Realogy CEO Ryan Schneider is wary of chasing agents with big signing bonuses because he’s not sure the return on investment is there, he explained at the Keefe, Bruyette & Woods Real Estate Finance & Asset Management Conference on Thursday.
Schneider said during the chat that the biggest disruption occurring in the real estate industry right now is financial disruption and a lot of that is coming in the form of aggressive financial recruiting.
“The competition for agents from a recruiting standpoint and a financial offer standpoint went to a zip code that was even more intense than I thought it had been earlier in 2018, in a way that I didn’t even think could get any higher,” Schneider said.
“Some times you’re faced with a choice in life: do you want to lose money to hang on to market share? Or, are you going to stay focused on your bottom line choices, and occasionally that means you have a bit of market share violence or someone is going to leave you?”
Schneider said in some industries, it may make sense to lose a bit of money up front that you know that you’ll get on the backend. But especially for the company’s owned brokerage NRT, every agent is essentially a free agent, so there’s no guarantees that upfront investment will pay off later.
“In a few of these markets, the competition has got to such a point where it could actually show up in a negative way in our results,” Schneider said. “We just try to be transparent about it and we still have to compete and deal with it.”
“In the own brokerage business, it’s much more of a volatile business because the agent is a free agent,” Schneider added. “The stickiness of an agent is not something you have like you do on the franchise side.”
In contrast, fast-growing, venture-fueled private real estate brokerage Compass, which does not offer franchising, reportedly has previously lured agents with six figure signing bonuses.
Earlier in the chat, Schneider noted that financial disruption was really the only disruption he’s seeing in the industry right now, which is why Realogy is currently focused on disruption to the length of the transaction or the agent and franchise experience.
“If you look at a lot of the disruption in our industry, you can see a lot of financial disruption that people are trying to do, but you don’t actually see that much disruption that’s making the consumer experience better or is changing the agent and franchise experience,” Schneider said. “A lot of the things that we’re trying to do, using our industry-leading scale – not just our agents and their brands but in technology and data – is find what are things we can do differently to help our agents and franchisees be more productive or efficient with tech and data or what can we do to change that consumer experience.”
Realogy announced the Fast Track program in March at its RGX Conference in Las Vegas, whereby doing a lot of pre-work on the title and mortgage aspect of a closing – Realogy owns both a title and a mortgage company – the buyer can step into a situation where much of the contract work is already done.
Realogy is hoping to take the closing process from about 70 days to between one and three weeks, Schneider said. Fast Track will begin its pilot in June.