Clearing the Low-Inventory Logjam

How agents are unlocking “latent listings” by reducing seller uncertainty

THE LAST 12 MONTHS have been marked by unprecedented low inventory, with the pandemic and the ensuing economic uncertainty reinforcing a long term trend of dwindling listing opportunities. These market conditions have created fierce competition among agents, rapid innovation, and new winners and losers.

Across the board, the winners, some of which have achieved their best sales performance on record, have differentiated themselves by doubling-down on their strengths, delivering value to consumers via their expert knowledge, business network, and problem-solving-driven service. This model delivers exactly what real estate consumers desire in a high-consequence, complex transaction in times on market volatility.

Unfortunately, what consumers often experience when interacting with status quo real estate marketing and tech is the exact opposite. Instead of being an extension of the personalized, consultative experience an agent should be providing, real estate marketing and technology throw consumers into an ecosystem of generic messages and one-size-fits-all experiences.

For brokerages and agents stuck in the status quo, the client’s poor experience can be especially damaging during a low-inventory-market, leading to systematic problems including lower marketing conversion, customer attrition and commission pressure.

It is the perfect timing, therefore, for all real estate professionals to carefully examine their marketing and technology strategies to ensure that consumers are getting meaningful, personalized value.

This commitment to elevate and personalize the real estate experience is not only a solution to clear the current low-inventory logjam, but a meaningful evolution in the real estate industry itself that will pave the way for its long-term future.

Personalized vs Spray-and-Pray

Whether it’s a postcard farm, Facebook advertising, or a portal advertisement, spray-and-pray marketing methods target a loosely defined audience with a lowest-common-denominator message. Inevitably, this approach — while scalable — does little to communicate why a potential client should work with a particular agent or brand. In fact, with the exception of some of the most sophisticated, highest volume teams, most agents derive an exceedingly small portion of their business through these methods.

The tech strategy for brokerages and agents fares even worse, with many firms simply resigned to the fact that their clients will use national portals and other 3rd party controlled technologies.

It goes without saying that this provides no benefit to the brokerage and agent, and it offers a poorly personalized experience for the consumer.

Contrast these realities to what actually generates the bulk of an agent’s business: sphere of influence. When working with their sphere of influence, communication with a potential client is, by default, personalized, consultative and actionable. Agents actively provide customized data and analysis, and solve problems specific to a particular client and market. Although highly manual, these activities are what lead to high conversion rates and customer satisfaction.

In low-inventory conditions, spray-and-pray marketing and a resigned tech strategy become even less effective as competition amongst listing agents intensifies.

Even personalized, SOI tactics can get even more time-consuming as seller confidence wavers in response to increased market uncertainty and risk.

Question is, how do you create a personalized yet scalable experience for your clients?

Meaningful Personalization That’s Not Just for Show

Many existing examples of personalization have been superficial and without measurable value. Handwriting a client’s name in a mass-mailer or asking about a family member in an email are perhaps thoughtful gestures, but they don’t take advantage of the deep potential that exists in thoughtful customization of marketing and technology experiences.


Meaningful personalization starts with understanding the problems a particular client faces, whether it’s their particular property, neighborhood, financial considerations or family situation. These inputs will shape the solutions that both marketing messages and technologies should deliver, and maximizes the chances a client will respond positively.

In the current low-inventory market, any number of concerns could be top of mind for a potential home seller. Is it risky to put my home on the market? What price can I get? Will I be able to find or afford a new place to live?

These problems can be addressed in generalizations, but the more specific the solutions are, the more receptive a potential seller will be. Arguably, if more potential sellers could have their problems addressed in a personalized manner, it would have a positive effect on the market as a whole as anxieties ease and confidence grows.

Meaningful personalization will always require a human-element provided by an agent, but it also requires data and tools to deliver the rigor. That’s where RealScout’s latest product release becomes a key factor.

Scalable, Personalized Problem Solving for a Low-Inventory Market

In a low inventory market, every home seller wants extra assurance that putting a home on the market won’t be overly risky, the price attractive and the process simple. Providing personalized answers to every potential seller can seem like a daunting undertaking. Not only does the work seem highly manual, often the appropriate tools and relevant data are unavailable to both real estate professionals and consumers.

While a solution like the CMA is a good retrospective tool to illustrate how listings will perform, they can be unreliable during periods of low-inventory with reduced sample size and increased price volatility.

Brokerages can provide more real-time insights through office meetings, in-house data-collection and analysis, but this can be difficult to implement and even harder to maintain through agent and client participation.

There are, however, platforms specifically designed to gain insights into serious, real-time, agent-represented demand in a particular market. RealScout’s network of brokerage and agents use RealScout’s home search platform with their clients, setting up MLS-grade search alerts. This preference and behavioral data is then anonymized and securely presented to listing agents as a way for them to assist their clients.

Market Alerts, for example, present a heatmap of homebuyer demand in a particular area, and how that demand has shifted over time.

It’s a powerful tool to keep potential sellers informed of current market demand in a very specific and relevant geographic area.

Test-the-Market takes this a step further by allowing listing agents to simulate a listing without actually putting a property on the market. Insert the basic parameters of a listing, and RealScout will provide a real-time measure of how many RealScout homebuyers would match with that listing. Furthermore, it calculates how incremental increases or decreases in listing price affects the number of matching buyers, enabling listing agents to present both an estimate for homebuyer demand as well as a data-driven pricing strategy for a particular listing.

Finally, the Reverse Prospecting feature allows listing agents to identify and reach out to buyer agents with matching homebuyers, once a listing is put on the market. This ability provides an additional, highly targeted marketing channel to the listing agent, something they can explain to potential sellers to reassure them that there are many avenues to finding the perfect buyer.

Tools, like the ones provided by RealScout, help listing agents problem-solve for their potential clients without extensive time investment, even before a listing agreement is in place. This level of personalized value-delivery is exactly what’s needed is winning competitive listings, especially during a low-inventory environment.

A Paradigm Shift in Brokering Deals

The data-driven approach to personalized problem-solving naturally extrapolates to a bigger paradigm shift in how real estate deals are brokered.

Since RealScout-powered brokerages and agents understand their clients better and at scale, that knowledge can be used not only for providing expert advice, but also for matching buyers and sellers.

The traditional model of putting a listing on the MLS and waiting for buyers to raise their hands to express interest is an acceptably effective, if limiting method, of brokering deals. By definition, this status quo broadcast model of brokering deals applies to 2 primary groups, buyers and sellers with active listings. A deeper look reveals, however, that there’s a subtle — yet critical — asymmetry to this picture: while both serious and potential buyers can participate in this model (since listings are available to anyone), only sellers with active listings (the serious ones) can participate.

A data-driven, personalized strategy, championed by companies like RealScout, enables the excluded category of potential sellers to participate in the market in a more meaningful way.

In the same way that potential buyers can see what sort of inventory is available before they decide to jump into the market, potential sellers can preview the demand before they decide to go through the more arduous and costly process of listing their property.

Especially in a market where listings are few and far between, unlocking latent listings through broader participation can be a real boon for listing brokerages and agents. This also helps potential sellers, by allowing them to reduce the uncertainty of listing their home, not to mention buyers in the market, who will enjoy the benefits of having more inventory.

A Personalized Future

The low inventory market that we face today, personalized problem-solving is the approach that creates the transparency and confidence needed to clear the logjam. Along the way, buyers, sellers, agents and brokerages benefit through more efficient, effective workflows that lead to better outcomes for every party.

Beyond that, a commitment to better understanding clients will empower brokerages and agents to truly play the role of ‘broker,’ match-making perfect buyer-seller pairs while increasing market participation.

In fact, adopting a marketing and technology strategy that focuses on personalization is a back-to-basics moment for the industry. It seeks to turn back the years of erosion caused by impersonal online real estate marketing and technologies, and build a modern client experience that humanizes the transaction without sacrificing substance. It amplifies the value of brokerages and agents by doubling down on their strengths.

It’s a vision of the future that expands the real estate industry as a whole, and not one that disrupts it.

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How Brokerages Thrived Through the Biggest Power Shifts in 2020

Real Estate Chess Gambit

How top brokerage leaders across the U.S. built a unique tech ecosystem to forge a path for long-term success

Real Estate Chess Gambit
Illustration by Mirko Grisendi
Amid a tumultuous and unpredictable year, real estate’s playmakers innovated at record pace and deployed new strategies that are redefining the future of the industry. Blink, and you might have missed some of these seismic shifts this year:
  • Q1: the implementation of NAR’s Clear Cooperation policy, a response to walled-garden listing data strategies that rose to prominence in 2019.
  • Q2: the pandemic necessitated the deepening of remote home buying/selling, a massive acceleration of a trend already in motion for many years.
  • Q3: Zillow’s announcement to harness its dominance with consumers to broker their own iBuyer transactions.
  • Q4: a major new player entered residential real estate with CoStar’s acquisition of HomeSnap, providing the $34B company access to one of the biggest real estate audiences in the country.
These developments represent the breakdown of long-held assumptions, yet another wave of talent and capital entering the space, and a consequential shift in economic and operational power throughout the landscape. Meanwhile, despite the climate of uncertainty, brokerage leaders have met these challenges by deploying their own long-term strategies, taking an objective look at their own strengths and doubling down on the unique opportunities presented to them. Chart showing number of brokerages using the RealScout Buyer Graph One such group of leaders represent 48 brokerages who, in 2020 alone, became vocal and active advocates for delivering best-in-class tech experiences for their clients and agents. This conviction is motivated not only by the need to fulfill modern technology needs, but also by the prediction that such robust brokerage platforms act as both defense and offense against disruptive changes in the industry. A key benefit of a strong technology experience is the ability to engage, and therefore secure, both clients and agents to the brokerage. Whether at the lead-gen phase, the home search phase, or the transaction management phase, new entrants in the market understand the critical importance of making sure real estate consumers are engaged on first party platforms. Brokerage leaders who partnered with RealScout share this view, and see a strong brokerage-owned consumer technology ecosystem as table-stakes to compete in the evolving marketplace. Deploying powerful agent/client collaboration tools is a simple, yet powerful, starting point to engage consumers and keep them in the agent and broker ecosystem. These tools lead to higher lead-conversion and the ability for agents to manage a higher volume of clients. Furthermore, the engagement these tools create ensures brokerages are well positioned to harvest the byproducts of increased repeat and referral business, and the most valuable opportunity of all: data.

Many of the developments in 2020 seek to bypass or disrupt the traditional brokerage ecosystem or business practices, despite the fact that the incumbent model is still the center-of-gravity of the industry as a whole.

As with almost any other technology experience, user engagement and data are inseparable in real estate. The key observation these leaders have made, is that there’s a big disconnect in real estate consumer data where the owner of the client relationship — the agent and brokerage — typically don’t have access or control of the client data that is generated. In other words, a consumer may work with an agent to buy or sell a home, but because they use third party technology, the agent has no visibility into the technology usage, let alone the ability to then add further value to the consumer through those insights.

This is another reason why a RealScout-facilitated data strategy resonates with brokerage leaders. Since the platform is designed for secure yet transparent handling of client behavior and preference data. Instead of giving away this critical asset to 3rd party portals, agents using RealScout can better understand and serve their clients. Brokerages and agents also have more visibility into their client base and therefore the overall health of their business.

While this strategy is immensely valuable to individual brokerages, there’s a broader opportunity that encompasses the brokerage ecosystem as a whole. Many of the developments in 2020 seek to bypass or disrupt the traditional brokerage ecosystem or business practices, despite the fact that the incumbent model is still the center-of-gravity of the industry as a whole. The simple yet powerful conclusion is that by doubling down on their strengths, brokerages and agents can unlock opportunities far greater and more tangible than some of the long-shot bets made in 2020.

A concrete example of this rallying cry occurred this year as 48 brokerages across 5 regions anchored “Buyer Graphs.” These initiatives brought together leading brokerages to build an open platform that securely and thoughtfully shares engagement data generated on RealScout. In doing so, the brokerages get a deeper insight into the market as a whole, deepen inter-brokerage collaboration, and ultimately deliver a more data-driven, sophisticated home buying experience to clients.

Nearly 50,000 agents are now part of these initiatives, providing access to insights and decision-making tools unavailable anywhere else.

These RealScout-powered initiatives have popped up in major metropolitan areas such as Washington DC, New England, San Francisco, Philadelphia, Orange County, and Denver/Northern CO. In fact, nearly 50,000 agents are now part of these initiatives providing access to insights and decision-making tools unavailable anywhere else.

Even the most unpredictable element of 2020, the global pandemic, was something these brokerages were better prepared for, thanks to these strategies. A best-in-class collaborative technology was exactly what agents and clients needed during remote transactions, and the results speak for themselves.

What’s striking about the strategy set forth by these brokerage executives is its simplicity and consistency. By focusing on the singular goal to provide the best possible first-party client experience — an experience that intimately involves client/agent collaboration — these leaders have been successful in responding to big industry trends, even larger macro-economic challenges, all the while elevating their ability to serve clients.

Although 2021 may prove to be just as unpredictable as 2020, the lesson learned from these leaders is that blindly chasing and reacting to trends is not the key to success. Instead, a simple, consistent, potentially contrarian vision, carefully formulated and boldly executed will protect against busts and accelerate booms.

Zillow’s Big Announcement: Focus on Your Strengths

Zillow’s Big Announcement: Focus on Your Strengths

The far-reaching impact of Zillow’s announcement that they’ll be hiring their own agents to represent iBuyer transactions is being discussed by many excellent analysts and journalists. 

But I wanted to talk about what you, as a brokerage executive, should do with this news.

One simple way to explain Zillow’s deepening iBuyer strategy, is their realization that they are better off directly monetizing their Top-of-the-Funnel dominance, instead of indirectly through reselling agent leads.

Zillow is doubling down on their key advantage. 

And my recommendation to you, is to do the same. 

Where does your current business come from? My guess is that the majority (90%+) is sphere of influence, repeat business, and referrals. These are all areas where a relationship (instead of web-performance) is driving consumer decisions. 

Focus on and invest in your advantage. You have a value-proposition—for now—that Zillow can’t compete with. If you can strengthen and solidify your network of current and future clients at the Middle-of-the-Funnel, you’ll be in a much more secure position going forward.

Since day one, deepening the relationships between brokerage, agents and consumers, has been the mission of RealScout. This isn’t an opportunistic marketing message, it’s what we do every day for our partners like Long & Foster, Howard Hanna, and TTR Sotheby’s International Real Estate, who each recognized the importance of doubling-down on relationship-based strategies. 

Whether it’s diving deeper into Zillow strategy, or discussing how we can build a strong Middle-of-the-Funnel for your organization, we’re here to talk.

Erika Cappa Joins RealScout as Director of Brokerage Relationships

Erika Cappa Joins RealScout

RealScout is excited to introduce the newest member of our team, Erika Cappa. Joining us as the Director of Brokerage Relationships, Erika brings seven years of experience as the Director of Technology Management & Support at RE/MAX INTEGRA. 

At RealScout, Erika will work to advocate for our customers throughout the country, strengthen relationships with our brokerage customers, and support them after the initial implementation. Gathering customer feedback and questions, she will use her expertise in real estate technology and customer support to help our team develop the right solutions. 

A problem-solver and a people-person, Erika started her career as a Military Police Sergeant in the US Army, where she was deployed overseas, serving tours in Iraq. Transitioning into the civilian workforce, she got her B.S. from University of Maryland. During her time at RE/MAX INTEGRA, she led a team that supported more than 17,000 individuals throughout North America and was instrumental in the implementation of three full technology platform transitions. 

We’re thrilled to welcome Erika to the team, where she will ensure our customers have the best experience and ROI using the RealScout platform.

Why Brokers are Losing the Battle for Buyer Data

In previous articles, I’ve talked about how buyer data is leading to a gold rush in the real estate industry, and how buyer data is revolutionizing how we do business.

A common observation in both is that brokerages and traditional real estate professionals are behind the curve in this buyer data land grab. Losing this battle means that brokerages and agents could lose control over their transaction supply and demand, thus weakening their position in the ecosystem.

So let’s explore the 3 reasons why brokerages are at a disadvantage today:

1. Brokerages don’t control where buyers search for homes

The most fundamental problem is that traditional real estate brokerages don’t control where their buyers are searching for homes. As NAR Surveys show year after year, real estate consumers are digital natives, conducting a majority of their home search and decision-making online or on mobile.

Real estate brands however, don’t control these digital channels. Most of the time, consumers are looking for homes either on a portal site like Zillow or Realtor.com, alt-brokerage websites like Redfin or Movoto, or on their local MLS website.

The problem is straightforward. None of these channels are controlled by brokerages, thus all the valuable information a buyer generates about their purchase behavior either gets lost, or worse, it gets collected by a competitor.

“Valuable information a buyer generates about their purchase behavior either gets lost, or worse, it gets collected by a competitor.”

Brokers and agents therefore, need to find a home search platform that they control, and importantly, one that consumers will choose to use.

2. Brokerages don’t know how to collect buyer data

Even for forward-thinking real estate brands with a strong home search experience, many don’t know how to collect actionable insights from their buyer’s search behavior.

This isn’t the brokerages fault, however. Extracting actionable data from user-behavior is a highly technical and arduous task that requires dedicated engineers and data scientists. While some of the largest brands may be able to field a team of experts, most brokerages would be hard-pressed to make that commitment.

“Extracting actionable data from user-behavior is a technical and arduous task that requires dedicated engineers and data scientists.”

Of course, the same non-brokerage technology players mentioned above are also fielding expert teams to make sense of buyer data. Unfortunately, not many of these companies are opening this capability to brokerage customers.

3. Even with buyer data collected, brokerages don’t know how to act on it

Leveraging buyer data for real estate business is still a cutting-edge discipline, and most companies don’t have the infrastructure or tools to take advantage of the opportunity.

Let’s examine the most basic use-case: marketing a listing. It’s common at brokerage sales meetings for listing agents to stand up and describe their new listing, asking whether their colleagues have relevant buyers. This is perhaps one of the most inefficient forms of listing marketing, and buyer data can transform this experience.

If a brokerage 1) captured their buyers, 2) collected the buyer data, and 3) had the right tools, listing agents can actively identify buyer agents within their brokerage that match their listing. So instead of standing up during a poorly attended sales meeting, they can send a personalized message to the most relevant buyer agents, no matter which office they belong to. While straightforward, the effectiveness is night and day.

Obviously, there are hundreds of other ways that a brokerage can take advantage of buyer data, ranging from business intelligence, marketing, and recruiting, but each requires technical work and a product know-how to execute.

“There are hundreds of ways to take advantage of buyer data, ranging from business intelligence, marketing, and recruiting.”

There are extremely few solutions in the marketplace that will help brokerages fight back in this battle for buyer data. Platforms like RealScout are some of the only solutions that effectively solve all 3 problems for brokerages.

While real estate brands may have gotten a late start in the battle for buyer data, with the right mindset, technology, and long-term partners, there’s still time for a decisive comeback.

About RealScout

RealScout (www.realscout.com) is the brokerage and agent-branded home search platform that empowers agents and their clients to find the right home faster. RealScout supports the competitive needs of brokerages and agents by helping them work in concert with their clients throughout their property hunt. Homebuyers receive exclusive personalized property matches based on their specific lifestyle and feature preferences. Agents have visibility into buyer activities to best meet evolving client preferences, boosting client loyalty and facilitating informed, data-driven decisions that generate more offers in less time.

How Market Share is Creating Competitive Superpowers in Real Estate

Avalanche

Originally published via Inman News

In most industries, one or two companies emerge as category winners after they reach enough market share to unlock massive, new competitive advantages that the rest of the market can’t replicate. I call these advantages superpowers.

In the residential real estate market, this process of market share domination is at an early stage now with the aggressive rise of venture capital-backed brokerage models.

For real estate brokerages to compete effectively in this changing market, it’s critical to understand how this process is playing out in real time — who the key players are, what superpowers they’re developing, and the steps you can take to develop superpowers of your own. That is my purpose with this article.

Before we focus in on real estate, let’s take a general look at the market forces at play and how they tend to work out.

Reaching the Tipping Point to Unlock Competitive Superpowers

To reach a position of dominance and compounding growth, companies must first reach a tipping point in market share which enables two critical superpowers:

  • Superpower #1: With enough market share, companies can literally make the market because they control so much of it.
  • Superpower #2: Dominant market share also enables a company to leverage data to differentiate and dominate.

How do companies reach the initial market-share tipping point, and how can they utilize these superpowers when they do? Two companies in other industries can give us a blueprint: Airbnb in the alternative accommodation market and Google — specifically, Google Assistant — in the AI arena.

Superpower #1: How Airbnb Grew Market-Making Might

Airbnb is a great example of the market-making superpower. Founded in 2008 by two 27-year-olds struggling to pay their rent, the room-renting service simultaneously revolutionized the hotel, vacation rental, and long-term rental markets while proving the viability of a new type of “sharing economy”.

By just about any measure, Airbnb reached the tipping point long ago and now dominates the alternative accommodation market:

Morningstar foresees Airbnb continuing to leverage “its strong network advantages to…maintain momentum for higher profitability despite increasing competitive and regulatory pressure.”

Airbnb has clearly achieved the Minimum Viable Liquidity needed to reach the tipping point and make the market.

Minimum Viable Liquidity = the amount of supply and demand that you have to control to be able to make the market by yourself.

But that’s today. As an early-stage company, Airbnb’s dominance was by no means assured. Growth was slow at first, and the company commanded a sliver of market share compared to competitors.

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On the contrary, Craigslist had a massive user base in those early years. Further, Craigslist was the place where people who wanted alternative accommodations (besides hotel rooms) looked for listings—which is Airbnb’s exact target market. So, Airbnb performed what has now become a legendary growth tactic by creating a bot that automated posts on Craigslist, unbeknownst to Craigslist and contrary to its terms of service. The ploy worked, helping Airbnb quickly grow its listings and users at almost no cost on its rapid rise to the tipping point.

Superpower #2: How Google Assistant Dominates through Data

While Airbnb is a great example of Superpower #1 (the ability to make the market), Google Assistant is a great example of Superpower #2 (the ability to differentiate and dominate through data).

Survey after survey finds that Google Assistant is the smartest and most helpful of all voice assistants. How did it get so smart?

Artificial intelligence is driven by data. To reach the data-domination tipping point, you need to amass a Minimum Viable Data Set.

Minimum Viable Data Set = the amount and quality of data that you need to kickstart a learning loop.

Learning loop = a positive feedback system that is self-reinforcing.

A learning loop enables you to provide significantly better services to customers than the competition, thus gaining more customers faster, thus improving your ability still more to provide better services, and thus gain still more customers, and so on in a powerfully self-fueling loop.

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There’s no question that Google Assistant has far more than the Minimum Viable Data Set today. Because Android is the world’s largest mobile operating system, Google can learn from its 1 billion users. This is double the amount from just last May, and more than 10x the number of devices that Amazon Alexa is on.

Google, however, didn’t start out at the top of the heap. How did the company reach the Minimum Viable Data Set to gain the data-domination superpower?

This is the story of another legendary growth tactic. Google launched a toll-free telephone service called 1-800-GOOG-411 in 2007, which provided a business directory based on speech recognition. It also enabled Google to quickly build a large phoneme database from users’ voice queries, and these billions of utterances, in all their human variance, would then train Google algorithms to understand us better and enable Google engineers to refine the company’s speech recognition engine to the point of a competitive superpower. Having amassed all the voice samples it needed, Google discontinued the service in 2010.

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To reach the tipping point and achieve a minimum viable data set, Google even used physical billboards to promote their free 411 service, which it later admitted was a data collection scheme to train the Google Assistant.

 

The Ripeness of the Residential Real Estate Market

Now, with the examples of Airbnb and Google Assistant fresh in mind, let’s turn to the residential real estate market.

The real estate industry hasn’t yet encountered a company that’s captured enough market share to reach the market share tipping point. One key reason is that the MLS has leveled the listing data playing field so that no one has been able to gain a competitive advantage with data. In other words, supply side is visible to everyone.

The demand side, on the other hand, has been largely invisible, because consumer behavior is either not captured by the brokerage community (see below)–or, when it is, it remains proprietary.

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Further, even the portals lack quality, high-intent demand data because their user base is diluted with less serious buyers (only 5-6 million home sold in the U.S. each year, despite over 195 million monthly visitors on zillow.com).

Though no brokerage has reached the tipping point yet, there are clear signs that at least one company is on its way. If those signs bear out, explosive growth could be on the horizon. And, once that happens, competitors will find it nearly impossible to catch up.

Let’s look at three quick case studies of growth strategies being deployed in the market right now in the race to the tipping point.

Case Study #1: Here Comes Compass

Compass has traded capital for rapid growth, raising a reported $1.2 billion and a valuation of $4.4 billion. With these resources at its disposal and not shy about losing money for the moment, Compass has been catalyzing growth by offering significant sign-on bonuses, investing deeply in technology, and doubling down on M&A.

Many observers have a hard time understanding how any brokerage can invest so aggressively, often complaining that “it’s not sustainable” – “it makes no sense” – “it’s not a profitable way to do business”.

It does make sense, however, if you consider the superpowers that a company gains by reaching the tipping point first and thus becoming a single, dominant company that can 1) grow by making the market and 2) differentiate and dominate through data.

For Compass, San Francisco is ground zero for this strategy, where the firm has about 36% of the market. Compass has expanded its local footprint quickly through acquisition, the latest being the March acquisition of Alain Pinel with its1,300 agents and $12.2 billion in 2017 sales volume—the third such acquisition in 8 months. According to Compass, the company is not only the biggest brokerage in the Bay Area, “it is now the largest residential brokerage in the country by sales volume, growing from $15 billion to more than $35 billion between January 2018 and January 2019.”

Compass has realized that market share makes their brokering power bigger. With more listings and more buyers, they can bolster your exclusive “coming soon,” “off-market,” and “in-house” transactions that the competition can’t match, creating a “FOMO” (“fear of missing out”) effect in both customers and agents.

If you’re a consumer or an agent looking at the screen below from compass.com, which shows Compass’ exclusive off-market and coming soon listings, how could you not work with Compass?

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These tactics fuel the incentives for buyers to work with Compass because Compass has the exclusive listings. And that means sellers have to work with Compass because they have all the active buyers working with their brokerage. And finally, agents will have to work with Compass because that’s where the action is. Boosting agent recruitment then brings in more listings and buyers, fueling that superpower growth loop.

If you want access to the market, you now have to go to the company who has the greatest ability to make the market, and that, in San Francisco, is clearly Compass.

Case Study #2: Independents Are Joining Forces

Now, the big question is: How can smaller brokerages, who don’t have the same level of financial resources as their venture capital-backed peers, compete effectively? To answer this question, let’s shift our focus across the country from San Francisco to a very different market: Miami.

Miami presents a very different picture from San Francisco. No individual brokerage has more than 10% of the market. So what’s the right growth tactic in this case?

As we’ve seen, Airbnb used the Craigslist growth tactic and Google used the GOOG-411 growth tactic to propel their company/service to the tipping point. The most practical growth tactic for smaller market players is to pool their network and data with others in their market to get to the minimum levels much faster. You — in concert with other firms in your market — already have the market share. That’s your advantage. You just have to take advantage of that advantage.

In Miami, if indies pooled their networks, they’d have over 20% of the market in combination, well on their way to the tipping point. Thus, Miami is ripe for the growth tactic of aggregation.

Plus, this new form of cooperation is already being used to compete more effectively in several markets around the country. Brokerages representing 16% of market share in Orange County, California, have come together in this way. In San Francisco, brokerages representing 32% of the market have joined forces. And in New York City, independent brokerages with 45% market share in combination are a major force in shaping the market.

Case Study #3: The Reality of Realogy

Turning to San Diego, one of the hottest real estate markets in the country, we see the potential for yet a third strategy in the race toward the tipping point—a franchisor aligning its brands to unleash superpowers.

Worldwide, Realogy-affiliated brands have some 300,000 independent sales associates in over 16,300 offices across 113 countries and territories. In San Diego, Realogy’s brands together have about 25% market share, approaching the level of Compass in San Francisco or the aggregate sum of market share of independents in San Diego.

Who Will Gain the Competitive Superpowers First?

We’ve looked at three growth strategies currently battling in real estate. But how will you know when you’ve reached the tipping point for market-making and data dominance?

To know when you’ve achieved the Minimum Viable Liquidity that unlocks the market making superpower, two key things have to happen:

  1. Clients/agents feel you have enough in-house buyers and exclusive listings to switch to your brokerage.
  2. Sold prices for proprietary listings are comparable to those sold on the open market.

How will you know when you’ve reached the tipping point for data domination—i.e., amassed the Minimum Viable Data Set that can fuel this competitive superpower?

Here, absolute numbers matter more than market share. You don’t need to have visibility into 100% of the market; instead, you can sample it. If you have hundreds of buyers and sellers, that provides useful anecdotal data. But you need thousands of buyers and sellers for sufficient statistical rigor to be able to demonstrate differentiation.

So, What Is Your Strategy?

Markets are being revolutionized everywhere you look. The residential real estate market is next. Or rather, it is now. Now is the time to act.

You can watch it happen, as big players make their moves to rapidly acquire agents and brokers, companies, and market share to become dominant players.

Or, you can make it happen by joining forces with other brokerages. When brokerages come together in new ways, they can unlock value for agents and consumers that no new entrant into the market is capable of.

10 Southern CA Real Estate Brokerages Launch Orange County Buyer Graph

Today, 10 leading residential real estate brokerages in Orange County announce the launch of the Orange County Buyer Graph, the 4th regional Buyer Graph initiative announced after the launch of the Silicon Valley Buyer Graph in March, 2019, the NYC Buyer Graph in September, 2018, and the SF Buyer Graph in November, 2018.

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The founding members of the initiative are The Address, The Agency, The Boutique Real Estate Group, First Team Real Estate, Marker Real Estate, Realty ONE Group, Seven Gables, RE/MAX Cornerstone, Surterre Properties, and Vylla. Together, they promise to bring best-in-class real estate technology and data to Orange County consumers.

The Orange County Buyer Graph, powered by RealScout, enables participating brokerages to securely share anonymized buyer demand data across brokerages, unlocking advanced market analytics and smart deal brokering for participating agents and consumers. Many of the ten founding brokerages have been using RealScout’s listing alert and agent-client collaboration platform for several years.

“We have long been heavy adopters of RealScout, and in 2017 we decided to provide this valuable tool to every First Team agent,” said First Team Real Estate President Michael Mahon. “We’re confident that the Orange County Buyer Graph’s benefit to our agents and clients is unmatched in the marketplace. Further, RealScout works in concert with our natively built RoadMap-AI sequence to connect buyers with the person most knowledgeable about the listing: the listing agent.”

RealScout technology provides:  1) award-winning listing search and listing alert platform that keeps consumers connected and loyal to their agents, 2) client home search data and analysis for agents and brokers, enabling better customer service and experience, and 3) secure, data-driven collaboration among agents of brokerages participating in the Buyer Graphs.

Agents, for example, will be able to use Buyer Graph data to advise their selling clients about how to price their listings, based on real-time, anonymized home search data. RealScout’s platform can show how the quantity of agent-affiliated homebuyers will rise or fall depending on the list price, allowing agents and clients to intelligently balance price and market reach.

From a marketing perspective, the Buyer Graph data enables listing agents to identify and connect with agents that have buying clients who match a particular listing. While identifiable consumer information is never shared, listing agents are able to reach untapped demand to broker high-quality transactions.

“We have a responsibility as brokers and agents to make sure our clients have the best tools at their fingertips, in order to put together the best transaction possible,” said Michael Hickman, President and CEO of Seven Gables. “The fact that this many brokerages came together under the same vision is a great sign for the Orange County real estate market.”

“Orange County is one of the most diverse, dynamic real estate markets in the country,” said RealScout Co-Founder and President Andrew Flachner. “This is exactly the type of market that requires both human expertise and data-driven decision-making to deliver the best results for consumers. The Orange County Buyer Graph is a big step in the right direction.”

The Orange County Buyer Graph, much like other Buyer Graph initiatives around the nation, is open to any brokerage that wishes to join the initiative. In markets where Buyer Graphs are not yet formed or announced, Brokerages can opt to anchor a brand-new initiative with their fellow brands.

To join the Orange County Buyer Graph or to inquire about starting a Buyer Graph in your market, please contact buyergraph@realscout.com. Learn more at learn.realscout.com/buyergraph.