REAL Trending Episode 33
Steve Murray talks about fundraising from Wall Street for real estate tech startups, and how the top agent in the world got where he is today.
REAL Trending Episode 33
From REAL Trends, the trusted source for real estate industry news, this is REAL Trending, episode 33. We’re breaking down the trends of the week and showing how they impact brokers and agents. I’m Steve Murray, president of REAL Trends. Today we’re going to discuss fundraising from Wall Street for real estate tech startups, and how did the top agent in the world get where he got?
Fundraising From Wall Street
So, let’s tackle the first one, a report came out talking about another fundraising round, this time by real estate tech startup REX. We’ve seen them here in Denver, and they’re in other markets as well. And basically they say they’re going to use algorithms and artificial intelligence and big data, and they’re going to wreck the MLS monopoly and the high fees that are charged to the consumers for the agents who are gouging them. And so on and so on and so forth.
Gee, this is a story we’ve only been hearing for … well, most of the 40 years that I’ve personally been in the industry. We’ve been hearing this same story. Recently of course, last five, eight years, we hear it more and more as Wall Street keeps funneling 10, 20, 40, 50, 100, 200 million, 500 million, a billion, or more dollars into real estate-based tech startups. Or is it their tech startups that are in the real estate industry? We’re not really sure. But they all have a common theme, which is we will use artificial intelligence, big data, high technology, targeted marketing to buyers and sellers. And we’ll reduce commissions, and we’ll deliver a better result.
You even have in this recent press release about REX from former Sun Microsystems CEO Scott McNealy that we’re going to be delivering what consumers want, how they want it, when they want it. I paraphrase. And you sit and you wonder if anybody who went out and invested in these companies, or who backed these companies, or who founded these companies, first of all God bless them for having the innovative mindset to tackle this industry, for the initiative to try to do it, and the success at raising money to do it. And we’ve seen dozens of these in the last 20 years. Twenty years ago it was transaction management and CRM that was going to change the world and improve agent productivity.
Well, that actually didn’t work very well, except for a small number of highly productive agents. Now we have tech firms going directly to the consumer saying we can do it better. Now, we’re on record as saying we think a firm like Redfin has a very, very good chance of creating a very successful business, because we understand their fundamentals, which is they’re basically playing within the industry, and within the MLSs, which have proven to be one of the most effective marketing tools ever designed for any housing market in the entire world.
We have others now who say well, we’re going to wreck that, because it’s not efficient, it doesn’t work. Then explain the Harris Insights Consumer Study that we and the California Association of Realtors and the CE Shop published last summer, that showed customer usage of agents at a 17-year high?
There doesn’t seem to be a lot of dissatisfaction with people using agents. Now, we will comment that nobody’s happy with the process of buying homes, or selling homes. We all wish it were more efficient, that you could do it like buying a car. But people don’t buy houses like they buy cars. It’s a very infrequent, it’s a very complicated process. It’s made so by the federal regulatory agencies that keep title, and mortgage, and brokerage apart. And the state agencies that do the same thing. It is lobbyists within each of those organizations that try to keep the other guys out of their business.
So, you can’t really integrate the three of them very effectively yet. No, most people are actually very satisfied with the use of agents, even though they don’t like the process. So, you then on the other hand have to give credit to people who raised money, like Opendoor, Offerpad, knock.com, and Zillow, who are saying we can make the process easier, we’ll just buy your home from you. And we’ll give you a check. How fast do you need it? Is five days soon enough? Or three days?
And do you pay a little discount for their cost of fixing and holding and reselling? Yes. But in many cases, not more than you would pay yourself, if you had to do it yourself. There may be kinds of questions about the prices, but I digress. We look forward to seeing REX and others like them compete for the business. Chances are, they may get a good piece of the business. But I kind of chuckle when I say they’ve been after it for a few years, and they announce in their own release that cumulatively they’ve taken listings on $1 billion in property. Ladies and gentlemen, $1 billion out of $1.6 trillion is almost not measurable. And particularly when it’s cumulative since they started. That’s not in a given year.
One wonders when Wall Street and Silicon Valley will wake up to the fact there is great use of technology in the industry, and there are a lot of top teams and agents and brokers putting it to use, and are doing even more so now, and will do more in the future to try to make the process work easier to find, to buy, and/or to sell homes.
But I always really appreciate newcomers to the industry, technology-based, big data-based, talking about how the existing system is essentially corrupt and overpriced and inefficient, when in fact consumers are voting with their own decisions to use agents and use the process that’s been designed, more so now than they did when we first did the study 17 years ago.
The Story of Ben Caballero
Moving on to our second story, for those who know the story of Ben Caballero, you know this is, even by Guinness Book of World Records anointed him the most productive agent in the world. We rank top agents and teams at REAL Trends, and we’ve had lots of phone calls about Ben and how he runs his business. And to put it simply, Ben developed a process, and a service offering that’s very focused, very limited in scope, in helping large production builders effectively market their properties through MLS and other online resources. He gets paid a fee at closing, he’s very effective at it. Has been doing it well for a number of years.
One can’t say that he is not an effective agent, even though he doesn’t do a lot of accepting of offers. As one discussion we had with a top agent years ago, said, well, you should rank only those agents who are full service. And I said well, if we’re talking about us having to now grade real estate agents and teams by whether they provided full service to clients, we’re all in a heap of trouble.
There’s simply no easy way to quite do that. He provides a niche service to a certain kind of client, and he sticks to his knitting. And isn’t there something to be learned from that example, that he’s created a business that so far is endurable, sustainable, profitable, and growing for Ben Caballero?
We think all agents and all teams and all brokers actually can learn something from his focus, and what he does well for the clients he serves.
Learn more about industry trends, marketing, and technology strategies, as well as listen to past REAL Trending episodes on our website, www.realtrends.com/blog/. And, here’s a special, the next time, we’ll get into a little details of what navigating the brokers world of the future is going to look at. This has been Steve Murray for REAL Trends.
The Conference for Residential Real Estate Leaders