At one time, all real estate companies were privately owned family enterprises. Not anymore.
Of the 10 largest real estate firms, eight are now publicly traded — Redfin, Zillow, RE/MAX, Realogy, realtor.com, Opendoor, Berkshire Hathaway and eXp. Compass will be publicly traded any day now, and my guess is that Keller Williams will be by the end of this year.
These companies represent 575,000 agents, almost 45 percent of all Realtors, according to the Real Estate Almanac produced by T3 Sixty.
“The residential real estate brokerage industry has forever changed from a mom-and-pop, cottage-like industry to a capital rich, publicly listed, technology-driven industry,” said T3 founder and CEO Stefan Swanepoel.
As technology plays an increasingly important role, centralization will accelerate and affect who controls consumer and agent data, manages customer support functions and who the client identifies with in the transaction.
Talking to a 1-800-Flowers customer support person yesterday in India did not change the outcome of my flower delivery. A local florist delivered the 36 red roses to Eagle, Idaho right on schedule. But severing that local connection could have damning consequences.
The Danieli Hotel in Venice was once a prized luxury hotel in Venice, Italy. Then, private equity and publicly-traded US company purchased it. The cutbacks were noticeable, as was the homogeneity of its look and feel and the loss of the owner’s personal touch.
Private, family-owned luxury hotels once dominated the industry. Not anymore. Some of the remaining ones stand out: the Breakers in Palm Beach, Pinehurst in North Carolina and Il San Pietro di Positano on the Amalfi Coast. No hedge fund manager is pushing them to make cutbacks to improve margins and increase profits.
What about real estate?
Does the de-personalization trend mean anything? Tracking down an agent to set up appointments, talking in person to a local title rep or chatting with a mortgage broker who you run into at the coffee shop — were these merely inefficient steps on the rugged road to closing a house deal?
Wall Street does not attend agent award ceremonies, belong to real estate trade groups or post videos on Twitter, Facebook, Instagram or TikTok. It does not see the houses that it buys, drive prospective clients around neighborhoods, go on home inspections or find plumbers and electricians for its clients.
It also does not display its face next to listings ads or drive around town with vanity plates that read “I sell Palm Springs.” Personal and local accountability is not Wall Street’s trademark.
Instead, it invests in assets, in companies and in the CEOs who run them. In most cases, it answers to no one but its investors: that is its fiduciary duty.
Wall Street’s success comes from company profits, revenue growth and shareholder return on investment — information that is all publicly accessible.
Unlike private companies, Wall Street’s investments are transparent, so little can be hidden. It is not inherently evil: Wall Street capitalizes companies that do the work. It helps to create fortunes, but it also funds innovation, expansion and positive changes.
The big question is, do small private brokerages have the capital, the technology and the will to keep up with the digitization of real estate that is remaking the process of buying and selling homes?
Ultimately, the consumer will decide what is important to them.
Something is lost, when you do not know the owner
CEOs come and go, but owners have more at stake and more to lose.
Many small, privately owned real estate companies still thrive — together they have the largest market share, though it is shrinking. We fondly call them indie brokers. Like local bookstores, they are the antithesis of the corporate-owned businesses. With recognizable faces, they are part of our communities.
Like books, vinyl records or old-school movie projectors, talking to an owner is a “tactile-like” experience. Somehow you feel better when another human being is right around the corner to help you.
Have we become too casual about giving that up to technology, corporatization and centralization?