Long regarded as one of the best prognosticators in the real estate industry, Rob Hahn, also know as the Notorious ROB, joins TRIBUS CEO Eric Stegemann to discuss the business of brokerage.
Rob goes into detail as to why teams are the biggest threat to the real estate brokerage business.
Hi everybody. And welcome to brokerage insider the podcast where we interview the leaders in real estate and technology. I’m your host, Eric Stegemann. And I’m the CEO of TRIBUS, a brokerage platform vendor. And today I am honored to be joined by a good friend of mine. Mr. Rob Hahn. Rob, welcome.
Thanks for having me. I don’t know about honored. I mean, you know, like we’ve, we’ve gotten drunk together, man. It shouldn’t be
Well, you’re a very busy human and have lots of stuff going on. So I thank you for taking some time out of your day on here, especially a new podcast, you’re always kind of a, does anybody actually listened to this thing or not?
It’s just an excuse for me to talk to you, you know, and then we’ll get to have an interesting conversation, maybe debate, maybe, you know, whatever
You, you, you have this and Rob has this great podcast that he does with Greg Robertson. Who’s also a friend at Coliseum and they call it Industry Relations. Right?
Sorry about that. Yeah.
Ah, so that podcast is called industry relations, right?
Say again, I’m sorry.
Podcasts that you do with Greg Robertson is called industry relations, right?
That’s right. Yup. Yup. So I try to block everything off, but phone calls keep coming in.
That’s okay. I get it. I get it. No problem. We just recorded another podcast, not long ago with an agent who’s a high power team leader and the entire time his phone was buzzing in the background to say, Nope, no problem. No problem. Now Rob is the managing partner of a consulting firm called 7DS and associates. He’s also the purveyor of notorious, Rob that’s notorious-rob.com where he writes probably the most insightful commentary and news updates about the real estate industry. And so Rob, as you know, this, this podcast is really directed towards brokerage staff and leadership inside of brokerages and franchises. That main listener base. What I will tell everybody listening is if you don’t regularly read a notorious, Rob, you probably should sign up for the email alerts so that they’re in your inbox. Cometary is, is oftentimes years ahead of time as to what actually happens. So, you know, Rob, what I wanted to start with, because I don’t hear, you know, I know this story cause I’ve known you now for 11 or 12 years.
It’s been a long time, man. We met, I think before you started TRIBUS, we were talking about the name, you know? Yeah. I remember
I was probably the first person outside of my little team in st. Louis that I told about the idea for TRIBUS and Rob wrote a post about our company very early on. In fact, I think the next day or the day after I went back and wrote 2000 words about drivers and it, it helped us get launched. So for that, I am eternally thankful and getting the word out.
No man, you’ve, you’ve grown the company. So, you know,
Thank you. But you know, the thing that I don’t hear you tell the story enough and I think is so interesting and worth mentioning is how you got to where you’re at right now. Because I don’t think people know all the nuance of, of how September 11th weaves itself into your story and what you did before seven DS. So why don’t you give us at least the highlights of how Rob got to be in the story?
I don’t know if that’s like that interesting, but I’ll give you the reader’s digest version. So I I’m lawyer larvae, right? So I went to law school. But instead of studying law, I did, I played magic, the gathering a whole lot, you know, I was on the pro tour. It started writing a bunch of stuff for it online. You know, this is before, you know, before online was a thing. Right. and long story short, I ended up going to work for the magazine called the dual list. That was being published by, was the coast. I moved out to Seattle while I was there. They’re like, let’s, you know, we want to do this, something with a new, this thing called a website at the time, I was one of the key people behind the number one magic website I figured, Oh, let’s start a company.
So quit that, you know, started that, did that for through the first.com bubble. We saw the bubble coming. So we sold out to USA networks. So I went there and worked there for a while, which was really fun times left and started another startup, you know and we were doing great. It was a cruel concept around micropayments, which wasn’t figured out in 2000. Well, the unfortunate thing for us was we were located at world trade seven and our second round of funding was scheduled to close to September 15, 2001. So you can imagine what happened right when nine 11 happened that I wrote, I’ve written about that, you know, on the blog people can find it. So after that, you know, it was just a terrible time. You know, for two, three years during which time I ended up kind of, I was doing some consulting work and it’s just trying to, trying to survive.
And I ended up hooking up with a online agency that was, that had religion as its main client. So that’s sort of how I got into real estate, but I started off in the commercial side, which I think gives me a sort of a different perspective or at least gave me a hugely different perspective on everything on real estate, on technology, because I was coming at it from the commercial side of things. I worked at callback commercial, you know, for, I wanna say like four years after which I left and, you know, started doing my own thing. And I’ve been doing that since 2009.
And so here he is with that ex from you know, working from the franchise perspective or the corporate perspective, at least at Coldwell banker commercial, but Rob’s were with some of the most well known companies that the leaders in our industry, he’s also been a major advisor to the largest MLSs in the country. I know you did work with what’s now bright or what was a MRAs before that, as well as the number of other MLS is talking about all sorts of things, which he probably can’t share with us what he told them about. But,
And in fact, most people don’t know what I do for living. Cause I feel like, you know, even the fact that I’m working with somebody is nobody’s business. Right. But my client, unless I have to do disclose it, I don’t. So people are like, how the hell do you make a living? I’m like, well, you know, I just don’t talk about my clients. Yeah. That’s all.
Would you say specifically, like, who is your, at your average customer? What, what kind of work do you do for them, et cetera. From a high level?
Yeah. I mean, from a high level, I basically ended up tending to work with some of the larger and larger companies because they’re the only ones who actually have the money. Right. Cause I’m, I’m far from the cheapest guy out there. And the other thing that’s sort of unique I suppose, is I, you know, I usually tell people, like call me when, you know, when it’s sort of a bet your company type situation, right. When you really don’t know kind of what to do, like I’m not the guy to call. If you wanna increase your, your agent retention by 5%. Like I’m just not that guy. Right. You know, if you’re, if your thought is like, we just want to increase our website traffic by 5%, you know, there are plenty of other guys including Eric and who could probably help you out better than I can.
I think you call me when you have, you’re facing a strategic crossroad and you really just trying to figure out what’s the best way of handling that. So, you know, whether it’s MLS is or brokerages or franchises or tech companies, I find that, you know, the best relationships are those where, you know, either the leadership has some truly like out of box thinking like we want to really pivot and do something else, then, then yeah. Then I’m your guy or you’re confronting a real problem. And you know, and you want to try and figure out like, what’s the way out, right. Then, then I’m your guy, you know? So that, those are I, those are the types of clients. I tend to have those types of engagements I tend to have. And it’s, it’s a lot of fun, you know, the downside of it is that maybe I, you know, I could potentially have grown much faster and become much larger if I’d done more of the traditional stuff, but I don’t know. I just don’t find that stuff, all that. Interesting. You know,
I was just going to say, if you, if you didn’t say that line, I was going to say, I think that would be boring to you.
I could do it. But you know, I mean, there are people who are, I think probably better at that sort of thing. And certainly a lot cheaper. So, you know, I just typically steer those people to other companies, other people that I know would do a really great job.
And so you think about some of the biggest ideas or the biggest questions in our space. So I definitely want to chat with you about a few of those, you know, one big one that’s certainly at the top of my brain right now and has been for six plus months is the concept of I buyers, right? And, and obviously things have changed and they’re buying according to the, the leading person that tracks these things says that their buying was down 90% during the virus, but, and some of them have pivoted, but w you know, if you’re a broker out there, you’re the largest, you know, we have a client of ours is the largest Remax in the world. And they do 35,000 transactions a year and dominate the market that they’re in. Should they be worried about an ibuyer stepping into their market and eating up their listing volume?
Yes and no. I know that’s like a cop out answer, but let me try and explain it. Yes, they should be worried, but no, they shouldn’t be worried about their listing volume because brokers just don’t have any listing volume, their agents have the listing volume. Does that make sense?
Well, there’s an interesting statement that we should,
Right. So the thing, I think I’m probably the most controversial about the thing that gets me a lot of hate, and I don’t really understand the hate is because ultimately I’m trying to help out brokerages. Like I like brokerages, you know you know, as I got my start in real estate was working with commercial brokers at the Coleman commercial, and I’ve always felt like the brokerages are brokers and the brokerage owners are the ones who are really, you know, they’re, they’re the driving force behind the industry. There’s some of the best people in the world, you know, like actual men and women, like just wonderful human beings and they’re caught in a real bind. So when I look at it is I’ve, I’ve long said the traditional brokerage is dying and it’s primarily because they don’t, you know, they don’t control the inventory, they don’t control the agents like their margins suck.
It’s getting blown out. And I’ve, you know, really for the past, I don’t know, four or five years. So that’s been one of my real focus is how do you turn this picture around? And I feel like some of the broker owners are just getting offended and I, and I, I, I feel badly about it. Like, I’m not trying to offend people. It’s just, the numbers are what they are. Right. So, yeah, from that standpoint, they don’t have any listings, their agents have the listings. And I think the wheezy way I think about that is imagine taking a listing from your, from the agent who acquired it and giving it to somebody else in your office, you would lose all of your agents the next day. I don’t think that’s, I don’t think that’s debatable, right? Yeah, for sure. I don’t know, to what extent then we can say that the brokerage has any listings. The brokerage has agents, the agents have listings. So those agents probably need to worry, but not really, right. At least not for a while because you know, the classic I buyer, and this is one of the issues that we have to talk about is people when people think I buyer, they’re thinking open doors, Zillow offer Pat, and two of the three have now left that business and are now traditional brokerages.
That’s only one model I think of, I buy, I define I buy are very differently, but from that standpoint, like there’s not enough money. There’s not enough capital out there where every agent has to worry, you know, their buy boxes are small. They’re only active in certain markets. You know, I figure the traditional sort of the real estate agent doing the classic traditional thing. You know, you probably have 10 year runway right before really starts to get disruptive. But what I would say to that is the market maker model. It makes so much sense for the consumer, right. And if that doesn’t make sense, what a market maker model is for those that don’t know sure. Market maker models, what Zillow offers is right. Where they go in and say, we will buy your house. Okay. And they give you a price and you either decide to take it or not.
Right. And I know the the industry’s like push back against it as to say, you’re leaving all this money on the table. And all I’m saying is, I just don’t see it in the numbers. Right. Zillow’s margin, if you will, you know, the difference between what they offer the seller and what the seller ultimately can, you know, if the seller says no, and they go put it on the open market, Zillow’s release research about this, the difference, like 0.2%, right? So I’m like, okay, 0.2% or $300,000 house is six grand. Right now it’s less than, it’s like $600 and who wouldn’t pay $600 not to have to stage at our house, not to have to put the kids in the minivan and drive around whenever a buyer wants to come visit. I mean, the convenience, the speed, the certainty, all of those things are just the real, right.
So I think what the industry has chosen to do is to talk about the investors and the flippers who come in, you know, the, we buy ugly houses, guys who come in and say, we need a 20% discount to market price and just lump them under I buyer. I’m like, that’s fine. I mean, do whatever you need to do, but at least understand that that’s not how market makers work. At least not on the numbers. I’ve seen, you know, if I’m showing different numbers, I’ll change my mind. Right. but I’ve been tracking that for quite some time. And I’m pretty confident that at least Zillow, which is the sole remaining market maker, doesn’t play, they don’t, they don’t play those games. I know they offer market value for the home and then they sell it for a very, very small premium. And I think what their hope is, they’re hoping to make all their money on services, like title and mortgage, right. So, you know, that’s the market maker model, but the one that I think brokers have to really pay attention to, or the knock FlyHomes model, I can’t even say knock anymore because they’ve abandoned that model, but it’s the buy first sell later model. And that’s becoming really popular. And in a certain way, I think I would say this, and I’ve said it before, if you’re a big brokerage and you’re not offering that to your agents, then I really question what your value is.
The, the let’s so the concept here of course, is that they will more or less float you the money to buy the house that you want to buy. It goes back to like a bridge loan. You know, it might’ve been referred to back 20 years ago when I first got into the business. Exactly. and that concept is, is that your offer is stronger because you don’t have to sell another house. That’s right.
So, yeah, I’ve been calling those, the bridge loan model. Right. And that’s exactly what it is. It’s I list my house with you. Right. But instead of waiting for my house to sell, you’re going to give me the cash where I go and buy my next house. Right. And then, and then now, and then I move out of my house. Now I have no emotional attachment to it. I’m not living there. I’m not putting my kids in a minivan. Now you can stage it, whatever listed, you know, sell it vacant. And the once that closes, then we settle up. Right. It’s a brilliant model. And a lot of brokers, a lot of agent teams are really starting to take advantage of that. And there are companies that are not popping up that are essentially trying to be platforms to allow brokers and agents do. That is only knock is not one of them because they pivoted, they switched their model.
I think that model, and I’ve said from, I don’t know, three years ago when I first started really thinking about, I buyers, I’ve always thought the brokerages should go down that path because the capital requirements are way lower than trying to be a market maker. Right. And the, the, the capital turn is much faster, right. You’re not waiting three months or maybe more like four weeks. So it just makes a lot of sense, but, you know, as yet I haven’t seen, you know, the real big guys embrace that. And I, and I don’t know why
Let’s I want to chat for just a second go back to the market maker model. And that concept, because to me that is you know, we almost had what I’m, what I’m referring to with the virus time is like a false start of the market maker model. And I totally get where you’re saying like that on the NOC, et cetera of the world the original and models that it’s almost like another service that the broker provides and just has in their stable of tools right. In the, in the listing packet. But that doesn’t change the model that doesn’t change how a broker operates. Right. I mean, for, for, for the, from the high level perspective, there’s still that the entire process that goes on, there’s still, you know, a home that gets sold. So home that gets bought. But to me, the part for the the companies that are out there, like open door, which yes, has a brokerage model to it.
But to me, I think that that’s just a, a short term, a way of having another option in a time where they didn’t feel comfortable making purchases to me, I still think Opendoor goes back and starts buying homes in mass again. And as you noted th the spread, it, it not very high, but it can be profitable. And going back to, again, what you said in markets like Arizona, where they’re only offering 1% more or so than what a traditional commission would be. It’s like, why wouldn’t you do that? Now, the second piece that I was thinking about is using the same terminology you just did, but I’m more using it in the financial services mix of market makers. So a market maker essentially has control over the inventory and the distribution of how a stock gets sold, because they control that much of the volume of what happens on a daily basis and their people own, you know, their clients per se or their internal trading desks own that much of the stock that they somewhat have control over the price on what happens to a stock on a daily basis.
So what prevents open door or any Zillow offers or whatever from going and owning so much of the three bedroom, two bath inventory in a market and delaying the distribution of that, that it rises prices. And instead of making it on the spread of, Hey, I paid you 8% less than what it’s worth. And I resold it at 6% less than what, you know, what it’s worth. And so I’m making that 2% spread. What’s preventing them from just going and holding off inventory, which essentially artificially rises prices.
I think there’s a couple ways to think about that. Number one is I never thought that the market maker owns and controls inventory, like even in financial stocks and bonds and whatnot, right. Because what the market maker is really doing is just creating liquidity. Like if they, if they ended up having to buy 10,000 units of pork bellies, it’s not like they just won’t own the 10,000 units of pork bellies. Right. Like that’s not their business, their businesses to buy it, like at 8:00 AM and then sell it by eight, 15. Right. Right. So all they’re doing is serving as intermediary to create liquidity. And I think for me, anyway, I think of market makers, like Zillow offers in exactly the same way. I honestly believe that Zillow, if they could buy a house for two 99 and then without staging it without renovating, without doing anything to it, sell it to another buyer, five minutes later for two 99, 200, I think they would do it. Do you see what I’m saying?
I mean, it’s the old 1% a statement, which I always talk about, which is, if you can make a 1% return on your money, you’re still positive. Why not do it? Right.
Right. And so it’s just right now, because of houses, the way, way that we buy and sell houses because of the transaction time. Right now, I feel like the market makers do have to buy a house. Then they have to renovate a clean it, you know, repair it to all of that stuff before they can sell it. Right. But I could easily envision a scenario where, you know, 10 years out the normal way, we just go about things. There’s okay. I want to buy a house. You know, as you place an order with a market maker, they go find the house and say, okay, how much do you want to sell your house for two 99? Great. We’ll buy it for two 99. How much you want to buy a house for two 99, 500. Great. Here’s a house two 99, 500 unrepaired in current. You know what I mean? Like I could see that happening. Right. And I think that’s the true vision, you know? But you don’t,
So you don’t see any, any of the, what’s it, what is that? A big company that everyone owner of homes it’s BlackRock.
Yeah. Black rock invitation homes. Those guys. Yeah.
You don’t see a model being created where you start controlling enough inventory and you start controlling the prices.
I mean, I could, but I, to me, that’s not a market maker. That’s a different, that’s a different beast. Right. That to me is more like a, the clients of market makers, like hedge funds. Right, right. You know and incidentally, cornering, the market is illegal, but I suppose those laws don’t apply to to housing. Right. Right. If somebody could corner the American housing market, the problem with that is the amount of money that’s involved in that is, it’s just, it’s, it’s ginormous, right? Like us residential housing is the single largest asset category in the world. Like, you know, you think about it, us mortgage, bonds, power, like the global financial system. Right. The aggregated value of like residential housing in the U S is something like, I can’t remember off the top of my head, but I want to say it was like North of $35 trillion. Right. So there’s no one like who has that kind of capital to corner the market.
I’m not saying that you have to buy every single home, but think about it from an inventory perspective, particularly right now to control the market. So two is, if you’re a market maker and then you start holding inventory, then you now control it and you don’t need a large percentage of the market to control it. You need probably a single digit percentage of the market to control it because that’s how many homes are for sale at any given point.
I suppose. I mean, I think at that point you’ve got to start getting into really sophisticated game theory stuff, because the idea is, okay, we control 10% of them. So not even five, 10%, that’s a huge chunk. Right, right. We control 10% of the inventory. So we can set the price on three bed, two bath houses. The problem is that somebody else controls the 90%. So if they break with you, that’s going to sell first. You know, it just gets, it gets weird, right? I mean, you have to, I think you have to do some real, real sophisticated analysis. And I think the issue is you’re taking a big risk because while you’re doing that, you know, you got, you’ve got it. You’ve got maintenance, you have cost of ownership of real estate, right. That has nothing to do with financial costs. Like you have to maintain it. You have to keep the grass mowed. I mean, that, that those are real costs. And I’m not sure that, you know, Zillow offers as the only market maker out there. I’m not sure that those guys are interested in that BlackRock might be invitation homes might be because they have a totally different business model. Right.
Blackrock funding at one point the refugee buyer model and one day an investor in open door. Or am I wrong?
I don’t know. I mean, Opendoor being private, I don’t know BlackRock was, I know, I mean, open doors, main investor has always been soft bank. Right. Which is part of the explanation why open doors is so much trouble, but I know like Len our homes was a big investor in open door. Right. Because they see the value in that trade up. Right. you know, it’s, it’s, it’s, we’ll see what happens, but all I’m saying is like, you know, you think about mortgage market, you think about the housing market and quite frankly, like a hundred billion dollars is really not that much money when we’re talking about American housing market. Right. Like that’s how big this is. So, you know, we’re, we’re used to thinking about, Oh, it’s the billion dollar company, or, you know, Zillow’s market cap as well, like 16 billion now. I mean, we’re like, Oh, they’re a huge company. Yeah. They are. But relative to housing, it’s still not a lot of money. So I just don’t see the market makers ever quote to your point, controlling inventory, to a point where they can start to set prices and dictate how things, I just don’t see it. So let’s just because the amount of money involved that’s all right.
I totally get where you’re coming from a hundred percent. So let’s say there, they just go back and open door et cetera. They go back to the just traditional market maker and providing liquidity into the market model or into the end of that process. Right. and they really dial in their numbers. Like I said, in Arizona, I think the last numbers I saw is they were only a percent more than what a traditional real estate commission might have been. So in that area, you even said it yourself, the same thing I’ve said for a long time, why would I ever sell my home and have people trips in through the house that who knows if they have the virus right now, I’m walking through my house. If I could sell it to open door and let them deal with it for only, you know, maybe a thousand dollars more or something. Right. So if they if they have that, you just lost out. If I’m the bigger, biggest broker in Phoenix, right. Then I lost listing. And I know you said that that it’s the agents. Okay. So it’s the, it’s the agents that are agents. They still, they still lost the listing inventory. And that means 50% of every transaction, the United States, two and a half plus million transactions every single year are up for grabs, right? Yeah,
Yeah. Yeah. Like, look, I buy her market-making this is going to fundamentally transform the industry and society. I’m just saying it’s going to take a lot longer than people think. And to me, the greater short term threat is more the the buy now sell later the bridge loan model. Why is that? That’s the bigger threat,
Right? Why is that a threat to a broker?
Because if you don’t offer it, you’re screwed. So it’s a threat and an opportunity, right? If you do offer it to your point, it’s one of the arrows in your, in your toolbox, then you’ve got a competitive advantage over other brokers, right. Or rather let’s put it differently. Your agents have a competitive advantage over agents have belonged to other brokers, which then helps as a brokerage. It will help my recruiting. It’ll help my retention. It potentially helped my margins. Although there’s some real question marks around that. But if you don’t have it, then you’re screwed. Right?
I think overall, I mean, I think anytime you can offer a less friction model for it. And one of the things that I’ve said about open door that’s a benefit for brokers is if you can figure out where Opendoor will pay you for sending them business, do it because what, what I think will happen going back to market makers is it is providing more liquidity. One of the things that I’ve hypothesized is, and as you know, cause I think I got the number from you is every single year, good year, bad year. There’s somewhere between five and five and a half million transactions, a residential transaction in the United States per year. Right. So what I was suggesting is if you could make the home selling process and the moving process easier, I think that the number of transactions will increase dramatically. I think if you’re a millennial your much, and particularly now where a lot of companies are starting to consider long term, not just through the end of 2020, but, but maybe forever allowing their, their folks to work remote. I think there’s going to be lots more moving if you can make that process easier for everybody. Right.
Agreed. Yeah. And that’s the huge change. Yeah.
The difference is, think about the biggest brokers in each market, where does their business come from? That they’re selling, there was signs in yards have lots of value, right. And if now all open door signs and there’s no more, you know, Remax sign or there’s no more Berkshire Hathaway sign that’s in that yard. Does the value of that brand start to diminish?
You’re assuming that the brand has value today.
Well, let’s talk about that. I don’t think it does.
Right. I really don’t think there are that many real estate brands that, that can say we have real brand value. And I know that’s going to drive the brand marketers and the CMOs crazy. And they’re all going to hate me, but I’m just, you know, I’m just going, based on what I’m hearing from actual agents. Right. And what I’m seeing in the numbers. Right. I just don’t see it. So if someone wants to show me data, otherwise I’m more than happy to change my mind. Right. Because you know, and we’ve talked about this a lot. Like I have strongly held opinions, but my opinion is subject to change based on the actual evidence of the data. Right. So when I see agents and one of the things that I do I do a lot of primary research now. Cause my practice changed a little bit.
So recently I went out and spoke to 18 different top producing agents, team owners and brokerages, right. And the top producing agents, they all uniformly say like, I don’t really get anything from my brokerage. Right? And this, this explains one of the reasons why traditional split based brokers zone so much trouble is because those agents, you know, they know they’ve got options. They don’t really need you. Right. Except for legal reasons, they might stick around because they like you. And they don’t mind that you’re making 10%, you know, 10 cents on every dollar. There does come a point where those people look at their numbers and especially with COBIT, everybody’s looking at their numbers and say, why am I paying my broker $30,000 a year? What am I getting from my 30 grand? Right. And right now I got to say a lot of brands, especially don’t have a clear answer to that. Maybe I’m wrong. Maybe, you know, maybe there are a lot of agents out there who are super happy to pay $30,000 because the Remax brand brings me business. I just haven’t heard that right again, that’s just me.
I mean, from an, from, you know, I have done some research on this, but not probably nearly as much as you have, but with the data that we got back, the number one and two reasons why people joined or stayed with a brokerage was number one was support. They felt like their broker was there for them or that a marketing person was there for them and they would have to hire or, or take on legal or something like that. So number one was, was good, good team members at the brokerage around them. Number two was technology, which obviously was a, was a nice thing for us to see it, try this. And then everything else kind of fell off the radar after that. And interestingly enough, commission wasn’t on the top of the list, right? So it wasn’t there thinking, Oh, I want higher splits.
It was really the people and the tech at the brokerage of why that was there from Remax is perspective though. Remax is still driving traffic or still driving leads potentially to agents. And I can tell you that without going into stuff, that’s covered under NDAs of ours with our, our customers. I can tell you that Remax corporate drives lots of leads to their agents through the TRIBUS CRM system. Cause we’re actually one of the only platforms that’s rebuilt where we get the lead push to us from remax.com for agents. And so I can tell you, there is a lot that’s going on there, but a lot of what you’re talking about is an agent as the client, a conversation. So why as an agent am I there? But to me the bigger thing that I’ve heard from you, not particularly so far that we’ve talked about, but in, in your writings for the past 10 years. And one of the reasons why I think you, you have this love affair with Redfin is because it’s the first and really still only brand that is consumer centric from brand down to consumer. Right?
Let me, let me, let’s actually step back a second. And then this actually ends up going into the question you’re asked about Redfin, right? So in the survey that you did and you know, the, the responses and so on, I think there is a case to be made that you have to separate the answers from agents and agent teams. That makes sense.
Yeah, it does because the team is going to be more self sufficient. Right.
And that, and what I’m saying is this, like one of the biggest stories and God I’ve written about this, like for the last five years, at least. And it just doesn’t seem to get enough traction and awareness. So maybe this podcast is the start of something. While we were thinking about all these like disruptions like Zillow and truly a and I buyers and open door while we were completely distracted by these outside disruptors, my thesis is that the biggest disruption in real estate in the last 10 years is the emergence of the agent team. To me, they are the biggest disruptive force in the industry. And that is not, it’s one of these like stealth disruptions. That’s managed to utterly viscerally brokerages and brokerage value and people aren’t really paying attention to it even now, even now. Right. So when I say I have no doubt that your survey, your study is true. I have zero doubt. If I’m an individual agent, the most important thing to me when selecting a brokerage is going to how much support do I get, right? And the number two is going to be, what sort of technology platform do I have access to? If you’re a team owner, both of those are almost nonexistent, right? So the becomes, the next question that I think everyone needs to ask is who is gaining market share? And I got data to prove the agent teams are gaining massive market share at the expense of individual agents.
Well, I, I definitely believe that to be the case because
You believe that to be the case in your, a brokerage owner, you have got to think about what is my value to a team with a hundred team members self-sufficient with its own system, own technology, own staff, own admin. What do I provide that team that they’re going to keep paying me 10% of their commission?
Well, I think if you look at mega teams, right, we’re talking 30 plus people on the team. I think in those cases, they’ve, they’ve gravitated towards a couple of brands calorie AM’s and exp being the, probably the two biggest ones, right.
Max has a number of really great teams. Right?
Yeah. And that’s definitely true because of the model. Right? Yeah. However, there has been migration of some of those teams over to exp and to Kelly over time and how suggest to you, you know, that I don’t, if I’m a broker owner, I don’t, I probably was already losing money on that team being part of my brokerage. Correct. Right. And so from that aspect, it’s kind of like, okay, who cares for the negative? Right.
So let me throw this out at you, you know, who actually is an amazing home for those types of teams. Who’s that HomeSmart
Yeah. They’re kind of the, the the under radar type of a company that’s in that market.
And again, people don’t think about it, but here’s, this is what people don’t think about. Right. Cause I’ve written papers on this is because those brokerages do not care about splits. They don’t care about sales volume. All they care about is transaction count. Right, right. Because of their business model. So look, I mean, you know, this, I know we’ve talked about this a lot at the same time that I’m seeing traditional split based brokerages are dying. I do think that the a hundred percent guys are, are they’re they’re really growing. I think they’re fantastic, you know, for, for the teams. And then the Redfin types, I think are the next wave and the reason why I say the Redfin types. And so this goes to, to answer your question, it’s not because they’re W2, although that’s an important part of the Redfin thing. It’s because reference not a brokerage. Redfin is actually a giant agent team.
Yeah. I mean, that makes sense because everybody works together and you’re not really, if you’re an agent, you, you do get a bonus at Redfin for closing deals, but it’s not the majority of your income. Right? Correct.
It’s not the split. Right. And because eight Redfin controls its employees the same way that an agent team controls their team members. So
I mean, that’s a whole other conversation though, is, I mean, is it legal for 18 leader to control their team members?
Of course not. I mean, every engine violating labor law, you know, this, I know this, we all know this. It’s just that no lawyer has brought a lawsuit yet, but the minute they do, I mean, every agent team is they’re going to lose,
But doesn’t that change the whole model of teams overnight where
Not really. So one of the interesting things is I’ve been in the last couple of years, I’ve been talking more and more to team owners who are voluntarily converting over to W2. Not because they’re afraid of the legal issues, but because they realize they will get much better margins if they convert their team members to them
Well that, you know, if you pay attention to things I’ve worked in the past at all, and you and I have had this conversation, you know, I ran a brokerage. We had traditional splits. We had exactly three, three split options, which was 50 50 for any business we generated and gave to the agent 75, 25 for any business they brought in the door or they could pay a desk fee and get a 95, five split. But on top of that, I had a team of salary based agents because what I found was my agents, weren’t doing a very good job, working the leads. I was giving them, we were generating 3000 leads a month at a hundred percent brokerage. And so I decided to bring some people that I knew were great and put them on salary and then they could feed their families and, and have insurance and everything like that.
And my company dollar went through the roof when that happened, even factoring in their salaries because the, you know, I could tell them what to do. I could say, Hey, look, you know, it’s eight o’clock you got to go show this house and they couldn’t say no. Right. That’s right. So, you know, I’ve been a big believer for a long time in moving to a salary based approach. The problem is going back to what you were talking about with, I buyers, it’s a capital intensive process. If you want to have any kind of big brand like that. Right.
It is. But it isn’t right. And what I think, what I’m seeing is it’s not the brokerages are doing this because they don’t have any money it’s teams that are doing those because they do.
So. I mean, what are the teams that you’ve seen doing this? What’s the average team size that’s doing it.
You know, I want to say, it’s not, there’s no average, but I’m going to say the minimum that I’ve heard of was about 15 TMS.
Okay. Yeah. So you’re starting to get up towards that larger mega team kind of
Correct. You’re starting to get there. And here’s the interesting thing. Even before that I’ve talked to some mega teams where they have their team members on a 30, 70 split, and you heard that, right. It’s not 70, 30, it’s 30, 70, 30% to the agent. And they’re happy to do it because they’re busy all the time. They don’t want to delete gen, you know, there, I mean, that’s the other thing about this, right? Everyone, every broker out there pretends like every real estate agent is his entrepreneurial go getter, you know, want to work their sphere. And it’s like, no, those personalities are actually really rare. Right? Most people just want to be handed a lead and work that lead. Right?
Yeah. I actually interviewed a couple of podcast episodes ago. I interviewed Peter from box brownie. And one of the topics that we’ve discussed on a number of my podcasts so far is about the concept of how international real estate is different from it is the United States. One of the things Peter mentioned on that podcast is, you know, most people are try to do in the United States. They try to do everything. They’re, they’re trying to be the listing agent and the marketer and the buyer’s agent and everything. And they’re really bad at a number of those things, but they’re probably good at one of those things. And you mentioned in other countries, I can Australia, et cetera, you don’t have that problem because people focus on what they’re good at. And it’s the same thing with teams. You’ve got the person who is great at being a buyer’s agent, the person who is great at being a marketer or on my lead generator. Right, right,
Right. And that’s one of the reasons why teams are so dominant, you know, they’re just gaining market share like crazy.
So if you’re a broker and you’ve got, we have a client that has 125 teams in their company right now, but you know, the average team is not 30 people. Right. it’s in the, in the single digits, if you’re that company, what do you do? If, if you’re worried about this
To look at their numbers, I’d have to look at their competitors. I have to look at a lot of things, but so I answer it this way. Generally speaking, I think I have to investigate going a hundred percent or becoming a team of teams. Right? What do you mean go a hundred percent because now I don’t care about price. I don’t care about volume. I just care about transactional counts. And I can have a model working with teams where, you know, I’m not arguing with the team owner about, well, you know, 95, five split versus 90 10 split. No, it’s like, Hey, I want you to go out and do 5,000 transactions because you’re going to pay me three 95 per transaction, and you want to keep a hundred percent. So here you go. If I bring you a lead, I will do a 30% override. Right.
But then you essentially have to go to zero services, right?
Yeah. Because teams don’t need services. The only thing you have to provide those teams is legally required. Brokerage oversight. Right. Right. And you, that’s what your transaction fee is for. Right. And that’s easy to do. Right. That’s easy to calculate.
Yeah, I definitely, but yeah, Yeah, I, I definitely, but you know, as far as teams go, you don’t think that there’s any team and sorry, I don’t mean to make a long platitude statement like that. No, no, no, no. I, I don’t, I, what I really meant to say was, do you, do you think that the inevitable ability of teams is that they always will go to where they only care about doing their own thing? Or do you think it’s possible for a broker to offer good enough services that the teams are sitting there saying, yeah, I get something of value from my broker.
Rob Hahn (45:00):
I mean, I’d look, I think it’s entirely possible. Right. you know, if I’m, if I’m a unusually smart, experienced brokerage, you know, could I offer advice and such to, to the team leaders? I’m sure you can, right. I’m sure you can. I’m not saying like it’s a one size fits all. I’m just saying from a model standpoint, if I’m counting on, I am so wise and so, so experienced and I’ve 35 years experience doing transactions that I could advise, even team owners, you know, on the intricacies, you know, the like, okay. And if you could convince those team owners to pay you 10% of every dollar they make, Hey, power to, you know what I’m saying? Like, I’m not knocking you. Like, that’s awesome. I just think about it from the other side. And I think if they were to place themselves, so think of it this way, right? I mean, I’m a consultant, right? What do I do? I offer advice? Could you imagine a broker paying me 10 cents of every dollar they make, just so that they could get my advice.
I mean, you’re bringing dollars in the door and supporting them. It’s not just like you wrote some, some commentary.
No, what I’m saying, that’s the thing as a broker, if you’re bringing dollars through the door, if you’re bringing them a lead, then you could easily just do an override. Right? So we’re talking about brokerage value. That is a part from lead generation. At that point, if you could convince somebody to give you a split, that’s fantastic. I just don’t know if that’s, let’s just put it this way. I just haven’t seen evidence that shows that those, this is sustainable in the long run because those team owners are typically the very best professionals in the marketplace. Like you don’t get to be a mega team owner because you’re, you’re, you’re mediocre. You know what I’m saying?
Sure. I think it’s, you’ve identified what you’re good at and you start attacking people do it. Right.
So when you look at it that way and you say, okay, what do I, what do I really get from this broker? Right. And if it’s a big enough broker, it’s not even the broker. Right. Cause you’re talking about the local manager.
Right? Okay. So number one is, is support, right? So what your answer has focused on and in a completely self serving tangent and, and going on the side of this question is, do you believe that technology and feel free to answer any which way you, you know, but you know, do you think technology from a team inside a brokerage perspective do you think it’s so far gone that the brokerage technology overall is so ill you know, set up or, or not best suited for a team or that they don’t trust the broker so much that there’s no value in that whatsoever?
Of course there’s enormous value. I think that’s a wrong way to think about brokers technology, right? So to me, the right way to think about brokerage technology, and I just recently had this conversation with a CEO of a tech company, is that it has now become clean sheets. Do you know what I mean by that? If you’re a hotel, you can’t compete with other hotels saying we have client clean sheets. Right. Okay. So in a similar way, I think if you’re a brokerage today, you have to have technology. The problem is, I don’t know that that’s big enough for differentiation and the only place, only time it becomes a big enough differentiation is when somebody is already working with you. Right. So, you know, in a real way, it’s almost like, like, like trying to go on dates right. And saying I’m a great lover. The only way that, that, that the other person is going to find out is to actually, you know, get into bed with you. So trying to convince somebody to get into bed with you by claiming you’re a great lover, what everybody else is doing, the exact same thing. That’s a tough road of hope.
So if you’re a brokerage and you have access to some technology or something that is really differentiated as really unique that they can see from the outside without having signed on a dotted line without having, you know, joined and hung the license with you, then that might be something right. All I’m saying is right now, I just don’t see that in the brokerage technology landscape, everybody makes the exact same claims. Everybody says their, their platform, their tool is amazing. And they have tons of testimonials from their agents saying, this is the most, you know, awesome banging thing ever. You know, and everyone’s saying that, so how do you, if I’m an agent and I have to try and pick between those, like how do I do that?
I think, you know, it’s almost like you have to get a test drive. Right.
Right. And even test drives though. Right. Cause you know, I mean, I just recently bought a car. So I know there’s a difference to the test drive and living with a car for 30 days.
That’s a true, a true statement.
And one of the issues with, so one of the issues with that for brokerages and technology and agents specifically, especially teams is there’s massive switching costs. Right. Right. Wow. If it were, if it were as easy as you know, I’m going to try this brokerage for 30 days and if it doesn’t work out, I’m just going to move to this other brokerage and it’s just, it takes 15 minutes to switch database connections, then maybe we’d see something like that, like test drives. But right now it’s, it’s a massive transaction fee if you a cost to switch brokerages. So it’s really difficult. And that’s what’s so
Yeah, in many cases, if you’re a decent agent at all, the broker, in many cases will give you, you know, give you money towards those switching costs, from sign marketing, et cetera perspective. Right. from a technical perspective you know, one of the things we in without being too self promotional here but one of the things that we do that has seen a huge benefit is, you know, we onboard the agent for them as part of our, our program that we do where we, we literally, our support team goes and downloads from their old system. All of their contacts cleans their lists, imports all of their email marketing, et cetera. And that keeps that switching costs down for that agent to join the team. But you’re right. They can’t go test drive our system. Now that all being said, that brokerage, I mentioned that has 125 teams though, you know, w with once again, without being too promotional of TRIBUS we have over 50% of those teams use our, our system as their primary technology tool. So do you think that’s just, we got lucky. Do you think that’s that that they trust their broker and, and not to steal their business? What do you think is the impetus to them?
I don’t know. Right? Because like, depending on who you ask, if you go and ask compass, right. All of their agents who are using their software and their technology, if you’re going to ask Remax, I mean, they’ve bet their company on Booj.
I don’t think they bet their company on Booj. What makes you think that they bet the company on Booj?
Oh, just, yeah. It’s, it’s kind of a internal joke. I guess I’ve been saying the last three earnings calls from Remax have all been boom, boom, boom. Right. Like, I don’t know what their corporate strategies apart from Booj – has made huge bets on and they keep talking about their internal technology. Like everyone does, you know, brokerages large and small. They all talk about their technology. My only point is unless your technology is, is visibly different from the outside right prior to, you know, a test drive. So I guess a way to think about it from an it just again, think about it as an analogy. If you’re offering a Tesla and all of your competitors are offering internal combustion engines, then you’ve got something that someone can see without having test driven. Do you know what I mean? But if it’s we have a five, Oh, you know, V8 and our competitors are 6.2 VA, you know, I got to test drive those. And right now, right now in the brokerage landscape, I’m not seeing the Tesla. I’m not seeing the, Oh my God, this is so obviously dramatically different than anything else that’s out there.
So I talk about all the time, our clients, the thing you’re talking about, I make sure our clients tell their prospect agents, you know, you’ve never, you’re essentially when you come over to our company, you are getting essentially an outsource support person for you, your team, et cetera, that will do whatever you want. Cause that’s kind of what we sell to the broker. And that’s the big differentiator because the truth is no matter what we do, we can have a better interface that looks more slick. Or does these three features that nobody else does like AI of identifying who’s interested in and what better than what anybody else does. But there’s a reason why there’s been no in the past seven or eight years, there’s been no major innovation, even compass and all these guys, Booj, Remax, et cetera. There’s no major innovation that’s out there because for the most part, you know, we all know what a broker needs or what an agent needs. I mean, what they need to be successful. The, the, the problem or the hard part is actually getting them to use it. That’s the key, right. Or that that’s getting them to log in, you know, at least once or twice a week. That’s the killer app. That’s,
That’s part of the problem. The other problem though, is this, I mean, so I’ll just ask you, right. If I’m one of those, if I’m an agent team from a Keller Williams, right. Can I buy TRIBUS? Well, here’s the thing I can go buy a dozen other quote platforms. Right? So in a real way, the issue is you’ve, you’ve chosen to make it your business model though. You only sell to brokerages, right? Well, there are plenty of CRM slash
Platform slash lead gen slash transaction manager,
AI. Like if I’m a team owner, there’s no shortage of vendors will sell me technology. So unless whatever my brokerage is offering is either a way better, which we just talked about. How do you prove that? Or way cheaper, it’s a tough row to hoe.
Right. Well, I mean, I think from our perspective, you know, where I was, what I was saying is one of the things I’m really proud of is that of 125 teams over 50% of them use our system as their primary system. And, you know, I personally think a, our support is a big reason why that’s the case. Sure. We’re essentially doing their property marketing work for them and onboarding team members when they add team members. But just from the perspective of, yeah, sure. You, as a team, most teams have something like BoomTown or conversion or, or commissions inc. Right. They’re doing lead gen to, to drive business to that team. And, you know, you can go out and buy those sorts of things. But if you have a good enough tool provided by the broker, you can just drive your own traffic to your broker pre-site and save the 1500 bucks a month for BoomTown. And I think, you know, if you have a good enough site or good enough tools that that’s, that’s part of it, I think the hard part is convincing the team that that’s the case and that it’s better, or at least as good as BoomTown or commissions anchor.
Like I said, I don’t have an opinion on, on all of those level of detail because I think it just comes down to the team owner. You know, what he thinks is worth it, et cetera. Because fact of the matter is somebody is going to pay for all this. Right? Right. Like your support staff, somebody is going to pay for it. By first of all, you got to pay your support team. Cause I’m sure they’re not working for free. Right. Which means you have to get paid by somebody. So that means the broker has to pay you since you’re only selling to brokers. So the broker has to get that money from someone somewhere. So, you know, maybe that’s part of the split, you know, however you do it at the end of the day. Like there’s no such thing as free lunch, right. You’re going to end up paying for it.
So the issue is if I’m a team owner, if I do the math, if I run the numbers and I say, listen, paying my broker 10%, you know, it’s totally worth it because it amounts to this. Whereas if I were to go and do this myself, it’s more money. You know, those are decisions. Those, those men and women make every single day. And I think break either way. My only point with all of this is if I’m a broker and I don’t offer technology, it’s like being a hotel and you don’t have clean sheets, you have to have it. You have to have it right. Whether it’s great or not great, you, you have to offer something because it’s just table stakes. The problem is once you’re past the table stakes, as yet, I’m not seeing something at the brokerage level, that’s truly differentiated settle,
But, and, and last, last climate question, cause we’ve already gone over time here, but when it comes to, and by the way, we’ve got two, one out of the 10 topics that I wrote about, is this an amazing
I be like a Joe Rogan style podcast and real estate, maybe I’ll do it. Like, we’ll just take four hours. You know,
It was just, Hey, he just paid a bazillion dollars with that Spotify deal. I know. Right. Maybe you should talk to him and about being the podcast, the exclusive podcast, but, okay. So you know, when you’ve got the these teams, when you’ve got all of these people that are out there as a broker in 10, you, you earlier, you mentioned 10 years from now being bought hires or changes of models, et cetera, which is, you know, a huge time period. And if anything is out there, it’s shown that in one year we can flip business upside down on its head with the virus with of course on events, which by the way, if you haven’t read Rob writes every year kind of a a, a future predictions
Rob Hahn (60:12):
Wrong. Sure. It’d be wrong or your money back.
Eric Stegemann (60:15):
But some of them are oftentimes spot on, but so, you know, you’ve got teams, you’ve got all of this. So from a, a franchise or from a compass, et cetera perspective, and we all know that compass saying that all of their agents use their system is bunk, right. It’s just not true, frankly. So, you know, Remax talks about everybody, you know, wanting to everybody to be, and so invested inside of their booth acquisition realm talks about, you know, the stuff that they’re trying to build internally, Berkshire Hathaway tried to build a massive system internally that they had a trashcan recently. So all of that and that’s out there and all these franchises. Why do you think that most of these large companies are unsuccessful and that like a perfect example is Realogy bought zap, right? And it’s $200 million for buying zap, a real estate technology company a few years back, three, I think three or four years back now. And so they spent $200 million on buying this tech company that was there. And now they’re throwing that in a trash can. Why do you think that the, these large companies that make this huge PR splash and then three years later, they kind of have to throw it all in the trash can?
Rob Hahn (61:35):
I mean, first of all, I don’t know that everyone’s done that like Boucher is throwing the trash can. Right. I don’t know.
We’re only eight year into it, right? Yeah,
Exactly. So I don’t know, like maybe that becomes a, the poster child for success. I don’t know the compass is not successful their tech strategy. We just know that religions app didn’t really work out. But how much of that is because of zap, how much of that is because of, you know, internal turmoil inside religion. I mean, it’s,
Eric Stegemann (62:02):
Let’s look KW and I’m not talking about command or Kelly, I’m talking about previous iteration, which was called edge, right? Yeah. So, you know, Gary Keller and his team goes out, go out and acquire what they call best in breed in terms of websites. And they had market leader for websites. And if that doesn’t date, how the edge at all yeah. That tells you something. But so they, you know, by, eedge for websites and for CRM, they by dot loop, which, you know, I think Gary Keller has said, they’re buying of that without investing in. It was one of his biggest regrets of his life so far. So they buy dot loop and they buy another set of tools. And, you know, again, three years later they throw it on the trash can and they start building their own system. So that there’s another one.
Eric Stegemann (62:50):
And before refugee had a zap, they had market leader too. Right. So when you look back at them, there is a line of dead or, or mostly dead companies that have been involved in selling to large franchises for example RED at Berkshire Hathaway. When they switched over from Prudential to Berkshire Hathaway, they bought red, there’s another company that’s more or less dead. Right. So or nobody talks about, so what, what makes it that when a franchise touches a system and rolls out PR what is it about it that either it doesn’t get embedded agents don’t accept it, or, you know, it’s just over promise and under deliver, what is it that makes that pretty easy?
Rob Hahn (63:40):
You know, I it’s, it’s, like I said, man, I, we can talk about specific instances, but I don’t think it’s possible to generalize to that extent. Right. In other words, like I know, I know large franchises that are very being very good luck, kind of rolling out their tech platforms. Right. Next home is an example of that. I don’t know that exp, although they’re not a franchise, but they’re national brokerage, they’re having enormous success with their platform. You know, the virtual reality thing that they’ve got. So I don’t know that we can sort of generalize. Having said that, having said that if we are going to generalize, I think the generalization has to be that we have companies that are not technology companies trying to play in technology without making the necessary investment to play in technology. If that makes sense. Right. And I’ve talked about this from the MLS side for years now.
Cause you know, some MLS is like har we’ll talk about, we spend millions on tech development and so on. I’m like, that’s great. But have you looked at what Zillow spends on its technology on a quarterly basis? Right. So that’s number one, that’s just terms of money. Number two. Who are your, who are you competing against for your tech people? Right. If I’m religious and I’m competing against Keller Williams for my tech people, that’s one thing. If I’m competing against Google for my tech people, that’s a whole other thing. So in a real way, I think there is a real question to be asked. You need to have technology as table stakes, but if you want to create differentiation using technology, then you kind of have to become a technology company. Right?
Eric Stegemann (64:18):
How, how do you as a brokerage, how do you morph to be a technology?
Rob Hahn (64:23):
I think the only way is you get acquired by a tech company. Not that you go acquire one, because then you’re still fundamentally real estate company. You need to go have Facebook come acquire you, you need to go have Google come acquire. You need to have, you know, Amazon come acquire you. I, to me, that’s the only way. But obviously that means that you, as the CEO and chairman of a real estate company, you are now for a tech company, how many people want to make that choice? Not many. Do you see what I’m saying? So I think it’s a really difficult thing. I think so let’s, let’s put it differently. If I were the CEO of a large real estate national company or a national franchise, I don’t think I even go down that road. I think I try to form a strong partnership or Alliance with a legitimate technology company.
Rob Hahn (65:14):
Right. And then I focus on what I do best, which is real estate recruiting, training, all of that stuff. And I have to modify my model so that I’m doing the right thing and the real cheese and the real estate side. And I have to rely on my partner to provide the technology side. I think that’s the only way you can do this. I don’t, I don’t see a different way. Right. Well, let me, let me ask the question in an interesting way here. So Keller Williams, brokerage tech company, or both neither, they’re not a brokers are not a tech company. They’re a friend, sorry, Frank, I should say, you know, franchise or a tech company. So you’re saying franchise, right? I mean, to me, they’re a franchise and they’re their real strength in its real growth has been it’s training. Right. That Kelly’s training and coaching is second to none.
Yeah. I would agree with that. I agree with you too, that they’re not a tech company. What about the, the, you know, the one everybody wants to talk about compass tech company or brokerage their brokerage. I think they would disagree with you. I think they would too. But I agree with you Remax buys Booj, you know, is it project? Yeah, it’s a franchise is, and my guess is when I asked you this question, you’re going to say Redfin, but I’ll ask it anyways. Is there any company that is involved in selling real estate that you would call a tech company Zillow, but they’re not a broker. They don’t have agents. Right, right. They don’t have agents that are not brokers on are, they’re not a franchise per se, but Zillow is, Zillow’s a tech company. Redfin is a tech company, right. A Open door tech company.
Rob Hahn (65:08):
Right. You know, offer pad, not so much offer powder as a flipper. I actually think I think open door is more of a financial company than it is of a, of a, I think their key to success longterm is going to be financial management and the data that they have on houses and being able to figure out what’s worth what and what needs right, right. Possible. But their roots are in technology. Yeah. That’s true. So, yeah, they’re a tech company, you know, first Redfin is a tech company first, although God Redfin is trying so hard just to become a traditional. But yeah, I mean, those, those are the things. So I don’t know. I mean, I don’t know if this is valuable to any of your listeners, but since we gotta wrap it up, I think, you know, the takeaway, I suppose, has to be, you know, just stick to what you’re good at because brokers are some of the best people in the industry and they’re really good at some things.
Right. But understand that the model is really changing and the traditional split based model is under tremendous stress. Not because of people like me, but because of agent teams. Right. And unless you figure out a solution to that and how to improve your margins, you know, into the future, it’s going to be a real tough, tough going. And I don’t think that’s anything anybody disagrees with. That’s the thing people might, you know, be like shut up Rob. But I’m like, I mean, I talked to one broker last year, he has like 1100 agents. Right. So he’s a big, he’s a big brokerage. He told me in all of 2019, all of 2019, right. From his 1100 agent brokerage business, which is locally dominant, he made $11,000.
Eric Stegemann (66:58):
Rob Hahn (66:58):
If it weren’t for the fact that he has a mortgage and a title operations, that’s attached to it, like he would never do it. Right. And most of the people listening to this, their brokerage managers y’all know this is true. Right. You know, this is true. So, you know, I mean, will you make your, make your businesses based on that? Right.
Eric Stegemann (67:18):
That’s pretty good. The average broker has a 3% profitability margin in the best years.
Rob Hahn (67:24):
It’s in the best years. And that’s the median, which means half our lag below that. I mean, we all know the reality, the cut, the problem is most people don’t know what to do about it. Or even if they kind of have an idea of what to do about it, they don’t actually have the money to do anything about it. So, you know, it’s a tough place to be. I, like I said, I feel for brokers and, you know, I know from talking to those clients of mine who are brokers, you know, with a lot of the conversation goes like something like this while Rob you’re really right. But Matt, how do I, how do I make this happen? Cause I don’t have the money. You know? I mean, that’s basically what it comes down to.
Eric Stegemann (68:01):
Well, I think I think that’s an interesting point to leave people with I’ll throw one thing out there that I’m seeing by the way I, which is rolling. So I, I believe that there is a huge opportunity that if you’re a broker owner out there and you’re saying, I don’t have the money, you can roll yourself into a large organization that does have the money. And there are companies out there looking for those opportunities. Right now you’re tied to a large financial beast that can’t compete. Can’t compete with compass and can move the way that they need to. All right. One last question for you, Rob. I ask everybody this question is the very last question, the first time on which is if you could change one thing about the real estate industry and it doesn’t matter what aspect of the real estate industry, but one thing about the real estate industry, what would it be Well of the 1099 exemption for real estate agent?
Eric Stegemann (69:00):
I thought you might say that. Yeah. Well, there you go. Rob Hahn so much for joining us hopefully you can find some time and we’ll come back and get to the other nine topics that I had set up for today. Sure. But thank you so much for coming on. Rob Hahn again is the managing partner of 7DS and associates, a consulting company that specialized in the real estate industry. Thanks again, rom. You’re so welcome. And if you are listening to this all the way through, please make sure you hit the subscribe button anywhere that you get podcasts, including Apple podcasts, Google podcasts, and Spotify. Thanks so much for listening to brokerage insider. We’ll see you soon. Take care, everyone.