Long & Foster CEO Jeff Detwiler is unhappy with the state of agent professionalism, training and supervision in the real estate industry. He put virtual brokerages in the crosshairs in conversation with David Charron, the president of MRIS Investors, at Inman Connect in New York City on Thursday.
“These virtual models fundamentally break that down and I think it deteriorates the quality of the transaction and the quality of the consumer experience,” Detwiler told the crowd during the conference’s data track.
“If they become more and more prevalent, lesser quality, less supervision, [and] less competency will deteriorate the entire industry and that will pull us all down.”
Detwiler, whose brokerage has 11,000 agents in more than 230 offices, refused to name names, but also criticized discount brokerages and brokerages that are putting technology first and getting a significant amount of investment money.
“There are no barriers to entry and I think we’ve got to be concerned about that,” Detwiler said. “I’m concerned about some of the discount models.”
“If the broker doesn’t make any money, they can’t deliver anything. They can’t train and they can’t afford to pay for supervision,” Detwiler said. “It’s not good for the consumer and it’s not good for us.”
Detwiler said he believed the brokerage business is more a means to an end for all the private equity companies that are entering the space. It’s about capturing data for them and not making money, he said.
“Being able to pursue a business for different reasons that is not fundamentally sustainable and can’t deliver a return — its day will come,” Detwiler said. “Investors don’t look for the company that won’t make any money.”
“We don’t go out and say, ‘Let’s see, who calls themselves [a] technology company and makes no money, because that’s the company I want to invest in,'” Detwiler added. “The day will come where you have to provide a return. Our friends at Redfin are experiencing that now.”
Detwiler characterized this current era in the industry as one where every brokerage is essentially racing to get to a point where they’re getting zero dollars back from their agents when it comes to commission splits.
“I don’t see it changing because of the hyper-competitiveness of the marketplace,” Detwiler said. “There’s always another broker that’s willing to offer a better financial deal to agents.”
Detwiler explained that, to compete for agents, brokerages need to expand the number of services they offer to the consumer. Long & Foster, which was acquired by HomeServices of America in September 2017, is focused on creating an all-inclusive experience for the consumer, organizing the transaction from start to finish, including mortgage, title and insurance, according to Detwiler.
“At the end of the day, what it does, is it continues to create a better consumer experience that’s more convenient and more simplistic for them,” Detwiler said. “I think that the role of the Realtor changes to become that relationship manager and really walk that consumer through and for the Realtor to take care of these complex and frustrating events that occur in buying and selling a home. ”
In 2018, Long & Foster closed nearly 78,000 transactions for a total volume of more than $28.9 billion. Eight percent of that volume came from leads the company generated, but Detwiler wants to increase that around 20 percent going forward.
“When we provide leads to our agents and they convert those leads to closed transactions and get paid on them, there’s no debate on what the value is,” Detwiler said.