State of the industry, market-proof hiring strategies + changes to digital marketing
In addition to the articles, here are a few items we are reading from across the internet.
Adam Neumann, the founder of WeWork, the poster child for investment-fueled, fundamentals-challenged startups that sputtered upon attempting to go public, has launched a new venture. Flow, which attracted approximately $350 million in venture capital investment, looks to introduce a branded, consistent model to the residential real estate space.
The venture capital firm Softbank, which participated in the huge funding rounds of Compass and Opendoor, reported a $23.1 billion loss in the second quarter. In that light, the company announced cuts including that it had fully exited its Opendoor holdings. The era of the grow-at-all-costs investment-startup model appears to be waning.
After posting a $494 million loss in 2021, Compass lost $289 million in the first half of 2022, of which $101 million was in the second quarter. The fast-growing brokerage, which became the nation’s largest this year with a 2021 sales volume of $254.2 billion, has struggled to secure profits as it looks to establish fundamentals after a decade of whirlwind growth. As part of the recent earnings report, company CEO Robert Reffkin shared that the firm is ending new-agent equity and compensation programs. These programs underpinned its aggressive recruiting and growth strategies. Now, more than ever perhaps, the company will be competing with others to recruit and retain agents based more so on the core brokerage fundamentals of brand, tech and support.
The U.S. Federal Trade Commission announced that Opendoor had settled a claim by paying $62 million. The FTC had levied the claim against the alternative finance company alleging deceptive marketing practices. The agency says that Opendoor mislead consumers in how it makes money, the information it provided sellers related to projected home value prices, repair cost estimates and estimated selling costs. Along with the payment, the company agreed to change its marketing and messaging that led to the allegations. Opendoor pioneered the compelling new business model of iBuying, and, as the most significant practitioner left standing in a proliferating field of iBuying and alternative finance, it faces significant scrutiny, from regulators and the industry at large. As its newer partnership with Zillow makes clear, the company continues an aggressive push to bring its innovative vision for streamlining real estate transactions to more consumers.
In August, Zillow Group and Opendoor inked a deal in which Opendoor will advertise its iBuying service to sellers on Zillow websites. Zillow will show a comparison of potential earnings from an Opendoor sale and from a traditional open market sale; Zillow will earn a referral fee from Opendoor for the sellers it connects to Opendoor. This represents a remarkable partnership from the former fierce competitors in the iBuying space. This move tracks with Zillow’s deeper push to serve as a homebuying and selling marketplace without participating directly through iBuying transactions.
In smaller luxury resort areas across the country, the proliferation of investor-owned homes creates housing shortages for the people who make the local economy hum and provide its basic services. This story profiles the situation in Sun Valley, Idaho, where workers must resort to living in garages and campers. This profile showcases some of the significant housing impacts investor-owned housing and short-term rental platforms have on communities.
A platform to centralize the management of home-related tasks for homeowners has long been a dream for real estate technology innovators and investors. Update, MoveEasy, MooveGuru and Inside Real Estate have all launched related efforts in recent years. And now there’s a new entrant, Milestones, which raised $10.3 million with a vision to become a major player in this arena. There is increasing energy in the space now. And the industry may see one gain serious traction among homeowners. This is a space to watch.
CRMLS and Bright MLS announced a joint venture in July, Redistribute LLC, which will aggregate and distribute MLS and brokerage data to other entities including mortgage lenders, insurance companies and other players. The company will share the revenue with those MLSs and brokers who provide data. This innovative move from MLSs reveals a new avenue for brokers and MLSs to monetize their rich data. Tech companies have been reselling industry data for years – this is a new effort to keep more of it for brokers and MLSs directly. Access a video interview with CRMLS CEO Art Carter in the lead story in this Insight edition for more information about the effort.
Beginning October 3, Washington-based Northwest MLS, which has over 35,000 subscribers, will release new listing forms that do not offer buyer broker commissions by default. The new forms make the offer of buyer broker compensation much more explicit for sellers, including presenting a variety of compensation options for them to choose from, including no compensation, putting the burden of buyer broker compensation exclusively on the buyer, offering a credit or setting a minimum compensation. Major class-action lawsuits and an ongoing U.S. Department of Justice investigations into how real estate commissions are handled is spurring change throughout the industry. This action by NWMLS is one example of the evolution in how commission-payment protocol is changing.
After years of strong housing market activity, which saw significant home price appreciation and record-high home prices, noted economist Robert Shiller foresees home prices dropping by as much as 10 percent in the next couple of years. Shiller, a Yale economist who presaged the housing bust in the late 2000s, brings some significant credibility with his perspective. A housing bubble requires three elements: rampant speculation, overvaluation and declining prices. The industry has definitely seen the first two – time will tell if prices indeed decline as Shiller foresees, and we officially have another popped housing bubble.
Enabling Intelligent Change.
