Fresh off a $45 million funding round, rabble-rousing discount brokerage REX is expanding to the Philadelphia area.
The brokerage is one of the highest-profile brokerages to bypass the multiple listing service (MLS). It charges a total commission of only 2 percent, often a third of a typical real estate commission. And it does not play nice with buyer’s brokers at other brokerages.
REX has been operating in parts of New Jersey since September 2018. But now the startup is touching down in Philadelphia and surrounding regions, including Southern New Jersey. It will also extend service to Delaware in the near future. REX’s footprint already covers California, Colorado, Florida, Oregon, Pennsylvania and Texas.
The push into Philly comes after the startup closed a $45 million funding round, bringing its total financing to $75 million.
The company reports quadrupling its listings year over year in 2018, and saving customers over $12 million in fees.
REX CEO Jack Ryan, a former Goldman Sachs executive, has joined a long line of tech crusaders who, in pushing their business models, have verbally eviscerated the industry.
He recently co-authored an op-ed in The Wall Street Journal that accused “the nation’s roughly 1.3 million residential brokers” of shielding themselves “with a skein of anticompetitive practices…” One of those practices, he said, is maintaining MLSs.
Putting its money where Ryan’s mouth is, (or, rather, withholding it), REX has a strict policy of never paying compensation to other buyer’s brokers for bringing a buyer to a sale.
Despite this, REX says it still will cooperate with outside agents. Buyers without agents, meanwhile, are assigned to “an independent REX Buyer’s Agent” to negotiate with the seller’s REX agent.
“While negotiations in the REX office can sometimes get a little adversarial, it is only because every agent understands that it’s their duty to provide passionate representation on both sides of the transactions,” REX assures unrepresented buyers on its website.
In Philly, REX will square off against another discounter that has made some strides there: Houwzer.
From the perspective of Tyler Walton, Houwzer’s director of marketing, REX is “just taking the pain from the home sellers and asking the home buyers to pay their buyer agent with cash or through the financing of the home.”
“Most home buyers rather just buy another home where their buyer agent is paid for by the seller,” he added.
He thinks REX is “too far ahead of their time for market conventions…”
But he hinted at some sympathy with the REX’s critique of the status quo, noting that Houwzer is “considering lowering our buyer broker commission to 2.5% for all our listings as the buy side becomes more efficient.”
Like many past discount brokerages, REX does not hire agents as independent contractors. It employs them as a salaried agents “judged on the customer service they provide, not the commission they bring in.”
Other brokerages that have started with similar compensation models, such as Compass and TripleMint, tend to fully or partially adopt a more traditional model over time — often in order to attract better talent. (Houwzer, however, also continues to employee salaried agents.)
Ryan said in a press release that: “[B]y combining cutting-edge data science with the human touch that consumers want and expect, REX is making home transactions more affordable, convenient and transparent.”
Experienced agents are no strangers to this kind of rhetoric. Many startup brokerages have launched wars of aggression against the industry. Like REX, they tend to cast their struggles as liberation movements for consumers.
But none have gained and held significant territory by working entirely outside the MLS.
REX claims to be the exception to this rule — the “first licensed residential real estate brokerage to successfully circumvent the outmoded Multiple Listing Service (MLS) real estate agent model.”
REX says it pulls this off largely by using artificial intelligence to identify potential buyers and then trying to lure them to listings with web-based ads. But it also markets its listings through some of the same listing portals that most agents use to reach potential buyers, such as Zillow.
REX mixes charitable giving into its pitch to consumers. For every 50 homes it sells, the brokerage says it builds a new home for a needy family.