The Future of Brokerage Exciting? Scary? Or BothThe typical member spent $2,000 on technology in the last year page 19 6% 15% 22% 17% 12% 6% 11% 10% Less than $100 $100- $999 $1,000-$1,999

The Future of BrokerageExciting? Scary? Or Both

2019 REImagine

September 25, 2019

Joel Singer Chief Executive Officer

California Association of REALTORS®

What has changed?

The Internet took over

page

3SOURCE: International Telecommunications Union

Internet users per 100 Inhabitants

How We Shop: Amazon, Apple Pay, Google Pay, etc.

page

4Series: U.S. Retail Sales

SOURCE: U.S. Census, Statista

How We Meet: On-Line Dating

Takes Over

page

5SOURCE: Proceedings of the National Academy of Sciences

Volume 116, issue 36

CALIFORNIA ASSOCIATION OF REALTORS®

How we watch movies: Whatever Whenever

1950s 1970s

VHS

Saturday night at the

movies

Movie Theater

1990s

2000s

1960s

DVD

page

6

Streaming/Downloading/

Wifi/Smartphone

Cable, Netflix

Chromecast,

Hulu, Amazon,

VUDU

How We Eat: On-Line Food Delivery Takes Hold

page

7SOURCE: McKinsey & Co, The changing market for food

delivery, global six-month study covering 16 countries

Food Delivery Market Growth

CALIFORNIA ASSOCIATION OF REALTORS® page

8

What industries have been

disrupted by the internet?


09

MM

❖ Music

❖Travel

❖Cable TV

❖Music

❖Transport

❖Retail

Whew!

What about us?


Industry Timeline

1960

1985

The Internet

Capital infusion

Corporate

America

(Merrill

Lynch)

steps in

Major

Independents

& Franchising

take hold

1996

2012

1970 1980 1990 2000 2010

page

12

SSSSS

Sheds

Brokerage

Sears

Homestore

Realtor.com IPO

Sears


Industry Timeline: 2012 - 2016

2012 2014

News Corp buys MOVE

Realogy buys ZipRealty

OpenDoor raises $210M on $1B

valuation

Compass raises $75M

at $1B valuation

Re/MAX IPO

Realogy IPO

2015

2016

2013

UpStreamhatched

LeadGenexplodes

page

13

Zillow

IPO


Industry Timeline: 2017 - present

2018HSA Buys Long & Foster

Compass raises $370M, reaching $6.4B valuation on total capital raised of $1.5B

RedfinNow

launches

Redfin

IPO

2019

Compass buys Alain

Pinel Realtors

page

14

2017

Compass

raises $450M

at $2.2B

valuationZillow passes

$1B in revenue

Softbank invests

$800M in Compass & Open Door

Compass

buys Pacific

Union

eXp hits

10,000 agentsZillow Offers

launches

What hasn’t changed?

In 2019, an estimated 91% of all residential sales were

assisted by a real estate licensee


Top U.S. Real Estate Companies By Sales Volume

page

17

2009 2018

NRT

HomeServices

Long & Foster

Prudential Douglas Elliman

Prudential Fox & Roach

NRT

HomeServices

Compass

Douglas Elliman

eXp

1

2

3

4

5


Our View: “We have a long history of innovation and change.”

page

18

The typical member spent $2,000 on technologyin the last year

page

19

6%

15%

22%

17%

12%

6%

11%10%

Less than

$100

$100- $999 $1,000-

$1,999

$2,000-

$2,999

$3,000-

$3,999

$4,000-

$4,999

$5,000-

$6,999

$7,000 +

How much money did you spend

on technology for your real estate

business in the last 12 months? (n=520)

Median:

$2,000

SERIES: 2019 Technology Survey

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Use of mobile technology

page

20

34%

43%

20%

3%

My business is

completely mobile

I am getting there My office is more

office-based

I am not yet mobile

Please select the statement that best describes the use of

mobile technology in your real estate business.(n=551)



I only use a

tablet, laptop

and/or smart

phone

I use a tablet,

laptop, smart

phone and/or

desktop

computer

I use a desktop

computer and

a smart phone

I only use a

desktop and

regular cellular

phone

REALTORS® most looking for technology to improve communication and information access

page

21

What objective(s) are you trying to achieve by incorporating

technology/tech tools into your business?(n=551)

75%

72%

69%

65%

49%

38%

34%

26%

6%

More effective communication with clients/…

Improve the ability to access information…

Simplify the transaction process

Manage clients more easily

More effective marketing

Generate more leads

Protect my data and enhance security

Cost cutting

OtherSERIES: 2019 Technology Survey


86% of REALTORS® use social media in their business

page

22

Which social media platforms do you employ in your business?(n=510)



79%

25%

53% 44% 28%

13% 10% 1%

Other 4%

86%

REALTORS® use social media for relationships and promotion

page

23

What is the primary reason for using social media in your real estate business? (n=446)

30%

22%

22%

8%

7%

6%

4%

3%

Build/maintain relationship with existing clients

To promote listings

Promote my brand

Find new prospects

Stay informed on latest real estate news…

Get leads

Network with other real estate pros

OtherSERIES: 2019 Technology Survey


Over half say their company provides a real estate platform

page

24SERIES: 2019 Technology Survey


Yes, 58%

Does your company provide a real estate

platform? (n=526)

72% use the

provided

platform

Do you use the real estate platform that

your broker provides? (n=303)

2 in 5 think they use a real estate platform

page

25SERIES: 2019 Technology Survey


Yes, 39%

Do you use a real estate platform that integrates software applications to manage your

day-to-day activities in real estate?(n=520)

“Zap”

“Microsoft Office”“Folio”

“KW Command”

“Google”

“CRM”

“Contactually”

“Compass” “CINC”

“Skyslope”

“Realvolve”

“Moxi”“Wise Agent”

“Top Producer”

“ZipForm”


“Real estate is now a technology

industry that sells homes.”

Creed Smith - Inman

But did we really change

enough?

(Have we changed fast

enough?)

The ultimate dis

“The ultimate disruptor is an unhappy customer.”

Pam O’Connor


The process is still far from easy…

page

29

+/-10 days +/-20 days

+/-10 days

buyer

seller

find

agent

financial

qualification

market

education

+ view

property

purchase offer

presented to

seller

accepted

sales

contract

negotiation of

termsopen

escrow,

deposit

earnest

money

disclosure,

inspections

title

search

closing

procedures

loan

funding,

title record

at city hall,

utilities

on/off

loan

processloan condition

removal

move

ininspections +

conditions

removal,

increase deposit

obtain

necessary

property

inspections

market/

sales

analysis

by

agent

establish

price and

list

property

open

houses

and

showings

facilitate

property

inspections

inspection

and

conditions

removal

receive

cash

proceeds,

rent back

or movemultiple

listing,

advertising

+/-15 days


provide

property

disclosures

26%

20%

18% 18%

14%

9%

7%

Too costly Took too

long

Rough ride Inefficient Smooth as

silk

Fantastic N/A

Series 1

Which of the Following Best Describes Your Home-Buying Experience?

page

30SERIES: 2019 Google Consumer Poll


page

31

Which part(s) of the home buying process needs the most improvement?

SERIES: 2019 Google Consumer Poll


42%

18%

17%

12%

9%

4%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Mortgage financing

Appraisal

Escrow/closing

Agent search

Home search

Other


Buyers’ Pain Points

page

32

• Loan approval

• Outbid by other offers

• Home appraisal too low

• Paperwork

• Contract negotiation

14% of buyers say it was difficult to obtain financing

Please rate how easy

or difficult it was to

obtain financing. (n=993)

SERIES: 2019 Consumer Survey


page

33

2%12%

22%

38%

26%Extremely Difficult

Somewhat Difficult

Neither Easy Nor

Difficult

Somewhat Easy

Extremely Easy

Mean:

3.72

1

2

3

4

5

1 in 5 experienced difficulty with their home appraisal

Did you experience any

difficulty with your home

appraising at a value

equal to or below the

final sale price?

(n=1,005)

Yes,

18%



page

34


Sellers’ Pain Points

page

35

• Agents charging too much

• Sales fell through due to buyers’ inability to secure a loan

• Home inspection

• Paperwork

• Contract negotiation

43%

20%

15%

12%

8%

1%

Getting a good price

Selling quickly

Selling the house

Finding a qualified buyer

Finding a new house to buy

Other page

36

Price top concern of sellers

What was your biggest concern as a home seller?(n=958)


SOURCE: NATIONAL ASSOCIATION OF REALTORS®

23% had challenges in the closing process

Did you encounter any

challenges in the

closing process?

(n=989)

Yes,

23%



page

37

Most still want to use an agent because of their professionalism

73% said that the agent’s educational background was

either extremely import, very

important or important

80% said they prefer to use a real estate agent because

they are professional

page

38SERIES: 2018 REALTRENDS Consumer Survey

Source: CALIFORNIA ASSOCIATION OF REALTORS®

80% said that buying or selling a home is a stressful process

47% agreed that the services

provided by agents are less

valuable now that the Internet

has all housing information

available

The industry has seen new internal

models…


Shift of power: broker to agentTechnology is the driving vehicle

page

40

Broker-centric Agent-centric

1960s-1970s

Main frame

computerBroker has all the

information

1980s-1990s

Personal computersAgents have more

information access

And there are teams

page

41SERIES: 2019 Membership Survey


26%

74%

20%

80%

19%

81%

Yes No

2017 2018 2019

Q: Are you currently working as a member of a real estate team? (n=4,031)


The next shift: agent to consumer???

page

42

Agent-centric

1980s-1990s

Personal computersAgents have more

information access

2000s – 2010s

Internet and mobileConsumers have all

the information

Consumer-centric


43

How do the venture

capitalists see us?

What are the ramifications of

having so much $$$ flowing

into the real estate industry?

$519 $1,225

$2,117 $2,893

$3,419 $3,945

128

211

283

326

374 335

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

2013 2014 2015 2016 2017 2018 (thru

10/18/18)

0

50

100

150

200

250

300

350

400

Dollars ($M) Deals

VC capital changing the rules of the game

page

44SOURCE: CB INSIGHTS

Real estate tech financing trend


All truth passes through three stages:

1. First, it is ridiculed.

2. Second, it is violently opposed.

3. Third, it is accepted as being self-evident.

Arthur Schopenhauer - philosopher

page

45


Why they didn’t see it coming…

page

46

Dismissive

Arrogant

Distracted


Disruption is all around us…

page

47

car

service

movie

rentals

music hotels

brick &

mortar

checks

vs. ePay

gas vs.

electric cars


Disruptors, innovators and failures in the R.E. brokerage industry…

page

48

page

49

Residential Real Estate Technology Landscape

SOURCE: Thomvest Ventures

Last updated: July 2018


Real estate industry: We have a long history of innovation and change.

Consumers:

page

50

Is that how they see it?


51

iBuyer:

a niche, a real threat or

an opportunity?


Traditional transaction vs iBuyers – The hype

page

52

Traditional transaction

annoying

painful

uncertain

iBuyer

speed

convenience

certainty

“iBuyers will have 20% market

share by the end of 2019.”-Brad

“iBuyers will have 60% market

share by the end of 2024.”-Rob


How iBuying Works:

page

53

01Seller fills out online questionnaire

about their home

02iBuyer uses algorithms and technology

to determine offer price

03iBuyer presents seller with a nonbinding

offer (typically within 2 days)

04iBuyer sends inspectors to verify value

and assess any needed repairs


How iBuying Works:

page

54

05Transaction closes and iBuyer takes

ownership and charges fee (6-8%)

06iBuyer renovates for resale

07iBuyer lists home

08Offer is received, enters into

closing process

iBuyers’ Target: Largest Segment of Home Transactions

page

55Source: NAR, Morgan Stanley Research

386

2039 2028

606

220 209

$0-$100k $100k-$250k $250k-$500k $500k-$750k $750k-$1m $1m+Axis Title

74% of Home

Transactions

Where iBuyers Operate

page

56Source: CBInsights

Austin, TX

Jacksonville, FL

Portland, OR

Tucson, AZ

Phoenix, AZ

Dallas, TX

Las Vegas, NV

Atlanta, GA

Orlando, FL

Raleigh, NC

San Antonio, TX

Charlotte, NC

Nashville, TN

Tampa, Fl

Minneapolis,

MN

Houston, TX

Sacramento,

CA

Denver, CO

Boston, MA

Chicago, IL

Denver, CoLos Angeles, CA

Phoenix, AZSalt Lake City, UT

San Diego, CA

Dallas, TX

Tampa, FL

Atlanta, GA

Charlotte, NC

Raleigh, NC

Dallas, TX

Tucson, AZ

Phoenix, AZ

Tampa, FL

Orlando, FL

Atlanta, GA

Las Vegas, NV

Charlotte, NCSalt Lake City, UT

Phoenix, AZ

Las Vegas, NV

Atlanta, GA

Denver, CO

Dallas, TXInland Empire, CA

San Diego, CAOrange Co., CA

Wayne Co., MI

Knox Co., TN

Nashville, TN

Austin, TX

Dallas, TX

San Antonio, TX

19

12

9

4433

Future Markets

Current Markets

Impact of iBuyers on Residential Real Estate

“The iBuying Market

could reach ~3% total

transaction penetration

by 2030, the equivalent

of ~175k homes.”

(Morgan Stanley)

page

57Source: Morgan Stanley Research

iBuying Homes (000s) % Total Homes

page

058

Growing Quickly

page

059

page

060

page

61

The cost of convenience:

traditional sales net more

Source: Collateral Analytiics

page

62

The cost of convenience

Source: Collateral Analytiics

page

063

Where could this lead? iBuyer

is a viable alternative for those focused

on convenience & certainty AND

sets a floor for home prices.

What beats a zestimate? A real offer

from an iBuyer.

Majority of buyers and sellers used an agent

90%

used an

agent

SERIES: 2018 REALTRENDS Consumer Survey


page

65

-Up 5% from 2014

-Up 9% from 2001

81%

85%

94%

91%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

55 and up

45-54

35-44

18-34

Ag

eYes No

Over half of buyers needed help with negotiating terms of sale and price

29%

24%

22%

13%

9%

3%

Negotiating terms of sale

Finding the right home

Negotiating price

Mortgage financing

Help with legal issues

Other

In which part of the transaction did you need the most assistance from your agent? (n=949)



page

66

59%

59%

44%

34%

32%

29%

5%

Negotiating price or terms of sale

Determining listing price/strategy

Advice about selling

Timing or sequencing the sale

Help with legal issues

Home staging

Other

page

67

Sellers needed assistance with a variety of things during the sale

With which part(s) of the sale did you need assistance from your agent?(n=942)


SOURCE: NATIONAL ASSOCIATION OF REALTORS®

Change is inevitable,

Growth is optional

John Maxwell – leadership expert


How to adapt? Embrace technology

page

69

It is not going away, whether you like it or not.

• Understand it

• Invest in it

• Take advantage of it


True stars will be those who adapt, and they will dominate the future

page

70

• There will be fewer agents overall

• Fewer agents working part-time

• Productivity will trend upwards

• Professional sports analogy: stars prosper


The Industry will continue to evolve…

page

71

Thank You

This presentation can be found on

www.car.org/marketdata

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The Future of Brokerage Exciting? Scary? Or BothThe typical member spent $2,000 on technology in the last year page 19 6% 15% 22% 17% 12% 6% 11% 10% Less than $100 $100- $999 $1,000-$1,999