homes remain very high. A Reuters poll had suggested that starts would instead rise in September, but rising prices for lumber and other building components have added some hurdles.
With a strategic investment in a Vermont-based Keller Williams Realty expansion team, the franchisor has launched a national mega team in Livian. Tailored to attract and support productive teams across the nation, KW has introduced a new team brand it hopes will become a significant player in this arena.
A critical analysis of the Clear Cooperation Policy Inman conducted a multipart investigative series on Clear Cooperation Policy, which NAR implemented in 2020. The policy, intended to curb property marketing that illegitimately circumvent the MLS, limits the ability for agents to market listings to a max of one business day before it goes active in the MLS. The series includes a discussion of how, in some markets, pocket listings continue at high rates. For example, one study reveals that the percentage of homes sold within a day of going active in the MLS (a sign that the home was actually sold before going live in the MLS) shot up in markets around the country after the Clear Cooperation Policy took effect. Irrespective of consumer benefit, brokerages and agents face big incentives with marketing homes off the MLS, a practice that has been commonplace for decades. As the industry looks to keep the integrity of the MLS intact, workarounds to the Clear Cooperation Policy as covered in this series make it clear that the practice is alive and well and will continue.
CoStar Group continues aggressive posture toward Zillow Group Andy Florance, the founder and CEO of CoStar Group, which has aggressively jumped into the residential real estate portal arena with its recent purchase of Homesnap and Homes.com, has developed an aggressive tone toward Zillow Group. His recent interview with Brad Inman at Inman Connect revealed how he’s hoping to position his firm’s real estate play in relation to the nation’s dominant portal. A backdrop to the conversation was Homesnap’s October launch of a New York City portal, Citysnap, that will compete with Zillow-owned New York City portal StreetEasy. While Zillow Group sells advertising and leads to agents for placement on other agents’ listings, CoStar Group has a focused strategy of only placing the listing agent’s contact info on listings on its sites.
John L. Scott, the nation’s 15th largest brokerage led by J. Lennox Scott, the grandson of the firm’s founder, is celebrating its 90th anniversary in 2021. The company epitomizes the entrepreneur-led, family-owned character that has dominated the industry since World War II. Family-owned and -run companies like John L. Scott are becoming fewer and far between, especially at the largest brokerage tiers.
Bill Riss, owner of Seattle-based Coldwell Banker Bain, whose 2020 sales volume of $6.4 billion made it the nation’s 26th largest brokerage, has sold his firm to a subsidiary of real estate title giant Stewart Information Services Corp. Stewart is a global firm publicly traded on the New York Stock Exchange with, as of early November, a market cap of over $2 billion. This is another example of the industry’s entrepreneurial owners selling and transitioning the industry in general into one that is more corporately-owned and publicly traded.
HomeSmart, the nation’s 10th largest brokerage and 12th largest franchise brand both by 2020 sales volume, has introduced a revenue-sharing option for its agents. Agents can choose to switch from the company’s existing compensation structure in which agents pay flat fees and keep all of their commissions to one in which they split commissions 80/20 with the company but then gain access to the company’s new revenue-sharing program based on them earning a share of revenue the agents they recruit to the company produce. With this program, dubbed HomeSmart Plus, HomeSmart looks to leverage a strategy eXp Realty used to fuel its spectacular growth in recent years. This move provides an example of how the industry is evolving as newer companies introduce popular features.
Many factors are pulling homebuyers to different areas of the country, with prices as one of the largest considerations. For example, the 50 US counties facing highest heat risk saw 5 percent growth between 2016 and 2020. Texas, where temperatures frequently exceed 100 degrees for much of the summer, is one example. Covid-19 and remote work also plays a big role in the way Americans are moving. T3 Sixty covers this as a complete trend in the 2022 Swanepoel Trends Report, which comes out in early December. Available for preorder at t3trends.com
A 30-percentage point gap remains between the homeownership rate of white and Black Americans. Student loan debt plays a significant factor in this spread. At a median student loan debt of $40,000, Black homebuyers had the highest debt compared to white and Hispanic buyers, according to a NAR survey. This delays the homebuying efforts of Black Americans and plays a factor in them purchasing less expensive homes. The homeownership racial divide in America will take years to address. But organizations such as NAR, by producing studies that highlight the discrepancies and add information that can help influence change.
Howard W. Hanna, Jr., who founded the nation’s seventh largest brokerage Howard Hanna Real Estate in 1957, passed away in late September. He represents one of the entrepreneur leaders who shaped the industry into what the industry is today. His legacy continues with his children and grandchildren who continue to run his company today. Thanks, Howard, for all you did for us.
The significant home price increases in markets across the country have been scuttling transactions due to appraisal issues at higher-than-average rates. In August, 13 percent of the nation’s appraisals fell short of the contract price, according to CoreLogic data. That’s nearly double the standard rate of approximately 7 percent. The rise of alternative finance companies, which include iBuyers and the increasing number of companies who help buyers make the equivalent of all-cash offers with the ability to waive financing and appraisal contingencies, are increasingly removing barriers that have traditionally caused transactions to fall through. These AltFin companies, as T3 Sixty has dubbed them, are ushering in a real estate financing revolution, a trend featured in the 2022 Swanepoel Trends Report, available for order at t3trends.com.
After announcing an agreement to acquire the nation’s most popular showing software ShowingTime in February 2021, Zillow Group closed the acquisition formally on October 1. A review by the U.S. Federal Trade Commission delayed the closing. While the transaction has closed, however, an FTC review remains active. As we discussed in the Opendoor-related summary above, industry participants are beginning to grow and operate in new and different ways, including Zillow Group. With its ShowingTime acquisition, the company now owns the industry’s most used showing app, which many MLSs use exclusively; it also has launched brokerage services to power its Zillow Offers program, provides digital transaction management services through its dotloop subsidiary, and owns the nation’s largest real estate portal in Zillow. The industry is embarking on a new era, with companies operating in new ways.
The U.S. Federal Trade Commission has been investigating Opendoor’s advertising practices since August 2019, and in September 2021 the company reported that a potential settlement or FTC action is still possible. Details about exactly what the FTC is investigating were not disclosed. As AltFin companies and other brokerage industry participants innovating with newer business models, new messaging, consumer relationships and government scrutiny emerge. The fast-developing industry has many elements in flux now.
California passes a law that ended exclusive single-family home zoning in transit-rich and urban infill areas throughout the state. Until this law, it was illegal for property owners and builders to construct duplexes, triplexes, multifamily units or any other housing types on lots in areas zoned as single-family. Experts expect the impact of the new law will take time, but it signals a major step forward in making additional properties available for new-construction units, and a cultural shift toward encouraging increased housing density.
NAR’s MLS policy committee will consider several policies related to the U.S. Department of Justice’s review of NAR at its upcoming annual meeting in early November. These include the banning the word “free” for agents advertising their services to consumers and prohibiting the ability for agents to filter listings based on agent compensation. If the committee votes to send this for a vote and the NAR board of directors passes them, the changes would go into effect on January 1, 2022 with a March 1 implementation deadline. These proposed changes are just a few of many that the industry faces, thanks to lawsuits, DOJ and FTC review and more.
HomeServices of America is ending use of the Real Living real estate brand it took on in 2012, when it acquired a controlling interest in it and the Prudential Real Estate brand. In an email and video to Real Living franchisees obtained by Inman, Real Living CEO Allan Dalton said that the brands inability to realize growth caused the company to make the decision to sunset the brand. For years, HomeServices of America had been actively working to transition Real Living affiliates to the Berkshire Hathaway HomeServices brand, which it introduced in 2013. Founded in 2002, the Real Living brand had over 2,800 agents who did over 28,000 transactions in 2020, making it the nation’s 19th largest brand by transaction sides that year, according to the Real Estate Almanac.
Realogy has added a new feature to its Spark initiative, which it launched in 2019 as a benefits program for agents affiliated with one of its brands. The new feature allows agents who join Spark’s premium level (which requires an annual membership fee), to contribute up to $64,000 to the program’s affiliated 401(k) retirement plan with the ability to borrow tax-free against funds they have in it. Realogy, the nation’s largest real estate company, in establishing and evolving a benefits program for its affiliated agents, who are independent contractors, is another sign of the industry corporatizing. Other large companies in the industry have pursued similar benefits programs for the independent contractor agents in their networks including eXp Realty and HomeSmart.
Redfin has expanded Redfin Direct, in which the company makes empty homes it has listed available for consumers to tour without an agent from 8 a.m. to 8 p.m., from 13 markets to 22 markets. The company partnered with security giant ADT to enable this; ADT will monitor homes in the program to ensure the homes’ security by sending listing agents alters when doors are open or closed and if one experiences unauthorized access. The industry’s tech-enabled future marches quickly forward with features like this. Agents are critical to a successful transaction but how they support clients will shift and adapt as innovations like this one from Redfin appear and take root.
REX Real Estate, a discount brokerage which operates outside the MLS, has publicly applauded the U.S. Department of Justice’s decision to back out of its antitrust settlement with NAR after NAR recently petitioned to have the DOJ uphold the settlement. REX, itself, filed an antitrust lawsuit against NAR and Zillow in March.
NAR continues to face significant pressure, from the government in the DOJ, REX and several homeseller lawsuits. These developments will keep the association’s hands full over the next months and years, and they may impact some long-standing industry practices and rules.
Compass has acquired LegacyTexas Title, a title insurance company that covers the Dallas-Fort Worth area. The acquisition represents Compass’s continued push to grow its ancillary businesses, which, with the acquisition, now features title and escrow services in six states.
The acquisition follows the company’s February 2021 acquisition of KVS Title and its October 2020 acquisition of title and escrow software startup Modus.
Ribbon, an alternative real estate transaction startup that helps homebuyers make all-cash offers on homes, raised $150 million in a Series C financing round. The company, which also partners with agents to help support their buyers’ transactions with all-cash offers, announced plans to expand to half the U.S. by 2023.
Real estate is seeing real estate transactions evolve in real time with startups like Ribbon providing new financing options to homebuyers and agents. Read more about the model in the upcoming 2022 Swanepoel Trends Report.
After raising $75 million in March 2021, Pacaso, the startup run by former Zillow Group execs Spencer Rascoff (chairman) and Austin Allison (CEO) has raised another $125 million, led by SoftBank’s Vision Fund 2. The company streamlines second-home ownership for consumers with a platform that allows them to own shares in properties in 25 second home markets such as Lake Tahoe, Palm Springs, Napa and Malibu in California and Park City, Utah. The firm recently launched its first overseas market in Spain. The firm holds active brokerage licenses in its active markets where it partners with local agents to purchase homes outright or shares in a home.
Pacaso debuted its platform just in October 2020 and claims to have an annual revenue run rate of $330 million. The speed with which the startup is growing and raising money epitomizes the current real estate era, is chronicled in detail in the 2022 Swanepoel Trends Report, available for preorder here.
Opendoor has acquired two general contracting platforms Pro.com and Skylight and will fold the companies’ teams into its own. The move represents a deepening and expansion of the services Opendoor, and other iBuyers, look to provide real estate consumers. IBuyers are quickly becoming more than just companies who streamline the transaction – they are jumping into the services adjacent to the transaction including mortgage, title and insurance, but also moving, home renovations and more.
The funding spree for alternative real estate finance models continues with HomeLight’s $363 million funding round. The funding includes $263 million of debt financing that the company says it will use to fund its cash offer service, in which the company makes cash offers on homebuyers’ behalf, and its home trade-in service, in which it helps finance a homeowner’s purchase of a new home and the sale of their existing home. The funding illustrates the intense attention the alternative financing model is receiving and the promise investors think it has.
Related to the story above, NAR is considering adopting a policy that will require websites that display listings through IDX feeds from Realtor association-run MLSs to display the contact information for listing agents prominently. Realogy has come out to publicly support the policy.
Listing broker and agent attribution has been a conflicting topic for brokerages and agents for many years. Many complained or resented when realtor.com and Zillow.com grew significantly by selling connections to other agents off their listings, but also faced some of the same issues on the listings presented on broker sites throughout their markets. IDX rules have not required prominent listing agent attribution, and this policy looks to change that. With CRMLS’s move, covered above, and large companies such as Realogy supporting the proposed NAR policy, this could be changing now.
IFunder Orchard, which provides brokerage, mortgage and title services to homebuyers and sellers, raised $100 million in a Series D fundraising round. The company provides cash-backed offers on behalf of homeowners buying a new home for a 6 percent fee. The funding indicates the sustained interest and attractiveness of the alternative real estate financing models cropping up, which include iBuyers and a growing number of alternative financing models.
The nation’s largest MLS, CRMLS, which serves over 108,000 subscribers in California, updated its policy in September to require all brokers to prominently display the name and contact info of listing brokers and agents on listings they receive through an IDX feed. Instead of appearing down on listing display pages, brokers must now display that information toward the top.
Now that Zillow Group displays listings on its site as a participating broker through IDX feeds, rules like this carry more weight, especially from the nation’s largest MLS. Many portals, including realtor.com, now prominently display listing broker or agent names and contact info. CoStar Group has said it plans to compete by leaning into the industry’s Fair Display Guidelines, of which prominent listing broker or agent display is key component.
Institutional investors and iBuyers captured a record share of single-family homes in the second quarter of 2021. These firms accounted for 16.1 percent of all single-family purchases across the nation in that period, approximately double the rate (8.4 percent) a decade ago, according to Redfin data. The tally excludes purchases from smaller, individual investors.
This is the highest share for any quarter on record, which goes back to 2000. As iBuyers increase their market share and major private equity-backed companies such as Blackstone Group increase their activity in the single-family space, housing affordability, especially for lower-income buyers, may become a bigger challenge.
Offerpad became the latest residential real estate brokerage company to go public. Launched in 2015, the iBuyer, which also represents buyers and sellers as a brokerage, went public on the New York Stock Exchange via a merger with Spencer Rascoff’s special acquisition company on September 2. The company began trading at a valuation of $2.7 billion.
The company joins its prominent iBuyer competitors – Zillow Offers, Opendoor and RedfinNow – as a public company or a unit under a parent company.
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.
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.
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.
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.
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.
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.
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.
Fannie Mae downgrades housing forecast After a torrid start to the year, the housing market may not see as big a 2021 boom as originally projected by some experts. Citing a continued dearth of inventory, constrained by homebuilding challenges, Fannie Mae has downgraded its 2021 home sales forecast from a 6.3 percent increase over 2020 to a 4.2 percent increase to 5.49 million single-family home sales. The economy, and real estate, continues to fly high, but inflation, higher prices, and homebuilding challenges, are beginning to emerge as the limiting reagents of the housing market. As these factors evolve, the outlook will undoubtedly shift further as the year progresses.
This month, Oregon passed a new law, which goes into effect throughout the state in January 2022, that requires real estate agents to reject the personal letters and sometimes photos that buyers, via their agent, submit along with their offers. This practice is fairly widespread in the industry and has become increasingly controversial in recent years as recognition grows that the act could contribute to discrimination based on race, family status or other details that comes through in these “love letters.” Oregon is the first state to pass the law, and others are expected to follow suit.