SRE Matrix, a low-fee, tech-focused brokerage that launched in 2014 backed by $200 million in funding, recently closed its Honolulu office, completing a wind-down of the firm’s company-owned brokerage offices.
The company, financed exclusively by billionaire resort developer Takeshi Sekiguchi, has also shut down company-owned offices in San Diego and Phoenix.
The closures are part of a full pivot by SRE to a new franchise-like business model. The vision is for brokerages to join SRE’s network of partner brokerages and service buyer leads under the firm’s low-fee model and originate mortgages funded by SRE.
The changeup is the latest reminder that scaling a low-fee brokerage can be difficult. SRE’s office in Hawaii, where SRE originally launched, never gained meaningful market share, despite having spent millions on marketing.
“We weren’t necessarily having issues,” said Troy Huerta, the president of SRE Mortgage Solutions and who serves as SRE Matrix’s broker of record in California. But, “doing a traditional brokerage we kind of knew wasn’t going to be the answer.”
“We’re alive and well and have plenty of money in the bank,” he added, putting the firm’s war chest at $175 million.
The Honolulu closure necessitated the layoff of four salaried agents, but the company still has broker licenses in Hawaii and all 49 other states, according to Huerta. This allows SRE to access listing feeds from MLSs that power its national property search site, through which the company can generate leads for partner brokerages.
SRE has learned that, when it comes to charging low fees, “even if it’s profitable; it’s a small profit,” Huerta said.
SRE Matrix had claimed to provide the full range of traditional service for about a third of the normal cost. It had pocketed a 1-percent fee for representing homebuyers, rebating the rest of the buy-side commission to clients. And it typically charged sellers anywhere from a 2-percent to 4-percent commission, collecting a 1-percent fee for itself and paying the remainder to buyer’s agents.
It later began building a network of partner brokerages, known as “SRE Alliance Partners,” that service referrals from SRE under the same pricing model.
Now the plan is to help the owners of those partner brokerages also become mortgage brokers who will originate loans for their buyer clients.
SRE will fund those loans through a mortgage lender that it recently purchased. Huerta said he couldn’t disclose the name of the lender due to a non-disclosure agreement. SRE also wants to build its network by recruiting loan officers to serve as both mortgage originators and real estate agents for the same buyers.
“We will make money upon the volume of mortgages we’ll be producing,” Huerta said.
Herbert Ayala’s Carlsbad, California-based brokerage, which, confusingly, shares the same name as SRE’s network of partner brokerages, called SRE Matrix Alliance, represents one of the first brokerages that will follow the new business blueprint that SRE is ironing out.
Ayala previously worked at a SRE Matrix company-owned office but set up his own brokerage after SRE closed that office, according to Huerta. For now, even though he runs his own brokerage, Ayala is only licensed as a real estate salesperson. So to comply with California real estate law, Ayala has hired Huerta as an independent contractor to serve as his supervising broker, according to Huerta.
Ayala plans on obtaining his broker and mortgage originator license and to originate mortgages for his buyer clients on behalf of SRE’s lender, Huerta said.
Ayala told Inman he was unaware of any SRE layoffs in Hawaii. “The way I see it is they’re still growing; they’re still expanding; they still have lots of great ideas,” he said.