Virtual, tech-powered brokerage Real now has nearly 3,500 agents in its network, having expanded its territory into seven new states and Canada in the second half of the year.

But even as the company continues to add new agents at a breathtaking pace, co-founder and CEO Tamir Poleg says Real is planning a “massive investment” in a consumer-facing product that includes mortgage and title insurance, with the ultimate goal “of changing the way people buy and sell homes in this country.”

The Real Brokerage Inc. reported a third quarter net loss of $1.06 million on $39.8 million in revenue, as its agents facilitated $1.44 billion in real estate transactions, up 879 percent from a year ago.

Toronto-based Real is aggressively marketing its value proposition to agents — generous commission splits coupled with tech tools — by offering them a portion of the commissions of new agents they bring to the company.

During the first nine months of the year, Real disclosed that it spent 75 percent of its $3.06 million marketing budget on revenue share payouts to agents totaling $2.28 million.

Since Real doesn’t have brick-and-mortar offices, there are fewer constraints on agent growth — Poleg told Inman in July that the company was aiming to have 8,000 agents in its network by next year, and 20,000 by 2023.

On an earnings call with investment analysts, Poleg said the company has developed a “new internal system that allows us to scale to 100,000 agents without making additional substantial investment in technology infrastructure.”

During the third quarter, Real opened for business in Indiana, North Dakota, Minnesota, and Montana. After the quarter ended on Sept. 30, Real launched in Iowa, Michigan and Idaho. All told, the company now has agents in 38 U.S. states and the District of Columbia. It also become an international company in August, serving buyers and sellers in the Canadian province of Alberta.

In addition to increasing its agent count, those agents are also becoming more productive. Transactions per agent grew to 1.5, up from 0.5 a year ago, boosting revenue per agent by 325 percent, to $13,000.

Poleg said that the long-term goal is for agents to average 2.5 to 3 transactions per quarter. The agents Real has been attracting in the past 12 months “are higher than average in terms of production,” while roughly 1,000 “historic agents” dating back to the company’s 2014 founding tend to be below average, he said.

With just 50 full-time employees as of Sept. 30, up from 18 a year ago, Real’s “efficiency ratio” — the ratio of support staff to agents, was 1:60. Although that’s considerably more efficient than the 1:25 ratio for the industry as a whole, Real’s long-term target is to have one full-time employee for every 75 agents, he said.

Real did grow its management team during the third quarter, bringing Katharine Mobley, formerly with First Advantage, on board as chief marketing officer, and Raj Naik, formerly with Workrise and Uber, as chief operating officer.

Real plans ‘consumer-facing experience’ including mortgage and title

Mobley and Naik will have their work cut out for them, as Poleg laid out an ambitious plan to expand the scope of Real’s business model from a virtual, tech-based brokerage, to an online real estate company with agents “at the center of the transaction.”

Tamir Poleg

“One of the takeaways from Zillow’s termination of their iBuyer program is that you cannot rely solely on software,” Poleg said. “Real will be basing its consumer-facing experience on a combination of software solutions for providing convenience, transparency and speed on one hand, and a human agent who will be able to guide the client and understand their needs and emotional journey.”

By building “a digital experience that leaves to the agents in the center of the transaction, we can dramatically improve the way people buy and sell homes. I think that in a few years, when people talk about Real or think about Real, and who are we competing with, the first answer will not be a traditional or technology brokerage, but rather a large online real estate company.”

Real ended the quarter with $45 million cash and investments, and Poleg said the company is preparing to not only invest in its product, but make acquisitions in ancillary services that will broaden its offerings.

“We have set an ambitious goal of changing the way people buy and sell homes in this country. And that will require massive investment in product,” Poleg said. In addition, Real is “constantly monitoring for acquisitions. Right now we’re focusing on early stage startups in topics that deal with things such as agent productivity, mortgage and title. We have some targets that we’re talking to and some of that $45 million dollars will be attributed to acquisitions.”

In the long term, he said, Real’s goal is “to operate independently under our platform and actually own the entire food chain.”

In the short term, he said, Real will “probably” make an initial into the mortgage business through a joint venture, but it may start out in title insurance “just owning it from day one.”

Real has no plans to change its core offering to agents, which includes a generous 85/15 commission split that’s capped at $12,000, Poleg said. But branching out into ancillary services and becoming an end-to-end provider of real estate services will give it additional sources of revenue.

If the commission on the sale of a $300,000 home is $9,000, and Real keeps about $900 of that, “I think that in the future, it will be easy to double, triple and quadruple that amount if we build the right experience around those services that we want to offer directly to the consumer,” he said. “The way we think about it is, let’s funnel as many transactions to the top of the funnel right now, and then over time, just monetize it in a better way.”

That’s a philosophy shared by a growing number of companies, who envision a future where “real estate brokerages are the loss leader, and people are making money on mortgage,” in the words of Inman Editor at Large Clelia Warburg Peters.

Tech-focused mortgage lenders like Rocket Cos., loanDepot and Better have all branched out into real estate brokerage and title insurance in order to provide bundled, end-to-end services to homebuyers.

And in a new twist on iBuying, startups like Flyhomes, Orchard, and Homeward are providing alternative financing tools to buyers and sellers who are represented by real estate agents.

That doesn’t mean Real plans to slow down agent onboarding.

“We do not provide any formal guidance, but as you can see, we’re growing agent count by around 120 percent to 140 percent year over year,” Poleg said. “We don’t see that slowing down.”

Investors seemed pleased with Real’s third quarter result — and what Poleg outlined for the future.

Shares in Real — which trade on both Nasdaq and the Toronto Stock Exchange as REAX — are up more than 70 percent this month, hitting a 52-week Nasdaq high of $3.45 on Thursday, Nov. 18, two days after third quarter earnings were released.

Get Inman’s Extra Credit Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.

Email Matt Carter

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