Nearly two years ago Geoff Lewis left the real estate industry. He retired from RE/MAX in February 2018, saying, in a statement, that the time was right for him to formally retire.
But watching the real estate landscape slowly begin to change over the past few years at RE/MAX, Lewis couldn’t stay away from the industry in which he worked for nearly a decade and a half. In June 2019, Lewis joined the ever-growing Texas-based JP & Associates Realtors (JPAR) as president of its parent company Vesuvius Holdings, LLC.
Lewis spoke with Inman by phone to discuss his decision to come out of retirement, as well as share some thoughts on the real estate industry heading into 2020.
What drew you out of retirement and over to JP & Associates Realtors?
During the last couple of years at RE/MAX, I’d really seen the landscape changing in terms of disruptive models and seeing those models grow and really feeling that the 100 percent transaction fee model is the most agent-centric, attractive model going into the future. At a high level, that was one reason.
The second thing is, when I met [Founder JP Piccinini], I really saw in him, the next visionary for our industry. In the past, and I’ll stress “past,” I think the two most successful companies in our industry have been RE/MAX, founded under the vision of Dave Liniger and Keller Williams, founded under the vision and ongoing vision of Gary Keller. What I saw in [Piccinini] was a young Dave Liniger — very visionary, very innovative, very energetic, really articulating the same vision for the future of the industry and for the type of brokerage that’s going to be successful in the industry that I have come to see. We very much aligned on that. His vision and leadership will be a significant reason why JPAR is going to become one of the leaders in our industry.
Why do you think the 100 percent commission model is going to be the best for agents in the future?
A couple of reasons. One, it’s cheaper, so agents can keep more of their own money. That was the premise on which RE/MAX was founded, but RE/MAX is now, for most agents, more expansive than a transaction fee model. What I saw when I was at RE/MAX was very much – and not just at RE/MAX but across the industry – desire for brokers to have their fee model, if they were in a franchise model, really be transaction-based rather than fixed fee and agents very much wanting transaction-based rather than fixed fee-based.
The reality at RE/MAX is a huge percentage of agents at RE/MAX are on a transaction-fee model, they’re not on a fixed-fee model. Their broker may be paying RE/MAX on a fixed-fee model, but the agent is working on a commission split or a transaction fee model. That’s why you see so many agents from traditional companies going over to the 100 percent commission, transaction-fee model.
The second reason is that, with advances in technology, it is easier for a new company today to offer technology that’s comparable or even in some cases, superior to what the larger companies are offering. Most of this technology is developed by third parties. What we’ve done at JPAR is, we can bundle together technology and do it in a proprietary way that allows us to have a tech stack or a tech suite that offers, we feel, everything if not more than they can get anywhere else. That’s due to the wide availability of technology. The larger companies are trying to build in-house, but I have not seen anybody really be able to build anything in-house that’s not available from third parties. You even see RE/MAX now saying they’re going to incorporate third-party software into booj and Keller Williams is incorporating third-party software into their system.
The third reason is, I think that brokerages that are the most agent-centric are going to be the most successful. I think brand is going to become less important. Agents realize that they build a personal brand and at the end of the day, their personal brand is more important to them than an umbrella brand. What they’re looking for is cost efficiency, technology and the ability to build their own brand and not have to pay more money for an umbrella brand over their own individual brand.
When you took the job, you said the industry was ripe for disruption. What are you taking aim at with that statement?
What we’re taking aim at specifically is the fee model between the franchisor and the broker and the fee model between the broker and the agent. That’s the primary aspect of it. The secondary aspect is being able to offer technology that we think is as good or better than competitors. The third thing is by being a newer, smaller company, we’re able to be a lot more nimble in terms of innovation.
We’re not hamstrung by being a public company. The public companies have difficulties with their fee models becoming more expansive compared to the 100 percent commission transaction fee model. Having to report quarterly earnings to Wall Street sort of handcuffs them from being able to reduce their fee models to remain competitive long term.
What do you think is the biggest threat to how agents operate their business?
I think agents need to be in a position to operate in a lower commission environment. I see continued pressure in commission rates coming from a variety of different areas. I see it coming from technology, where the agent’s role can be reduced or bypassed, I see it coming from the instant offer companies and I see it coming from the commission discounters. I think all of those are going to carve out a niche market and what it’s doing is, it’s taking market share away from the other agents.
As commissions come down, agents need to find a way to become more productive in terms of volume and to have lower cost so they can maintain the level of income they had in the past, even with lower commission rates. The way they do it is brokerages that charge them less and have systems that allow them to increase the number of transactions. That’s going to be the benefit of more experience more productive agents and will push less productive agents out of the business.
One of the things I like about JPAR is we have a productivity standard. There are a lot of companies around, particularly some of these other so-called disruptors when it comes to 100 percent commission or commission discounters that have very low productivity among their agents. We’re building a culture at JPAR, a culture I was used to at RE/MAX, of performing agents. Good agents want to be around good agents but even the better agents today are looking for lower-cost alternatives. When they see JPAR, they’re attracted to a lower-cost alternative that has a great tech offering and still has a productivity standard.
You came from RE/MAX and the franchise model, but JPAR has both a franchise and own-side brokerage business. Is franchising the only way to sustain major growth? Obviously, some companies like eXp Realty and Compass have scaled quickly without it, so where do you fall on growing as a franchisor versus growing as a brokerage?
I think [franchising] is the best way to grow quickly. It’s not the only way to grow quickly. Another way to grow quickly is to get someone to give you a billion dollars. I personally believe SoftBank is very much going to come to regret the amount of money they’ve given to Compass. The multiples that Compass has been paying for brokerages and the bonuses they’ve been paying to agents are a hindrance to their ever becoming profitable.
I think franchising is a superior way to grow quickly. I think you can attribute eXp Realty’s growth to its virtual model. At JPAR, we still believe in having brick and mortar offices. We have very small, very efficient, very cost-effective brick and mortar offices but we find agents still want that. There are some agents who still want a private office. There are still some agents who want to drop into an office and there are some agents who like the idea of an office even if they never go there. So we have a very streamlined, cost-efficient model. But I think eXp Realty doesn’t have that cost for their expansion, so that’s part of what’s been behind their fast growth.
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