Agents generate approximately $100B in commissions annually…and real estate companies want more of those commission dollars for themselves.
Agent Commissions Are Big Targets for Real Estate Tech Companies
As real estate tech companies continues to expand, innovate and “do” everything they can for potential clients, those tech companies have to face the gnawing reality that real estate agents remain central to the real estate industry.
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More than 90% of potential real estate buyers and sellers, according to the National Association of REALTORS®, want and connect with a real estate agent to help them buy and/or sell their house.
That connection buyers and sellers want and have with real estate agents and brokers is worth approximately $100B in agent commissions every year.
Real estate tech companies want a bigger piece of that agent commission pie for themselves. Here are some strategies real estate tech companies have to get more commission money from agents and brokers.
Zillow 3.0: Back to Basics Strategy
Yes, Zillow is going back to its roots by focusing on “extracting” an additional $1.5B annually from agents by 2025 via its Premier Agent program. This “extraction” from agents paying for Zillow’s Premier Agent Services would generate a total of $2.9B annually for Zillow.
- 2021 Revenue = $2.1B
- Plus, +800M from Adjacent Services such as Mortgage & Title
- Plus, +600M from Other IMT
- Plus, +1.5B from Premier Agent Services – or between $250M – $300M per year from agents
- Total of $5B in 2025 Revenue
Compass Wants & Intends to Pay Agents Less
According to Mike delPrete, well-regarded real estate strategist and advisor on real estate tech, said that Compass, “in its own words,” wants and intends to “improve its own company’s economics with agents…” kicking in or “giving” Compass more than +1%/year of their commission earnings. DelPrete said, “If you’re a Compass agent, the company’s plan for profitability hinges on reducing your commission split over time. Sorry!”
Compass’s medium-term goal of a 2.5% commission split on its 2021 revenues would total for Compass an additional +160M annually.
Opendoor Already Experimented with Buyer Agent Commissions of 1.5%
According to Opendoor’s Q4 2021 earning report, the company sold 20,000 houses in 2021. As this largest iBuyer company uses its scaling efforts to push buyer agent commissions down, Opendoor would obviously generate more revenue.
Why? Because a savings of -0.75% in buyer agent commissions would result in approximately +$53M y/y for Opendoor.
All Real Estate Tech Companies Offering Increased “Value” to Agents in Lieu of Reduced Commissions
Zillow is offering its Premier Agents exclusive access to pre-qualified buyer leads.
Compass is promising increased deal flow and efficiency.
Opendoor is promising increased deal flow and efficiency.
Perhaps the question for Zillow, Compass or Opendoor is, is less simply more or is more simply less? Do the math, agents.
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Thanks to Mike delPrete and Inman.