cloud brokerages to the moon
Issue 58 - November 12th, 2021
BRRRRRR: cloud-based real estate brokerages are GOING TO THE MOON!
We are in a golden age of transformation in the residential real estate brokerage world. Publicly traded companies like eXp and Fathom Realty with cloud-based brokerage business models absolutely smashed earnings in Q3 and are seeing record numbers on agent count growth, revenue growth, and listing growth. Join Real, another cloud-based brokerage who recently went public, reports earnings next week, but I am expecting a similar showing from them as they have launched many new markets in the last few months and agent counts have climbed in all previous quarters.
Newly public company, Compass, which has positioned itself as a “tech brokerage” lost $100 million just this last quarter but promises to be profitable in 2022. Their business model is still an outdated “office-heavy” and commission split model which I don’t personally think will last into the future. Others who follow this same path are becoming the legacy “old-school” firms in the industry like Realogy, Berkshire Hathaway Home Services, and ReMax. People don’t care about the fancy amenities of an office they did 5 years ago and agents just want to be at brokerages where fees are low and they still receive incredible tech, support, and service. A shift is happening big time in the industry as we speak.
This shift in the industry was already in motion pre-pandemic with agents spending most of their time meeting clients at properties, working from coffee shops, or just working out of a home office. Technology has enabled agents to keep up with everything they need from their laptop and smartphone, and the need to connect in person with other agents in an office environment has diminished over the last decade.
In my view, if you are a real estate agent who is wanting to spend a lot of time in a fancy office then you will probably never make much money. The money is made in the streets hustling deals and networking, and the plush office environment is not a place to be for the successful agents.
Cloud-based firms can invest heavily back into agent services, support, and tech without being burdened with the overhead of huge staff payrolls and office leases. Agents continue to demand more and more from their brokerages and as we push forward into the future, the firms who can offer the best service at the lowest possible costs will take over as leaders in this industry.
Newsworthy Links To Share
Cloud-based brokerage Fathom Holdings Inc. reported double-digit growth in revenue, real estate transactions, and agent count in the third quarter, with quarterly revenue at the company swelling to $100.9 million. For the three months ending Sept. 30, revenue was up 81 percent from a year ago. With agent count at Fathom Realty up 50 percent from a year ago, the company’s brokerage arm completed 11,498 real estate transactions, up 42 percent from a year ago. The company said ongoing investments in future growth drove a $3.4 million net loss during the quarter. (Inman)
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The typical home value of homes in the United States is $308,220. This value is seasonally adjusted and only includes the middle price tier of homes. United States home values have gone up 18.4% over the past year and Zillow predicts they will rise 13.6% in the next year. (Zillow)
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Opendoor thrives in home-flipping market Zillow just exited as earnings beat estimates. (CNBC)
Zillow offloads 2,000 homes to New York City investment firm: The Seattle-based listing giant struck an agreement to sell 2,000 of the homes from its failed iBuyer business to New York City investment firm Pretium Partners, according to a report Wednesday in The Wall Street Journal. Pretium Partners intends to rent these homes out as part of its portfolio of 70,000 single-family properties, the newspaper reports, citing “people familiar with the matter.” (Inman)