Realtors and the real estate industry have followed one particular business model for generations: assist buyers and sellers with their transactions in exchange for a percentage of the price that is split between the agent and their broker. Due to transitions in economics, business philosophies, and the growing role of technology, things are changing—and Realty ONE Group is leading the way.
Established in 2005, Realty ONE Group has experienced exponential growth since its founding and has expanded to 18 states and nearly 10,000 agents. In the past 3 years, gross annual sales have doubled to $15 billion, which amounts to a home sold every 15 minutes. Year-over-year growth has been 25 percent for 3 years, and its franchise business has grown 97 percent in 5 years. It has also diversified into an escrow operation, a title company, and property management.
Aside from the pace of its success, Realty ONE Group differentiates itself from traditional brokerages in several ways. The most obvious is its fee model, which replaces the agent/broker split with a flat transaction fee that enables agents to keep 100 percent of their commissions.
Dan Hart, chief financial officer, points out that, even in down markets, this approach helps support agents’ bottom line. “If there’s a shift that reduces agents’ volume, our fee model enables them to keep what they earn,” he says. “In the long run, it’s in their best interest.”
Realty ONE Group has also been structured to encourage innovation and collaboration at all levels. This is accomplished by minimizing bureaucracy, implementing an open-door policy for all executives, and maintaining a relaxed atmosphere that extends to senior management. The nameplate on founder and CEO Kuba Ieniew’s door reads “Chief Trouble-Maker.” Hart’s reads “Dictator of Dollars.”
“Traditional companies can’t change fast enough to keep up, but we’ve laid a foundation to be nimble and adaptable.”
To engage agents and empower their success, the group places a great deal of emphasis on the six Cs: “coolture,” commission, care, community, coaching, and connect. Coolture is the company’s unique corporate culture. Commission is defined as just that, commission. Care refers to the internal agent support system. Community means participating in various activities that address local issues and benefit local populations in Realty ONE Group’s many locations. Coaching is provided through regular meetings at corporate offices, the open-door policy that helps with individual transactions, and ONE University (ONE-U), the company’s training arm. ONE-U offers the Rev Up and Level Up programs that help new staff and franchisees get started and improve the practice of established agents and offices.
The final C, connect, refers to IT capabilities and addressing the real estate industry’s lack of robust, comprehensive technology solutions. For example, there are more than nine hundred multiple listing services (MLSs) in the United States, but they do not share information; they restrict membership and typically offer real-time data that is only 70–80 percent accurate.
Hart believes that data needs to be delivered directly to users. That way, they don’t need to purchase information from companies like Zillow, Trulia, and CoreLogic. He envisions a cradle-to-grave suite that integrates every component of each transaction and the overall customer life cycle—the Amazon of real estate.
“We want to go beyond real estate data elements and transactions to offer ancillary services, so we can develop and maintain customer relationships,” Hart explains. “We can be a resource for discounted home warranties, mortgages, 1031 exchanges, and other home services, so when it’s time for customers to move again, we’re ready to help them. We’ll be a one-stop shop for everything from escrow to electricians.”
The company is preparing to roll out a transactional platform that combines MLS listings with real-time data from agents and additional aggregated information from third-party suppliers. Realty ONE plans to launch many of these capabilities this year. The ultimate goal is a business-solutions platform that presents an icon-based portal, much like the face of an iPhone, that agents and customers have at their fingertips to access any real estate-related resource at any given moment.
Just as Realty ONE Group is changing real estate compensation models and technology, Hart believes his own role as CFO is also changing to incorporate many functions that would typically fall to the chief operating officer. In addition to traditional financial reporting and budget responsibilities, he is now involved in leveraging technology to drive smarter decisions in operational issues, which range from compensation and sales plans to the cost of process flows and transactions.
“Almost anything that has a dollar driver attached to it now needs the CFO in the room to ensure we take the best advantage of a wide range of business opportunities,” he says.
As the relevance of and reliance on technology increases, the challenge will come when customers are able to research property listings and all the associated transaction processes on their phone and then ask why they need an agent at all. “Traditional companies can’t change fast enough to keep up, but we’ve laid a foundation to be nimble and adaptable and to make the most out of these new challenges,” Hart says. “We’re leading the way to what technology in real estate is going to look like.”
With that in mind, he expects Realty ONE Group to hit the 100,000-agent mark within five years—only the fifth real estate company to ever accomplish that feat.