Hey guys welcome back to the podcast super excited to have mike del prete with me in the house. If you don't know that name you're certainly going to get to know this guy really well on this podcast. He is a global tech strategist and certainly recognized as an expert in the space he's a guy that creates unbelievable amounts of content to keep us all educated. So we can make good decisions about our real estate practice our agent practice and a brokerage and more, but he also spends a lot of time in real estate tech starting around 2015-16 from memory uh.

So mike welcome to the show thanks tom happy to be here. Yeah, thank you so much so broadcasting live from new zealand on your end. New zealand just wanted to do a little lockdown, so we might have some wacky uh wonky wi-fi moments, but everybody healthy happy on your end yeah. I know everyone's good here, but um yeah happy to be here in in new zealand.

You know: we've been here for a little over a year now used to live here in the past and yeah with the recent lockdown. I think you know my kids are online. All the kids are online everybody's online right, everybody's at home, so the uh, the little pipe under the pacific is at maximum stress right now. Yes, yes! Well! Thank you again for being here um.

I know a lot of people like they want to talk about real estate tech and we have a lot of things we're going to cover in this podcast for my listeners out there um, but mike, would you take a minute and maybe give them a little deeper Dive into your background, so they have some greater context like i was you know, looking at like agora and then you know my highlights were things like guitar hero call of duty right and then trade me, because i know it from new zealand. So you've got a rich history in in building tech and being a part of tech, and then you transition to real estate, but maybe just maybe unpack just a little that so people have contacts before we go hard on all the real estate stuff, yeah sure happy To um, so if you go way back right out of college, i started a tech company. You know i didn't want to work for anybody else. My parents were entrepreneurs.

I thought all right. I'm gon na i'm gon na launch a tech company um. It happened to be in the video gaming space. You know we kind of pivoted our way there i'd like to say.

I just woke up with this great idea, but you know it wasn't the case. It took some time to get there sure and yeah in doing that, we we got to work on some really cool franchises, like guitar hero and call of duty kind of this was the emergence of things going online and interacting with people online. So that was um. That was a lot of fun.

I i did that for about five or six years and then sold it um never raised any venture capital. So you know my my philosophy is more of you know it's not about spending other people's money. It's about spending my own money, so i i really value good businesses. I know what it's like to run a business and to have to watch every dollar in and out yeah.

So i i did that um, you know kind of stuck around for my earn out. Two years and then the family - and i we just kind of spun the globe, put the finger on new zealand and said all right. Let's, let's move somewhere else. The kids were young, wanted to kind of experience, another part of the world yeah.

So we we picked up and and headed over here to new zealand, and we lived here for four years and um. You know at that point i joined this company called trademe, which you're familiar with it. It's like the biggest internet conglomerate of the country. Right we own all these marketplace and classified businesses.

If you want to buy or sell a car, buy or sell property buy or sell a chair anything you got to go to you go to trading and my job. There was heading up strategy uh, which meant kind of charting the strategy for the business and also looking for investment opportunities companies to buy and invest in, and that was fun um and that was kind of my first foray into the world of online real estate. You know i kind of naturally bought and sold properties before then, but one of our businesses was like the zillow of new zealand, so really got into property and and when um, when i left trademary and we moved back to the states in 2016, i said all Right, i'm going to focus on real estate tech, it's just for whatever reason. I was particularly interested in new models that are changing the way people buy and sell houses.

Yes, and i'm a data guy, you know. So i wanted to find the data and i wanted to find evidence it's not about who raised some money or who issued a press release but like what's actually working out there right and um yeah. It's been kind of a fun ride. You know the past four or five years, just looking internationally trying to connect the dots see what's working, see, what's not working happening there.

So i'd like to say i'm like super passionate about real estate and - and i i am about the change, but you know really it's just the confluence of of a lot of great stuff. It's a it's a cool space, um, it's big and there's a lot of change and it's also a hard space right like i don't know how the industry's gon na play out. It's really hard and i like intellectually challenging situations. So it's uh, it's great from that perspective.

Well, a couple things you know for someone that reads your content. I certainly encourage everybody to go to his website and and sign up on his newsletter and start reading his content um. You can hear actually now that i think about what you shared here like the way you started your business, you bootstrapped it up, you didn't raise capital, and i can. I can totally pick up on that psychology in how you view other businesses, like these people, raised all this money.

It's and i'm not saying you're calling some of these companies they're responsible, but when you lose like 30 000 every time buy a house. It does make you question like what's really going on here, but i'm getting a little ahead of myself um. So you chose real estate because i look at it the same way. You do there's been almost no change until really just the last call it eight to ten years of real change like true quote-unquote disruption, the the late great ken jenny, a long-time friend of mine who passed away a year ago or less than a year ago.

Kenny would always say to me back in like 1992-1993. This industry is going to blow up unless they do something about it. So now here we are. We find ourselves with, i think, four or five major things that we should discuss and for my friends that are listening understand i want to keep you informed.

That's why i'm bringing on mike. I want to keep you in a position to defend your position against the disruption right and whether that's just being aware of it. So you can articulate the different degrees of separation between what you're doing what others are doing to buyers and sellers. But at the end of the day i want you to be the recognized expert in your local marketplace and to do that you've got to be well informed so mike.

I want to look at four things from this short little 160 page report that i've gone through a couple times and marked up and sort of synthesize it down to four buckets that i think my listeners would really like to get your insight on the rise of Eye buyers and what we think that's going to look like in the future real estate. Psychology, specifically how are humans addressing home, buying and selling from a mindset standpoint from a psychology standpoint, power buyers, which i think some are going to have to understand what that means. I certainly get it from the way you defined it and then, ultimately, where do you see agents in the future? So, let's just start with number one like: let's talk to us about the rise of ibuyer, you know open doors, zillow offer pad and redfen that's completely flat, but they're still out there and so many others that are trying to get into space. What agents need to understand about al ibuyers and then we'll get into how we can defend our positions and all that good stuff as well? Yeah.

That's a big broad question. I know there's a lot there's a lot to unpack there. I know well if, if we kind of, if we go back to my personal story, you know like i, i came back to the states in 2016.. I was interested in new models that are changing the way, buy and sell houses, and that's that's when open door started right, so it was really kind of this.

This perfect timing and, if you think about models that change the way somebody buys themselves like i buy, was the only one at the time that that really was trying something radically new. You know it wasn't just bringing certain things online or digitizing this or speeding that up they kind of cleared the table and said we're gon na we're gon na give you a whole new path from a to b and um and a really interesting proposition. You know so it was a fun company to watch and i remember spending you know: i'd be spending my evenings going through mls records and public property records on redfin and just kind of like trying to trying to follow the data and see, let's see, what's going On there, so i think yeah i bind was kind of the biggest thing to happen to the space since the the advents of the real estate portals you know, zillow and truly on realtor.com a decade before um the proposition you know really compelling right. Just kind of forget about having to worry about all this stuff and we'll just give you an instant offer on your home and you can move out whenever you want and then you're and then you're done with it from a business model standpoint.

I was fascinated by kind of what was what was happening there, how they were planning on money and and how they pivoted and changed their change their model over time. I i guess i mean to answer your question, then i'll. Let you kind of direct it where you want to go but like what? What do we need to know? I mean, i think, the biggest thing that i've been trying to communicate to the industry for the past couple years is: i buyers are here to stay they're not going away. They have raised and spent billions of dollars on this model and they're they're ad.

Like a lot of that, money gets spent on advertising right, like you know, god forbid, you live in phoenix, but you've probably been inundated with buyer ads and commercials and billboards for years now. So consumers know about this. Consumers know there's a new way to sell your home and they're going to start asking questions. So you just you got to be aware, like there's this new game in town, you can't ignore it.

I don't think you should dismiss it. You should really, like you, said tom kind of understand it and and be able to as an agent act as an expert advisor to guide somebody through the process. Maybe i buying is right for a homeowner. Don't steer them away from it.

You know you got to do what's right for them. Maybe it's right for them. It's not right for everybody, but maybe it's maybe it's right for them. It's so hard to.

Even you know. I can imagine somebody right now in phoenix who just wants to shoot themselves or raleigh north carolina or now you know houston, austin, dallas, etc, where this has become the norm, and so many other you know so many other major cities in the u.s um, like you Were you were kind enough to publish like transaction data so from memory i want to say it was like 0.2 or 0.5 of all the transactions in the us, which doesn't sound like a lot, but it it appears that they're picking up more and more momentum. So what insight do you have on the data and the number of transactions? And what is that telling you about? What could be their market share? Yeah. That's a good question, so kind of be pre-pandemic.

2018 2019 nationally they were like half a percent market share right, which is it's unfair because they weren't national. At the time they were like super centralized in those cities. You've talked about um market share in in those cities. You know phoenix would be the biggest one right.

It's kind of you know five, six percent, that's that's where we were at and phoenix is the you know the mother of all eye buyers, city right. It is it's perfect um others. You know maybe two three percent market share, uh and, and you know, during the pandemic, it just kind of dipped really low, but last um last quarter. You know the last three months i buyers bought more homes than ever before, yeah, so they're back they're back in a really big way: yeah um, you know - and that's not just more than 2020 - that's more than 20 19 20, like any other time period.

They're. It's huge they're, buying, tons and tons of houses, and you know we can get into that. Why later but um, in terms of how big it is, i mean i've never been. I don't have a crystal ball right.

All i can go on is, is the data of the past and the present tell you: what's happened what's happening and you can kind of connect the dots and figure out where we might go um. I've never been. Somebody who thought, oh i buying is the future of real estate. It's going to be 50 of total transactions or even 20 right.

You've you've got like the mother of all eye. Buyer markets. High point market shares like six or seven, where they've been five six years spent hundreds of millions of dollars. You've got a second tier of markets where you're at a couple percent market share.

You know the evidence shows me that this is kind of a high single digit market share situation right um, it appeals to some people and that's that's the amount, like the other way to think about it. Tom right, if you're in phoenix you've been inundated with this stuff for years and years and years, but still if you want to sell your home 95 of people still choose the traditional way. Of course, you actually did a really nice job with one of your slides, where you actually showcased. You know, here's here's, the sort of way to look at commission right.

You took like compass as an example charging two and a half to three and i'm you know compass, cold banker. Banana real estate could have been any one of them. Just happened to be compass and then redfin at one percent and then open door at like seven percent, like a premium cost for whatever convenience. This is offering.

Do you have any insight on on? Who is the ideal prospect for that? Like who's? Who says i'm going to pay infinitely more for that convenience, yeah kind of non-intuitively? It's it's people with kids and pets. Interesting, that's like well, it's kind of that's the closest. You know, i'm not going to say that's by the way. That's a big yeah! That's a big group of people.

Yes, but it you know, one of the biggest um one of the biggest pain points is open houses yeah, and you hear it like if you hear an open door, commercial on the radio like they're talking about the pain of open houses, so having an open house. If you have kids is a real pain right, you got to like keep it clean and get the kids out every time. There's an open home um same thing with pets. You know you can have an open home, it smells like dog and you got to get your three crazy dogs out of the house every time your realtor wants to show it.

So i you know i've asked time and time again and looked at the date. I mean demographically, it's not just young people, it's not just older people. Typically, it's folks who who've gone through some transactions before and they know the pain of of real estate. I mean it's also people that that don't want to deal with an open home um.

It's somebody who, who values the convenience of that instant offer right. I just i don't want to worry about everything else. I want it to be done, quick and that could be somebody with kids or a dog that could be somebody who's kind of inherited, a house as part of an estate sale, and they just don't want to travel to florida to sell it. You know i mean it could be, it could be anything, but basically it's anybody who kind of values the convenience of that instant offer.

So do you you think my mind always goes to so how do i help my clients defend their position right? If you listen to your competitors ads - and you say now, what's my variation of that like i'm - going to sell it for more essentially for less cost and i'm still going to remove all the hassles, you want no open houses but the highest possible price at the Lowest cost, i'm your gal, i'm your guy. Do you think that's the strategy for agents or you know they got to know about it, especially if you're in phoenix right like and and they probably tried everything you could imagine on their postcards, trying to basically say no to open door no to zillow, which is Probably the wrong strategy, but instead here's what i'm for - and this is what i stand for - and these are the things i'm gon na - do to make the experience better, more convenient, better price, etc. What are your thoughts yeah? I i think i think consumers like having the option. You know they they, like kind of the two pieces of paper and saying, here's your you know: i've i've gotten you an instant offer from zillow and open door and offer pad here's here's what they are right.

If we bring your house to market today, this is what i think we can get for it and here's your kind of standard cma to kind of build up to that people. People like the choice. I i think a bad strategy is bad, mouthing the eye buyers. A bad strategy is ignoring them right, you got to kind of, and and if you're an agent and you're doing that, you can still make money.

I mean there's these. The eye buyers will give you a referral fee. If you bring them business, um many realtors still charge a homeowner, a commission. If they sell to a um, you know if they sell to an eye.

Buyer right. You know if you're a realtor, you can make money either way exactly um and it's commensurate with the amount of work you put in and all of that, so i i if it were me, i would be kind of completely open and honest about all these options And - and i position myself as the local expert, not just in the neighborhood but with all the different business models - bingo, you know bingo love it um. So if we think it, you know, if we think in the peak markets it's five to six percent of the transactions we're talking about, you know nationally millions and millions and millions of sides um. Does it even matter that these companies are not making any profit while they're doing this like? Does the music eventually stop and they slow down? I wish i had a good answer to this because i, the intuitive part of me wants to say it does matter like it should matter whether a company makes or loses money right, but it just it seems to matter a lot less right.

I mean you know. Zillow's been unprofitable for a decade, you know redfin's been unprofitable for a decade like they're publicly listed companies they just it doesn't matter, investors will will you know still put money in so and maybe that's the lesson is that you know - and i hear from some folks Some agents who are like oh i've, seen this before these companies are losing money and it's all going to come crashing down. Um and part of me wants to believe that's true, but the the other part of me, the rational part, says no, it's actually not true. It doesn't matter, that's not how the world works.

That's not how the stock market works right, um, it's all about telling a story about the future. So i think the real lesson learned is, if you, if you consider, i buyers your competitors or compass, a competitor right, you're, going up against a company willing to lose hundreds of millions of dollars every year yeah to do something. It's not because they're stupid right, they're they're trying to get somewhere, can you lose 100 million dollars in a year right and - and maybe you should ask yourself well, why are they doing that? Where are they trying to get to, and should i be worried about that or how can i kind of work with them through the process so sure? No, i think the fact they're losing so much money is just um. It shows how big the stakes are.

Yeah again, we always go back and say: hey. There's a 90 billion dollar commission play just on residential before you, and i know where all the real money is mortgage, closing services, title insurance etc, and you know we'll get into all of that more. But i want to ask uh, i want to ask you this question um. You know we kind of discuss fees right and we certainly know the transaction count is improving, but not in every location.

My question is: do you see a price range that maybe is safe from this, or can you see somebody in manhattan or in beverly hills, saying yes, i'd like to sell my house and get an instant offer for 22 million yeah um, the so historically the sweet Spot for eye buyers has been around 250 k yeah and that's the that's kind of the median that was the median price in the us now. The median price in the u.s is around 350 right and the median price for ibuyers is around 350.. So that's that's! This turnkey turnkey home right and they talk about buy boxes, which is you know the how much they'll spend for a house um and again a lot of the a lot of the press releases around. Oh, we bought a million dollar house or we're expanding our buy box.

We're doing this we're doing that, but but really the bell curve of activity is really tightly clustered around. That 350 k price point right now. It's this turnkey house in phoenix right like that's, that's the house that works they need to be able to and turnkey is, is the key thing here right. They need to take possession of the house um new carpet new paint and then sell it really quick um and they need to know they need to know how much it's worth and how much it's gon na sell for.

So the farther you get away from that in price point or housing stock or heterogeneous housing markets. You know manhattan old brownstones in the northeast, like it just stopped or or even houses and uh that have winters right. You know like frozen pipes and snow on the roof, um that all introduces a lot of risk and uncertainty into the model. So i don't want to say those markets are safe, but they're, definitely not the low-hanging fruit markets where people are going to be targeting.

It's interesting, the the correlation there between that and what we see with multi-family units being acquired over the last two decades. Everybody's, like follow the sun, stay where it's warm, we'll deal with the rain and the you know the occasional floods, but we just don't want to be freezing so interesting um, but that plays nicely into so so, let's just say it was five percent of the market That means that 95 of customers still wanted experience from a real estate professional um inside this you talk about sort of the the real estate psychology right unpack that for a little bit, because i think this is going to help a lot of agents realize like why They are in such a good position, but you know maybe we can reinforce it, and maybe you can put a little fear in it because there are some things inside there. I think they really need to pay attention to yeah. So i kind of consider myself a bit of an armchair psychologist.

It's really interesting, you know so as a hobby, i'll read psychology books and yes, and as as i was you know, as i was doing this research like picture me, you know kind of setting out in 2016 traveling around the world reading all this stuff talking to Companies doing this research, you know i i was coming from a position where i was i was coming from the world of tech, and i thought why can't i just buy and sell my house on my phone. Why is this not working? Why is nobody doing this? Yeah - and you know i kind of i've gone through this journey, this evidence-based data-driven journey and i've ended up where i am based on the the realities out there and i think the reality is. Human psychology has a huge impact on this industry, and it's not that um. You know the technology can be built, but technology is not the biggest headwind here.

Right. Access to capital is not the biggest headwind. It's psychology yeah. So what i you know what i mean by that, what i talk about in that report, so there's a psychological concept of loss aversion, and you know this isn't something i've made up.

This has been out there been studied by psychologists for decades right and that that you know basically says that as human beings we're more likely to make decisions to avoid a loss than to get a corresponding gain right. So i'm more likely to make a decision to avoid losing five dollars than i would to gain 10. It means we're, conservative and, and that increases exponentially with the size of the transaction, so think think about it like this. If you wanted to sign up for a video streaming service, what's the what's the loss, what's the risk? What's the potential downside um, you know it's.

These are these are low value transactions and they're very frequent right every month you pay your bill. You try netflix um, you don't like it, you cancel it. You've lost either. It was free or you've lost.

Like 13, not a big deal right, no um, but then, if you think about these high-value transactions that occur really infrequently the the downside of making a mistake. Is quite big, um think about buying a car um? You know choosing a university to go to uh if you're going through a divorce, and you need to pick a divorce lawyer or like major surgery like these are big decisions where you you want help going through that the downside of making a mistake is huge and, And then you know you see where this is going right. Real estate is at the extreme. Real estate is typically the highest value transaction.

Someone will undertake in their life and it's the least frequent. You know a couple times. So what is the downside of making a mistake? It could be tens of thousands of dollars. It could be getting your kids in the wrong school district.

It could be safety right. Am i in the right neighborhood, i mean there's a huge downside risk so from a fundamental human psychology standpoint we want to. We want to kind of insure against that risk. We want to avoid it.

We want someone, we want to get an expert to hold our hand through the process and that's why that's why there's experts right, you know: there's there's specialized divorce lawyers or m a attorneys or people to help you through these high value, low frequency transactions. That's real estate agents, yeah right they are, they are insurance so that to guide somebody, so they don't. You know they. They either don't make a mistake or they feel they're, not gon na feel like they're, about to make a mistake.

So it's interesting, i mean first of all like i could just go like mic drop and just say: okay, we're done right, if you all just so, i'm interviewing seth godin a few weeks back and and we were chatting about real estate and positioning and zillow and His response was look if all you do is share listings you've already lost like if that, if that's your value proposition, the game is over. It's about being the hyper local expert. It's really about being the guide, it's about being the person that could navigate through 25 offers and make the best decision right like helping our customers with the things that the internet can't do so so you know, do you feel, do you feel certain about the future? For real estate agents and if there was from this report and other you know other research you've done, are there two or three things you would say boy. If i was an agent today, i'd really be paying attention to a b and c yeah i mean i'm.

I'm pro real estate agent. I know it's a big shift for me over the past four or five years. It wasn't that i was anti-agent, but it was more of why do agents exist? That's right, they're, not relevant anymore um and i use real estate agents. You know they provide a level of value to me that i i can't get on my own and i don't want to get on my own, and i don't want my family to rely on me getting all that right on my own right, um yeah, the the Industry is changing pretty quick and there's all these new business models so you're talking about a b and c i mean, i think you know agents in the past and currently they need to do more than share listings.

They need to be that local expert um part of that now is understanding the different business models available in certain markets. You got to keep track of. You know what zillow's got on offer. Realtor.Com the i buyers, these power buyers.

Do i want you know, are you going to buy before you sell, get a cash off like all that stuff? You can be that expert and you should be the expert and that's the value you can provide to consumers um and, and then i mean yeah to loop back to the psychology standpoint. It is it's true. It's there. You know there is this psychological headwind against new models, and you can say to someone you know like okay, when you you know when you're i say a little facetiously, i love zillow, but you know you could say to somebody like when you're done screwing around on Zillow and you want to get serious about selling your home come to me i'll help you through that you know you can get your zillow offer i'll go out i'll, get you three more instant offers i'll give you a really good, cma, um i'll talk to you About these programs, you can buy your new home before you sell your old one and i'm unbiased.

You know if you're talking to somebody in a zillow polo shirt like yeah, there's a little bias right there right, but the agent can be and should be totally unbiased. In this space i agree, and i think it's it's - it's actually a breath of fresh air that you're saying hey. You just need to understand all the different models, so you can actually say to your customer. Look, there's a lot of different ways.

You can do it today and then just to say, here's all the different options, but the fact that you're, the one that's doing it. The non-biased way, shows your strength that you're not afraid of these. These different models. You understand that they're a tiny percentage of the transaction, so i love that and i think there's so much to um.

I met tony robbins when i was 18. That was the first time i met him. He was on set uh to do an infomercial where my dad was the host right, so he was 28. I was 18..

He made his entire career on understanding that people do more to avoid pain than they do to gain pleasure. So it's interesting that you, you went that direction as it relates to eye buyers like the what, if what if this is the wrong route, what if we actually give up too much money? What, if you know what i mean like there's just so much to play with there yeah yeah? No, i think it's, i think it's true and nobody's talking about psychology and real estate like and they need to be it is it is. I think it's the most important thing and if you look at, if you look at these new models and why they fail or why they don't get traction, it all comes down to psychology right, like am i going to use some like, i don't know, just imagine Trying to convince your partner that you want to sell your home using a discount brokerage that you've never heard of before yeah. You know, like that's.

That's an uphill battle like you want to sell our home using what and how much they like uh. I don't know man, why? Don't you just call the agent? You know like yeah? It's it's not it's! It's nothing more than this risk aversion where you just you, don't want to make a mistake through that process. So it's like, if you're an agent, that's a big thing. You have on your side, but don't take you know, understand it, don't take advantage of it, don't take it for granted.

No! No, but it is there and and that's kind of how you how you can slot in and if you look at these new models like zillow and open door and the eye buyers, you can see them kind of slowly, realizing that in the way they've pivoted their Business over the last couple years, like they're slowly coming around to understanding how important not just an agent is, but like the local agent, you can't just hire a bunch of people, give them your polo shirts and say: okay, we have agents, it's not it's not that Right, no and then we both know they're also now paying attention to where all the real money is again mortgage, title closing services, etc um. But i want to make a point because i know at least one of you will will think back to uh a podcast. I did with the buddy and we're talking about you know he he said without even saying his name. He said no, no, no, you have to understand, like people want to do everything on their phone like.

Could you imagine in 2020, putting your 16 year old into a stranger's car and saying yes go ahead and take that you know take him to dinner. Take him whatever and of course the answer was there's no way and then we look at the impact of uber that now that's an everyday occurrence all around the world. But i want to reiterate what you said yeah, but i could take an uber like five times. Six times ten times in a day, i'm not gon na buy and sell a three four five hundred thousand dollar house.

You know more than once every ten years right. So do you think that do you think that psychology plays or do you think, there's some thought in hey, maybe just maybe in 10 years from now it will be, like sure, put my 14 year old in the uber and go yeah? No, i i totally i'm with you on this. You know in uber experience and ordering groceries online is totally different than buying real estate and it's not the technology, it's the psychology yeah. So i think i think it's in that report.

The other thing there there was this um. You know this harvard study about um. Oh, like artificial delays, yeah yeah, the idea is yes. Yes right, yes, yeah.

The idea that the longer you have to you know it's good things come to those who wait right. The longer you have to wait for something up until the point of course, but the longer you have to wait, the more perceived value there is uh. So i think you know it's like. If you go into a five-star restaurant, you order a meal and then it's immediately delivered like that.

Doesn't that something's wrong right! You want it to take some time um, if you, if you like, file your taxes on them online and turbo tax. You know you'll see like this little scrolling bar like checking for this checking for all refunds. Checking for this - that's all fake, like the computer knows like that. It's done, but it's inserted there or, if you're, you know, on your bank's website and they're doing a security audit and there's like a little bar.

Those are all fake because if it happens too fast it like it, it sends us it doesn't work in our brains. Right, it's confusing it's like wait, a minute that was. This was too big of a thing to happen too, fast yeah. So if people want to delay when they're submitting their taxes or ordering a five-star feel like do they really want a one-click mortgage or they really want a one-click purchase, i don't think people do i've.

Seen no evidence suggesting that, like people want the transaction to be, you know easy and i hesitate to say fast. I mean they don't want it to be too long right, yeah, but i i don't want to be able to buy a house in one click. I don't trust myself, it wouldn't feel good and there's just no evidence out there to do it so yeah, just because it's it's happening with netflix and groceries. I don't think you can make this mental leap to be like, oh and then it should happen everywhere else.

Um, and even if it does real estate, is like the last cab off the rank in terms of where it's going to have have some sort of impact, because it is so infrequent such a high value right and you can even say um. You know chatting with so many of my friends in the mortgage space the one-click mortgage right, the the problem with that is usually the lack of humanness on the back end. I still want that advisor. I still want to call and go mike.

What do you? What do you mean like i'm supposed to close in like five days? Why did i just get an email? Why did no human actually reach out to me so there's there's that balance. I think between you know some things that we want to just hit a button and have magic happen, but i think we also still want that. Humanness that connection that person we can reach out to that expert, advisor and and the blend of the two. Certainly, in my conversations with seth and with yourself and with others, i think that's where we see it.

We want that fast, beautiful experience, but i want a human that's going to guide me and navigate through the process 100, and that is the hallmark of a successful model in real estate in 2021. Right, it's exactly that it's combining both of those right bingo. So so, let's talk about power, buyers, um! Even when i saw it, i was like what does he mean by this and then for you know, for the transparency, i'm an investor in a company called easy knock. They do this.

I've been a huge you know, knock and others that are doing this. I think it makes a ton of sense now you see compass, doing it real easy doing it. I think berkshire hathaway launched a product similar to this you've. Seen everybody realize there's a there there, but maybe the person that doesn't understand we're talking about unpack, what is power buyers and then how should agents be thinking about it in their own business? Yeah, no good, good question um and you know for all transparency.

I'm an investor and advisor in a company called homework, but i love all these companies they're all they're, all doing a really good job, yeah um i've. So i i use the term power buyers to describe companies that are that are getting close to the transaction and helping buyers out right. So i buyers are getting close to the transaction and helping sellers out power. Buyers are getting close to the transaction and helping buyers out and they're.

Typically, two products uh buy before you sell and a cash offer yep. So i think those are pretty self-explanatory, but just to put a sentence behind each one right buy before you i mean yeah. Buy before yourself like buy before you sell new home with their money, you move in and then this company lists your old home for sale. They sell it and then you and then you're done right and then the cash offer basically turns your offer into a cash offer, no contingencies using.

You know using their money um. These are really the models of the moment for 2020 and 2021 because it's been a seller's market. High demand low supply. How can how can i stand out how you know everybody wants to move? Nobody.

Somebody told me this once and it's great nobody gets excited about selling a home people get excited about buying a home. Yes, you know um, so i think this is a great area to target um. Do you think in the future i mean because, let's, let's assume that there will be a time in the u.s and around the world where there is enough inventory right where buyers actually have choice versus? Oh, my god write an offer. Whatever it takes, remove all contingencies.

You know take my three-year-old go. Please just accept my offer. There's gon na be a time and place where this would end. Do you think this this product category endures the test of time, or is it just in this moment? No, it's a good question and you know maybe there is some bias because i'm i mean i have a little teeny tiny bit of skin in the game right, but i and i could be wrong, but i i think it sticks around.

I mean i, i think it becomes the the the new norm like why. Wouldn't it's just a better, it seems like a better way to do it like. Why, wouldn't you do that and it's not going to be 100 of transactions? Maybe it's not even 50, but you know what, if it's a couple percent of transactions, that's still several multi-billion dollar businesses that can operate in the space and it's a great example of how you can use access to capital um as a competitive advantage to provide a Cool new interesting product, so i i think it has some i mean yeah. I think it has stain power and also the reason i i talk about power.

Buyers is not to pigeonhole them into this idea of a cash offer, because that's just a financial product yeah. None of these companies are doing just that. You know they're, building out entire ecosystems around that buyer experience and helping somebody out. You know so you talk about mortgage right.

You make money on mortgage and closing services. These companies, the i buyers, their mortgage attach rate, is like one or two percent. It's just not it doesn't. It doesn't work right by the time you're selling a home - it's too late to attach a mortgage to it, yeah um, but the power buyers, their mortgage attach rate is 70, which is because yeah.

The first thing you do when you go to the website. Is you get pre-approved, it's just. It fits in right, nobody gets excited about selling a house, they get excited about, buying a house and then they you get pre-approved to go through this process. So they're they're able to build out this ecosystem, combining finance and brokerage and closing services all under one roof to to do something cool, and i think the you know in the future you so there.

Some of these companies are are walled, gardens closed ecosystems. It's like a brokerage, you know so something like orchard, that's it they have their own agents, they have their own service. You know they're it other companies like homeward and noc. They have networks of agents.

So they can. Anybody listening to this can sign up for them. Right and - and you can do that - i i feel, like you know in the future - there might there's going to be. You know these services offered at hundreds of brokerages, you know and maybe they're maybe they're powered by a dozen companies or so with a financial muscle, but there's no reason that everybody can't offer it and um and there's a really last thing i'll say in it.

There's a really interesting network effect at play with cash offers, because if you, you know how many offers do you have to put in on how many houses and lose them to another cash offer before you start asking your agent? How what do i do about it? What do i need to do? How do i solve this yeah? Are you shocked at all, i mean again we're both investors in in companies that play in this space and they're both doing well. Are you not shocked that like bank america wells chase and all these others haven't said hi we make money loaning money like we can get into this game like i'm, i'm shocked that they don't even it appears they don't even look at it yeah it's um. No! I i am a little. I am a little surprised that there hasn't really there hasn't been a faster response to that right.

You know, i mean well even someone like even someone like zillow or open door. You know these these other power buyers. They were out there doing this for a while and open door kind of just recently launched their own cash offer product um. You know.

I think i would be shocked that zillow didn't launch something by the end of the year and then you have all the traditional mortgage companies yeah. I wonder like what's taking them so long like this is a once in a generation opportunity. Why are you not going out there and and doing this um? I i don't know what the answer is, but yeah. It is a bit surprising that it's um.

It's been such a small playing field. Today, yeah yeah. I agree. I agree.

I actually call it empower buyers versus just power buyers. I think that, like they're, just they're, just a vehicle doing power buyers to get transactions done and well, let's, okay, let's this has been super fascinating. I can't wait to see the comments that people are going to have about this um, but let's end with really the big question like: what do you think is the future of real estate agents? You know: do you do? Do you foresee we're at 1.6 million right now in the u.s? Here's a fun fact uh as of right now from rds our buddies over there. Nine percent of all commissions in the first six months of the year were paid out to call it 800 000 or the bottom half of the mls and then the top half.

As you can imagine took 91 percent of the commissions and then when you really look at the top one percent, five percent 10, 15, all the way to 25 percent. You could almost argue and for my friends that are listening, pay close attention. You could almost argue looking across the median sales price of the us, that, if you're not in the top 25 of volume, let's just keep it their volume and therefore commission you're, not even in the game you're, not even making enough money to to call yourself a Real estate professional, i don't mean that, like someone that doesn't make the money isn't a professional but, like you you're not making enough money to live. What what do you think happens with this i mean? Could we go to 300 000 agents, or are we going to go to 5 million agents because all those companies want more fees? Welcome to welcome to my brain mike.

This is the stuff that i'm thinking about at four o'clock in the morning. It's interesting. It's tangential to what i think about it four o'clock in the morning, but but from a different angle, um. I well there's there's pressures at play in the industry around increasing agent efficiency.

You know, and i'm thinking about zillow right, um, zillow's kind of you know. The premier agent program is like noah's ark right and they're, bringing on agents and pairs and and if you play by zillow's rules, that's great. You get a lot of leads and you can do stuff, but the i you know what i think, what what everyone in the industry is doing and realizing think about the recent announcements with rocket and better is you know this employed agent model is weak. It's just improving agent efficiency, you know if i can handle sourcing leads and and hot leads, and i can bring them to agents.

I don't i don't you know. If i have 100 leads, i don't want 100 agents, i actually want just 10 agents and i'll give them each 10 leads, and then they can make more money. I can make more money and we're all out there. What i'm hesitating with is how strong those forces are like there's.

Definitely there definitely is that force, but i think just it's: it's probably hitting up against the incumbency of the industry right now and how it works, and that's just such a huge bulwark against change. I i don't know if you know, i don't think that's going to change overnight. I don't think you're going to go, lose a million agents by this time. Next year, two years or even five years from now um it's going to be a struggle, but i i think um you know i i used to in terms of who, who are the winners? Are you know i used to think it was? Whoever could touch a consumer first, one right if you're zillow and you get somebody to your website and they're browsing you you win, you got the consumer and now you can guide them through the process.

Well, what i'm? What i'm kind of coming to realize now is it's not who can touch a consumer first, but just who can touch a consumer and then once you've made a connection, you build the best relationship with them possible, bingo right, so that the downside, with with someone like Zillow with a big call center and millions of leads is that they can't they. You know the zillow employees and the call center can't make a relation, a meaningful relationship with every person they just they just can't do it. You know, but if you're a real estate agent, you connect with somebody locally, whether it's at a soccer game or they cold, call you or they see a facebook ad or you've gotten a lead through zillow and you call them or you're dropping off mailers at their House, no matter how you touch them, if you're able to build a relationship with them, that's the key and it's hard to scale that, like you, can't use technology to scale that you can't employ your agents and scale it. It's still just really hard boots on the ground right, picking up the phone, you know being good with people's names and knowing their kids names like all that kind of relationship, stuff yeah.

It is those - and i you know it's funny like hearing like simon sinek, say we shouldn't be calling these soft skills, because these are hard skills right. The ability to build rapport follow up, make a connection um. You know so much of the data forever has said. The agent that wins is the one that answers the phone right that responds, but then you look at um, i'm sure you know the guys are a thousand watt uh.

You know mark and bright, have been long time, friends and some of the content that they're putting out now around the lack of loyalty. Or how do you maintain trust? You know there's just there's so many breaks in the consumer experience post the transaction when, when really, i always say that's when the real, that's when the real relationship begins right, i just sold you guys a house you're. Now a part of my tribe you're in my community, but again i'm getting ahead of myself. So so i think we're both on the same page.

We think the best will continue to be the best agent. Efficiency will always be where it's at i'm gon na go a different direction, one one last last question so about three years ago i was doing my annual conference and i threw up a slide, and i said for as long as i could remember, and i got Into this industry in 1989 - and i said, here's what the real estate market looked like and it was like you know: 90 of the transactions were done by real estate agents. Seven to eight percent were for sale by owner, you know diys and then, like maybe one or one and a half percent were like you know. We buy ugly houses right like buying at the courthouse steps that kind of stuff, and then i said, but then i've watched it shift, and i said this is where i think it's going and back then remember.

This is three. Four years ago i was saying i think i buyer could be like a ten percent of the market right. I just i just think, there's going to be a segment of people and there's always going to be a diy segment, but then i have this. This sort of red chunk, all it said, was attached with a referral fee and everybody was like.

Oh and i'm, like you, know, relocation agent, agent referral, so so what i wanted people to understand was, i see commission compression differently than just discount brokers. Well now, i'm out, you know, talking to people and doing events, and i'm literally saying my prediction is in the next three years: half of every real estate transaction in the country will have a referral fee attached to it. Think about all the companies that are arbitraging they're, going directly into the vein of the real estate agent mortgage companies, real estate companies, just pure advertising companies. I'm just curious, like you know you, you do a lot of research.

What do you think? No! That's! It's interesting! I'm curious what the um do. You know what that number is today, i'm trying i'm desperately trying to get it. It's it's it's a hard one, because how do you tell between you know when you're looking at sales volume gross commission income as it would relate to you know 250 of the top mls in the country that can you know, control 95 of all transactions? It it's hard to get to. We see it when we look at our our clients numbers right, you see it because you know who who's on zillowflex, who has rdc vip.

You see who's got, you know quicken as a partner at example, and you see agent agent referrals, you see relocation um, but i i like, i think about it. As the blob remember the movie. The blob like nobody could get away from it, but it was moving really slowly and it kind of just gobbled everybody up. I keep telling people like if you don't defend your position, there's a really good chance that you'll be doing the same amount of work for half the pay, yeah yeah, no, nothing! It's really interesting! Now that you mention it, it's it, it does resonate and there is definitely a shift in the industry.

To do that. I mean there's so much top of the funnel is so important and these companies are spending billions of dollars to advertise and attract consumers. You know when someone like an ibuyer they'll buy. You know out of all the consumers that come to the ibuyers website and request an offer.

They'll only buy five percent 10 so that other 90 they got to do something with it. They're gon na they're gon na monetize it it's gon na, be a referral fee. So these these new models are generating a lot of that. So there's definitely um.