It might be said that no industry in North America is as susceptible to disruption as real estate is. Everywhere you look, there is yet another technology company raising huge financing rounds at unicorn valuations claiming to disrupt the industry.
And yet, one of the most disruptive forces in real estate in recent years has gone mostly unnoticed except by a few in the trenches in real estate: a new breed of brokerages who have leveraged technology to offer extremely low-cost brokerage services to agents and agent teams. Because they offer the agent 100% of the commission with no split paid to the brokerage, this group of brokerages are often referred to as “100% shops” in a faintly derogatory fashion by traditional brokers.
Their ranks include companies like HomeSmart, Realty One Group, Charles Rutenberg, Fathom Realty, and dozens of other smaller companies that are now popping up all across the country.
They are among the fastest growing in the industry and are challenging not just the stalwarts of traditional brokerage such as Realogy and HomeServices of America, but also the former-upstarts-who-have-joined-the-mainstream companies like Re/Max and Keller Williams.
Amazingly, these companies are poorly understood by outsiders, even by longtime brokers and agents. Their low-cost dominates perception and there is very little understanding of how these companies work, or why they work. Focusing only on price and cost means you miss the big picture.
Accordingly, rather than calling them “low-cost” or “100%”, I will refer to these companies as Next Generation Brokerages (“NGBs”). They practice an agentcentric model of brokerage that is built around efficiency, productivity, and centralization; that practice is enabled by changes in technology, which drives massive changes in the structure of the real estate industry.
While we at 7DS Associates believe that in the long-run, The Platform and W2-based brokerages such as Redfin and Opendoor will rule the industry, in the near-term, the Next Generation Brokerage is taking over.
This Red Dot is about them, why they work, how they work, and how the industry should prepare for their dominance.