Through December Inman will be digging into the real estate industry’s most prominent brokerages, iBuyers and paradigm-shifters to suss out the biggest challenges each face in 2022. Check back regularly as we publish new reports on Keller Williams, Compass, Zillow and others in the days and weeks ahead.
With its 337,450 agents, six real estate franchise and company-owned brands, and several ancillary businesses, Realogy has expertly navigated a coronavirus-marred real estate market while maintaining its spot as real estate’s top dog, according to multiple industry best lists.
However, just as markets shift and stock market fortunes change, some wonder when Realogy’s crown will be snatched by one of its competitors — will it be Compass with its expanding tech stack and aggressive recruiting tactics? Might it be fellow real estate titan Keller Williams who’s been teasing the idea of an initial public offering? Or, could a wildcard be waiting in the wings to swoop in and surprise everyone?
“It’s nice to be on the top of the list, but there are lots of lists out there, and we don’t measure ourselves by whether we’re on the top of lists like that,” Realogy CEO Ryan Schneider told Inman of his company’s standing. “What’s really important, even in a world of different competitors, is what we’re doing.”
With RealSure, increased investments in mortgage and title, and strategic partnerships in the luxury space serving as a tailwind, Schneider said he’s confident in Realogy’s ability to weather whatever headwinds 2022 may bring.
“If you combine that with the talent on the team and the recognition we’re getting for that with the incredibly good financial results we’re sharing, especially relative to our industry and our competitors, we think there’s a bright future ahead as we continue to invest in our people, in our technology, and in our businesses,” he said.
Here are five areas where Realogy is focusing its energies in 2022.
Growing RealSure as they make a foray into power buying
The pandemic has hastened the transaction revolution, with iBuying and power buying steadily rising in popularity among consumers looking for a quicker and clear-cut buying and selling experience. Amid Zillow’s Zillow Offers blunder, real estate analysts and agents have been predicting which platform will take the throne next, with RealSure, Realogy’s iBuying arm, often being left out of the conversation.
“I am happy that this is finally being marketed and becoming a bigger deal than it has been,” an Inman reader commented under an article about RealSure’s first CEO. “Agents have not been [utilizing] it because most do not understand enough [about] how it works, so they are afraid to [offer] it [to] clients for fear of making a mistake.”
Realogy CEO Ryan Schneider told Inman the company has taken a decidedly slower approach to expanding RealSure, which is the company’s iBuyer joint-venture with Home Partners of America.
Available in 24 markets across 11 states, RealSure enables homesellers working with a Realogy-affiliated real estate agent to take advantage of a backup cash offer if the home doesn’t sell on the open market. If the seller accepts the cash offer, they have 30 days to move after closing and will pay a minimum service fee of 2.5 percent to help cover the cost of buying, holding and re-selling homes.
“We think RealSure has a lot of growth potential, and we’re going to be investing for that growth in 2022,” he said. “In fact, I even told our investors in my last earnings call that one of the things that we’re going to do is increase our investment in [the fourth quarter] of 2021 to get going in that direction.”
Although RealSure is nowhere as big or recognizable as Opendoor, Offerpad or even RedfinNow, Schneider said he believes the platform’s business model is more robust and able to weather extreme housing markets since Realogy isn’t in the business of flipping homes. “In fact, we are not iBuyers,” he said. “We are not trying to buy and then sell houses.”
Schneider said Realogy, through RealSure, has “only occasionally” had to follow through with purchasing a seller’s home. For him and the company’s more than 53,000 agents, Schneider said the real value of RealSure is in winning more listings — not in purchasing and flipping homes for a profit.
“Our product is architected to help the customers sell their house and then buy the next one,” he said while noting Realogy gained market share for the fifth consecutive quarter and outpaced the National Association of Realtors’ reported 9 percent volume growth by 3 percent in Q3. “Only occasionally do we need to actually build the balance of buying a house.”
“We architected the product for that reason because we don’t want to be in the home-flipping business, and we think it’s more sustainable than our competitors,” he added.
Realogy is looking to win even more listings in 2022, as RealSure launches cash backing for homebuyers, also known as power buying. Already available in Austin, Texas, Schneider said RealSure’s foray into power buying will create a frictionless end-to-end transaction for consumers, especially considering the seamless integration of the company’s mortgage and title services.
“We think we can take these two transactions and help people get from one home to another home much more seamlessly than other people are doing, and again, not by being the one to buy and then sell the house,” he explained. “We’re doing this by providing the guarantee behind the customer to hopefully let them transact and get the most value themselves with our agents, our mortgage business and our title business etc.”
“Our partner, Home Partners of America, has deep experience pricing homes and buying and renting homes to people,” he added. “They have a history of 20,000 homes and they’re in 80 markets, and together with RealSure, we’re only in 24 so far — so we’ve got a lot of growth potential you can see right there.”
Doubling down on mortgage and title services
Alongside RealSure, Schneider said Realogy is focusing on shoring up its mortgage and title businesses, both of which are a vital part of the success of RealSure’s newly minted power buying service.
“We do believe simplifying the transaction is incredibly critical,” he said. “We have a national scale title business and we have a national scale mortgage business, and we’ve increasingly been integrating those businesses into the transaction for customers, in our products and in our closings, to make it easier for them.”
Although real estate analysts and experts have doubted the viability of ancillary mortgage and title services in the past, the transaction revolution has provided a pathway for brokerages to make the investment in the space worthwhile.
“Whether it’s being initiated from the real estate or mortgage side, both components are being smartly combined to provide an integrated, highly convenient consumer experience,” real estate analyst Mike DelPrete said of companies, particularly iBuyers’ ability to harness the power of agents, mortgage loan origination and deep discounts for consumers. “The companies unable to provide that are the ones at risk.”
Realogy believes mortgage and title are a vital part of their current and future success, with the company recently selling a portion of its controlling stake in its Title Resources Guaranty to invest in its other businesses and pay down debt.
“While we really like our Title Insurance Underwriter, this agreement enables us to be even more laser-focused on Realogy’s core businesses, including critical consumer-facing transaction services in franchise, brokerage, title settlement and escrow, and mortgage,” Schneider said in a statement after the sale closed in October.
Schneider acknowledged real estate companies, including Realogy, can’t reach or maintain profitability on mortgage and title alone but noted it’s a crucial building block to the company’s long-term viability.
“I think [title and mortgage] is an area of big growth, revenue and profit, and we’re literally demonstrating it with our title capture rates and mortgage capture rates,” he explained. “I think the customer is going to demand a more integrated experience that’s easier and simpler, period.”
“You can look at what the margins look like if you only have title and mortgage, versus if you’re able to make at least some money from other things,” he added. “So I’m all in on it. But I’m mostly all in it for the customer experience.”
Continuing to ride the luxury wave with investments in Corcoran, Sotheby’s International Realty
Alongside RealSure, Corcoran and Sotheby’s International Realty (SIR) have been shining stars in Realogy’s success over the past several years with both brands getting significant shoutouts in quarterly earnings reports.
In the company’s Q2 earnings call, Schneider said Realogy’s luxury business outpaced its overall volume growth from Q2 2020 to Q2 2021, as their Corcoran-owned brokerage business earned the No. 1 spot on The Real Deal‘s top brokerages list and SIR became the fifth-largest real estate brokerage in the nation.
“We really like our luxury business, and we’ve loved the growth that we’ve been able to drive above and beyond the market,” he said while also giving accolades to Coldwell Banker Global Luxury. “We’re always looking at additional opportunities to turbocharge our luxury presence.”
Schneider highlighted Realogy’s recent deal with Sotheby’s auction house to acquire home auction platform Concierge Auctions for an undisclosed amount in November. The acquisition gave the companies an 80 percent joint ownership stake in Concierge Auctions, as well as Sotheby’s and Realogy executives a place on the company’s new Board of Managers.
Concierge Auctions operates in 30 countries and 44 U.S. states, with the platform processing more than $3.4 billion in competitive bids with an average home sell price of $3.5 million in 2020.
Schneider said the acquisition of Concierge Auctions will open the doorway for Corcoran, Sotheby’s International Realty and Coldwell Banker Global Luxury Alliance to further cement their place as leaders in the luxury market. “We think having our leading position that we’re growing even above the market, plus adding these new vectors like Concierge Auctions business is both a good symbol of how we feel, but also a big part of our success,” he said.
Although a majority of Realogy’s fortune in the luxury space has been the result of sound growth, mergers and acquisitions planning, part of it has indeed been due to an awfully robust luxury market driven by increased demand for primary and secondary homes during the pandemic — something several preeminent luxury agents and brokers predict will soon come to an end.
“My only concern is that things look too good,” Hilton and Hyland agent Gary Gold said in October at Inman’s Luxury Connect.
“For sellers, we don’t know where the market’s going or what’s gonna happen tomorrow. The government could enact something tomorrow that totally stops everything for a minute,” Serhant. broker-owner Ryan Serhant added. “If you are selling right now, and you’re driving the greatest convertible ever and it is the most beautiful day we have ever seen. That’s where we are right now.”
He continued, “It might rain. So let’s take advantage of all the signs there. We’re not gonna be in our convertible tomorrow and the next day and the next day because one day it’s going to rain.”
Even with the return of seasonality, reenacted international travel restrictions, and the COVID-19 Omicron variant taking the reins from the Delta variant, Schneider said his agents have already proved they know how to thrive under pressure.
“I’m so proud of [our agents], and so this next wave of coronavirus doesn’t intimidate me at all on what our luxury agents can do,” he said. “Just look at how well they’ve done in the last 18 months.”
“We also still have not seen the international buyers coming back to the U.S. like they used to be partly because of travel and other restrictions, so we think there’s still some upside in that area,” he added. “There’s demand there still to be had when some of those travel and immigration restrictions change.”
Choosing a collaborative approach to building out Realogy’s digital strategy
At Inman’s June Connect Now, Schneider shared the blueprint for Realogy’s future, which includes doubling down on ancillary services, further tech innovation, digging into the iBuyer market, and taking a flexible approach to Realogy’s offerings. The CEO was especially excited about leaning into the digitization of the real estate transaction and creating the best experience possible for agents and consumers.
“The transaction has to get simplified for the end customer [and] that includes helping the agent make it simpler. That’s where the integration of things like title and mortgage comes in,” he said. “Every model has got to go more digital, and no matter what your value proposition is, you’ve got to deliver more of it digitally.”
Schneider said he stands behind what he said at Connect Now and that Realogy’s investment in RealSure, RealVitalize, and their eight-month-old partnership with MoxiWorks is proof. “We do believe simplifying the transaction is incredibly critical,” he said. “We’ve made a lot of progress, even since we talked about it in June.”
As Realogy makes progress with its digital strategy through iBuying and power buying, mortgage and title, and bespoke luxury solutions, its competitors — namely Compass, which recently unveiled the next two pieces of its expansive tech stack — have also upped the ante with the launch of expansive end-to-end proprietary solutions.
“We believe strongly that given how people work differently, especially in real estate where you’ve got a lot of people basically running their own business, people are going to make different choices about how they work, and that’s true historically and today,” Schneider said. “We don’t believe that you can provide one thing that is going to work for everybody.”
Instead of working to create an all-encompassing proprietary solution, he said Realogy has embraced an “open ecosystem approach” that meshes the best of Realogy with the best third-party vendors have to offer.
“We are fully committed to an open ecosystem approach to technology, and it’s something we think is a competitive advantage for us,” he said. “We provide Realogy technology that we’re really proud of, but we also are providing third-party technology that we think is also quite good, such as MoxiWorks.”
“We’re wanting to support our agents and franchisees no matter which technology they decide to use, and you can do that in today’s world with application programming interfaces (API) and open architecture in a way you couldn’t do five to 10 years ago,” he added.
Schneider said eschewing the strategy to make everything proprietary, has enabled Realogy to create a highly collaborative environment that celebrates the best that everyone — not just Realogy — has to offer.
“We believe that if there’s a great third party product, we would be crazy not to offer it to people in our network as agents and franchisees,” he said. “We’re agnostic as to whether they use the product that I provide or the product of the third party provides because we’re doing the architectural work, to have it be part of the Realogy open ecosystem.”
“That effort required to integrate things is not small, but we absolutely believe it’s worth it, given that people in this industry, in particular, do work differently from each other,” he added.
Staying on top
This year, Realogy nabbed the top spot on T3 Sixty’s Mega 1000 list once again with a whopping 333,736 transaction sides and $184 billion in 2020 sales volume. However, T3 Sixty noted other main players with traditional and non-traditional models — namely HomeServices of America, Compass, eXp Realty and Redfin — are quickly gobbling up market share and making their play to become the top dog in an increasingly consolidated real estate market.
“The largest companies are most certainly getting bigger and the Almanac analysis pinpoints exactly the rate and extent of the change,” T3 Sixty CEO Stefan Swanepoel told Inman. “The industry is consolidating before our very eyes.”
T3Sixty noted brokerages with nontraditional business models have the most to gain in the coming years, as consumers increasingly embrace alternative transaction and financing processes. The percentage of the nation’s top 20 brokerages with alternative models increased from 9.4 percent in 2017 to 17.8 percent in 2020, T3 Sixty noted, with employee-agent, cloud-based and flat-fee models experiencing the most growth.
“The sustained growth of Redfin, which uses an employee-agent model, and the recent explosive growth of eXp Realty, which uses a virtual, cloud-based model, have contributed to the increase,” T3Sixty explained. “The growth of brokerages employing an agent flat-fee model have also pushed the percentage higher, including No. 10 HomeSmart, No. 16 Realty One Group and No. 18 United Real Estate.”
Schneider told Inman he’s not worried about the shifting tide in real estate, as Realogy dips its feet into iBuying and power buying, bolsters its ancillary services, and forges partnerships with companies in real-estate-adjacent industries.
“If you look at our results, we’ve been gaining market share for the past five quarters and we’ve had substantial above-market growth, we are expanding both our own brokerage and our franchise brokerage businesses, and we are increasingly doing more title and mortgage as we integrate those transactions,” he said. “We’re also trying to be innovative with things like RealSure to set the stage for the future.”
