Issue 23 - March 12th, 2021
Welcome to all of my new readers, and thank you to all of my OG readers who continue to spread the word. This newsletter keeps growing in popularity, and I really appreciate everyone reading and sharing with people. I love writing this each week, and I look forward to continuing to bring interesting content your way!
Today’s post is something I originally posted on Medium towards the end of 2020. This memo really outlines the way I think about the future of the residential real estate industry, and more specifically what I am working on with our incredible team at Archetape.
Archetape is a full-service, cloud brokerage for real estate agents. In this short post, we outline the current landscape at brokerage firms today and our vision for the future of this industry.
At their core, residential real estate brokerage firms have remained relatively unchanged for the last few decades. Generally speaking, firms that let agents keep the bulk of their earned commissions provide very little service, while brokerages who tout high levels of service take a large chunk of their agents’ earned commissions.
All large, well-known, brokerage companies today are competing in this same “Split and Service Sandbox.” Their primary revenue generator is the split they take from their agents on each property sold. They have to find creative ways to achieve a “good enough” level of service and support to seemingly justify their value to the agent, while at the same time making enough money to keep their business moving forward.
We think this is a very outdated way to run a real estate brokerage business today. This structure stifles any sort of real innovation for agents because this model hardly makes any money in today’s world, since brokerage firms are constantly in a commission split arms race to recruit agents to their firms. It is a race to the bottom for traditional brokerage business models, and as a result, the quality of service they’re able to provide their agents continues to decline. Commission split firms cannot invest in the future for their agents as most are just trying to find ways to survive as the industry becomes more competitive.
The brokerage business models of today bring to mind thoughts of Blockbuster Video before Netflix completely made their business model obsolete, or dinosaur-like software product companies before Marc Benioff and Salesforce completely changed the industry forever with his innovative SaaS product architecture.
At Archetape, our vision of the future for the residential real estate brokerage industry is vastly different than it looks today. We believe our job as the real estate brokerage is to treat our agents like they are truly our customers. We strive to exceed their expectations with high-quality service at the lowest possible cost. We are building this company from the ground up to thrive in today’s fast-paced world. We believe that our cloud structure and fixed transaction fee business model architecture will fuel a tectonic shift in the way this industry operates in the future.
Our model allows us to smartly grow as a business as we are able to forecast key metrics and intelligently plan for the future. This fixed fee model also benefits our agents as our pricing model is one of the lowest in the industry and not calculated as a percentage of commissions.
Our cloud-based structure allows us to focus on prioritizing our dollars into tools and human support systems for our agents. We are also able to keep our costs to agents (our customers) extremely low because we are not spending money on costly overhead, freeing us up to focus on investments into tools and resources for our agents.
Our service offering to our agents is also clearly defined as we provide very specific tools and agent support resources, and we will continue to innovate and expand our menu of agent services in the future. We do everything with the best interest of our agents at the core of everything we do at our firm.
At Archetape, we believe agents deserve a better brokerage option than what is available today. When incentives are aligned between a brokerage firm and its agents, the consumers benefit too. All companies must adopt a consumer-first mindset, or they will eventually go out of business. Our agents receive consistent, high-quality service; can make more money with lower fees, and serve their clients better for a lower cost — this is the future of the residential real estate brokerage industry, and we are excited to embark on this journey to build an industry-transforming company at Archetape.
Newsworthy Links To Share
Farmland investing platform AcreTrader cultivated a $12 million Series A round to continue modernizing farmland transactions and removing barriers to investing and ownership. AcreTrader enables individuals to purchase shares of farmland online in minutes and manages all aspects of farm management, reporting and administration. The investors are able to receive annual distributions from farmers renting the land and also can capture land value appreciation when the land is sold. (CrunchBase News)
Rent Ready, a Charlotte, N.C.-based platform for making apartments rent ready, raised $10 million in Series A funding. Grotech Ventures led the round and was joined by investors including CreativeCo Capital. Rent Ready utilizes a proprietary technology platform to make scheduling and completing a turn – from painting through cleaning – pain-free for apartment staff. As a true end-to-end solution, they also source and vet the pros and ensure they complete high-quality work on time. (PR Newswire)
St. Louis-based Transactly, a real estate technology startup raised almost $3 million in a bridge funding round. Transactly develops technology to coordinate real estate transactions for agents and brokerages and launched its platform in 2018. The company grew 700% from 2019 to 2020 and expects to have the same amount of growth in 2021. (St. Louis Business Journal)
Real estate broker, REX, sues Zillow and National Association of Realtors over anti-trust concerns. In the suit filed in U.S. federal court in Seattle, Rex alleges that Zillow and its affiliate Trulia are illegally favoring listings by brokers who belong to the National Association of Realtors, the most prominent U.S. real estate trade association. Home listings by non-NAR agents are now relegated to a “hidden tab” on the websites, the startup says. (Politico)
EXP Realty, a cloud based real estate brokerage, posted their most profitable year in company history in 2020. The company saw year-end agent count increase 63 percent year over year to 41,313. As of March 11, that agent count has continued to balloon to more than 48,000. Those agents rode the hot housing market to record performances for the company. Agents with eXp Realty closed 239,981 transactions in 2020, a year-over-year increase of 77 percent. In the fourth quarter alone, transaction sides were up 113 percent to 82,055. (Inman)