Craig McClelland on reshaping traditional brokerage models

Name: Craig McClelland on reshaping traditional brokerage models
Uploaded: 2025-08-01T15:25:15+00:00
Duration: 31 min 21 s
Channel: HousingWire

HousingWire

4 months ago

This week on RealTrending, Tracey Velt talks with Craig McClelland, Chief Strategy Officer at HomeStory and president of LOCAL Realty.

Tracey and Craig talk about the importance of consumer-centric strategies and how industry giants like Zillow and Rocket are reshaping traditional brokerage models. Craig also talks about the role of technology and data in extending the real estate transaction timeline, and the emerging trend of niche and boutique brokerage models.

Here’s a glimpse of what you’ll learn:

The importance of putting consumers first in real estate
How disruptors like Zillow and Rocket are changing the game
Strategies for small brokerages to thrive in a competitive market
The benefits and challenges of niche and boutique brokerage models
Related to this episode:⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠

⁠Craig McClelland | LinkedIn⁠
https://www.linkedin.com/in/craigatlanta/
⁠Homestory⁠
https://homestoryrewards.com/
⁠⁠⁠⁠⁠⁠⁠⁠HousingWire | YouTube ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠
The RealTrending podcast features conversations with the brightest minds in real estate. Every Monday, brokerage leaders, top agents, team leaders, and industry experts join us to share their secrets to success, trends, and the lessons they’ve learned.

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00:00If you're a broker and you think agents are the center of the transaction, you might not be so correct on that.

00:06Today, I spoke with Craig McClelland. He is the chief strategy officer of Home Story and also the president of Local Realty, which is a small boutique firm.

00:16He's also an industry thought leader, and we had a great conversation about referrals, where business comes from,

00:23you know, what is changing in real estate, in the industry, in brokerage right now, and how do you stay ahead of that change?

00:30So enjoy the podcast. Craig, thanks for joining the Real Trending Podcast.

00:36Yeah, thanks for having me.

00:38Yeah, so today I want to talk all things industry trends, consumer expectations, just kind of get a beat on what's going on out in the industry right now.

00:49And one of the things I've really noticed is a lot of brokerages have, they've always put agents first, that's obvious.

00:57But I feel like there's a renewed, I don't want to say interest, but need to think about the consumer as much as the agent in what they're doing.

01:10Usually that was kind of the agent's purview, right?

01:14So talk to me a little bit about what you're seeing out there.

01:17Is that what you're seeing too, or are you seeing something different?

01:20I love this topic.

01:21I think that it's a requirement.

01:23We have to put the consumer first.

01:25Like, and, you know, we should partner with agents.

01:28We as brokerage companies should partner with agents to help them support the consumer, but the end goal should be the consumer.

01:33And I think that, unfortunately, the evolution of real estate from the 70s to today has really highlighted creating massive independence for the agent and, like, supporting them and, like, hey, it's your listing, your lead, it's your consumer, it's your this, it's your that.

01:50It created this environmental relationship where the majority of brokerage companies, how they support their agent base is the agent is the consumer, and then that agent does whatever they want to with the consumer.

02:03But yet we have all of these companies, think of, like, Zillow.

02:06Zillow puts consumer first.

02:07You think of, like, Rocket.

02:08Rocket's putting consumer first.

02:09Like, we have all of these big enterprises that are putting consumer first and being very successful with it, that we have to partner with our agents to support them in having the tools and resources and the bandwidth to put that consumer in the center of the transaction, put that consumer first.

02:25Yeah, it's just interesting.

02:26I feel like it was really the settlement that kind of brought that to the forefront some.

02:32And then a lot of the consolidation happening in the industry.

02:35And I want to talk about some of that because people are very curious.

02:39Rocket, Redfin, what are they going to do?

02:41And then a lot of the other portals have purchased, you know, companies.

02:46Well, Lower Mortgage bought Movado.

02:49We've got Realtor.com and Zenlist.

02:51You know, we've got several different companies.

02:55We've got Bayview bought Guild.

02:56Yep.

02:57A lot of the play is going on right now.

02:59Yeah.

03:00So tell me your take on that.

03:01And what are you seeing out there?

03:03How do you think it will impact real estate brokerage moving forward?

03:09I think that I don't want to say that the settlement brought it to the forefront of the conversation.

03:17I think it's been this is something that has been incubating over time.

03:21Like, you know, I mean, the how Zillow has been working with the consumer has has now gotten to a point where it's impacting the rate, the agent's relationship with the consumer.

03:34Right.

03:34And I'm not saying in a good or bad way, but it is.

03:36It's like, hey, if Zillow is doing all this for the consumer, like the agent should really step up and do play a different role or they should make sure that the consumer is really supported in their journey.

03:45And the journey's changed, you know, back in the past, it was just a couple of months that you like you met an agent.

03:51They, you know, you got prequalified and they they showed you houses and you wrote contracts and you went through inspection and you got financing, blah, blah, blah.

03:57And then you went to closing.

03:58And it's like this three month period of time.

04:01And now it's like with all this data out there, it's now becoming this longer, you know, maybe 14 months.

04:08We've done studies where it's on average, the consumer is from the time they interact with a portal to the time that actually close.

04:15It's like 14 to 18 months.

04:17So like the agent has to support this different length of a journey.

04:21So, you know, what do you do to do that?

04:24Like it's these tools and resources.

04:25So about the the ecosystem plays that are going on, I think that it is the timing's just right.

04:31Like the consumer has to have a longer relationship with whoever they're going to purchase or sell with.

04:37And that requires different tool sets that inquires a different engagement with a consumer that inquires like different components in that ecosystem to support the consumer's journey.

04:48Now, you know, if you if you want to dive deep into like what Rockets doing, like Rockets creating the forever cycle.

04:55It's not just the hey, you bumped into a portal.

04:58You need questions answered.

04:59Hey, how do I stay in touch with you for 14 months?

05:03How do I get you financing?

05:04Blah, blah, blah.

05:04And how do I close you?

05:05But then the other end of that, hey, how do I service your loan?

05:08And then how do I bring you back top of funnel when you're ready again?

05:11Right.

05:12Like so lots of lots of exciting stuff.

05:14I think it's great.

05:15I think it's amazing when the industry has this much focus and has this much attention.

05:19It opens up like massive amounts of opportunity.

05:22Yeah, I mean, Zillow did try with Zillow Mortgage and actually their mortgage company has grown.

05:30I think Rocket is on a whole nother level, though.

05:34So it'll be interesting whether they succeed with what they what they want to do or not.

05:40And how do you what are some tool sets or what do you think the average agent needs to be ready for or take advantage of?

05:50You know, one thing I'd be real careful about is I wouldn't compare Rocket and Zillow right now because Zillow's path to where they're at was different.

06:01They came up through a portal and they came up through the industry and they just recently started looking and smelling and tasting like what Rocket's creating.

06:11And that was just like six to 12 months ago.

06:14They started looking.

06:15Investors started comparing them.

06:17Hey, you compare a Zillow to a Rocket, right?

06:18But Rocket came a totally different path.

06:20Like Rocket came through that originations channel, you know, high volume top of funnel of originating through, you know, acquiring customers top of funnel with interest of mortgage.

06:30And then bringing them down through that origination path.

06:32So they both got to where they're at from different places.

06:35So you've got to remember, like Rocket has spent years perfecting this originations path and Zillow has spent years perfecting this portal path.

06:43So they're not it's not one to one.

06:45Right.

06:45It's very different because if Zillow really wants to compete with Rocket, they have to figure out origination.

06:50If Rocket really wants to compete with Zillow, they have to figure out portal.

06:54Like that's why they bought Redfin.

06:55So, you know, you have to look at where they're coming from because they have different margins they're playing with also because there are different margins in origination than there is in, you know, in this lead conversion and referral model.

07:10So anyways, like I would I wouldn't put them apples to apples.

07:12I kind of like apples to oranges, but very much in the same category and getting closer to each other.

07:17And it's going to be very fun watching Rocket, because if you have watched any of what Rocket has done historically, Rocket is very quick to execute on things and they and they figure things out and they're willing to take risk.

07:29So if you look at like right when they launched it, like they they launched it, they got this thing approved.

07:35They were already hiring more W2 agents.

07:37They've already pushed the path that August 8th they're going to shift their portal from Rocket Homes is going to push over to Redfin's portal to, you know, for all your home search needs and everything.

07:46A lot of that will go through that channel.

07:48They're going to move really quickly and they're going to I've already heard from brokerage companies that a lot of them are lowering their lead source or disconnecting the lead source of like Rocket business is now going to go to the Redfin agents.

08:00It'll be interesting watching it.

08:01It will create impacts in markets because there's a lot of volume to that.

08:05Now, what your question was, what do brokerage companies, what do agents need to do is like, you know, we really need to refocus our lens.

08:12Right. Brokerage companies for years have their lens has been my consumer or my customer is the agent.

08:21And and seeing how that plays out as we move forward is going to be really difficult because just having a lot of agents doesn't mean you're going to be successful.

08:30That can't be the definition of success in the future, because if you have a bunch of agents that aren't getting any business because Rocket is deflecting business over here and Zillow is deflecting business over here, you know, what is what is your firm look like?

08:44What is your value trade off with the agent?

08:46And margins are so tight in brokerage, they just get tighter in those scenarios.

08:50Right. Like when you just have agents that are just doing deals with their family members, you know, the commission model is really tough to sustain it.

08:58So it's got to be like, what's the value trade off with the agent?

09:00So if that's your customer, like how do you align with that that agent for them to get more customers and to grow their book and to and to, you know, and to, you know, get into luxury real estate or get into commercial real estate?

09:11Like you really have to successfully do that now. You can't just like have it as a bullet point on your website.

09:18Hey, we're we happen to be in commercial. We happen to do luxury. We happen to do these things.

09:23What I've been telling firms to do is like you really have to pull apart your P&L and you have to identify like what are the four or five things you're good at and decide to be great at those things.

09:32Like you've got to be like in your market that if if an agent's thinking about getting into luxury real estate, like we have created a defined path that we can show you that 85 percent of the agents that go through this program successfully move their book up a 20 percent lift on price range or whatever it is to get into higher category homes.

09:54And we can help them grow their book by 20 to 30 percent by by doing these things.

09:58And we have tools that actually engage those customers for that longer tail relationship.

10:04So you're partnering with me to grow your book. You're partnering with me to lift your price range that you typically work within.

10:11And you're partnering with me to have the right resources to make sure that your customers have that long tail journey and they're stickier for a longer piece or period of time.

10:19And that's like and that means that the other things that I'm OK at, I have to abandon those things like I just can't do them anymore.

10:26I have to take them off my Web site. That's not a I don't want you to be known for those things anymore. Right.

10:31So the one thing that, you know, I know that NAR has always put out a statistic that the majority of their brokerages are very small.

10:40It's a small broker. And that really hit home.

10:43I did a series of brokerage roundtables around Florida with the Florida Realtors leadership team.

10:50And when you ask the room, how many of you have, you know, are single brokers or, you know, selling brokers or you have less than five agents, more than half of the room every time raise their hand.

11:02Yeah. So what about them? What you know, what do you see for them?

11:08Because my focus has always been on the bigger brokerages being that we have the Realtrends 500 and we kind of work a lot with with the large companies.

11:20But there are a lot of smaller brokers out there who are not sure what their play is.

11:24So, yeah, over the past couple of years, I've done a lot of work with the MLS's and shockingly enough is, you know, if you had 2000 brokers on that roster on the MLS,

11:34almost every time that we look at a roster, half of the 50 percent of that MLS roster is single office brokerage companies like 50 percent.

11:45And then if you're going to look at like offices that are over 100 agents, it's a very, very small group of brokerage companies.

11:52So it's pretty shocking. I've thought that shocking over the years also is that that is like categorically like the majority of all the firms are small operations, small office operations across the U.S.

12:04But to your question is like, what should they be doing is, you know, as you're watching the evolution that's happening in real estate is you're seeing a lot of exodus of agents from these like shops that are they're focused on agent count.

12:19Those are exiting towards these. They're either one of three paths.

12:24Like one is they're moving to these boutiques that are very niche style and they're very focused, laser focused on luxury.

12:30They're laser focused on a purpose. They're laser focused on a community.

12:33They're they're like they're they're just a brokerage outfit that's around like lakes or they're just focused on this one specific whatever it is, mountain town or something that it is.

12:43Or the other end of that spectrum, which is, you know, it's a it's a very discounted model.

12:49It is, you know, it's a shop that is maybe transaction based. It's a couple hundred bucks a transaction.

12:54There's actually one in Atlanta right now that charged one hundred and forty nine dollars for an entire year and you keep one hundred percent of the commissions.

13:02They go completely virtual. They don't offer any services or tools.

13:05That is the trade off between any agent understands that when they go hang their license there.

13:10The third path is getting out of the business. You see some of the agent count going down a little bit.

13:14So I'll tell you, like, I see a lot of growth and opportunity in this niche style, like these laser focused companies.

13:21Like so if you think of a firm like the firms I've been talking to and the brokerage companies I've been talking to and advising is like they need to get laser focused on what is your purpose?

13:30What's your value trade off with the agent? Like, hey, we can provide this thing to the agent.

13:36You know, maybe it is, you know, moving up into luxury.

13:39Maybe it is moving their bracket of of the, you know, the types of clients that they service.

13:45Maybe it is, hey, we have developed a program to help you, you know, grow this part of your book.

13:51Right. And we can categorically show you how we are successful at doing that.

13:55This isn't just a line on our website.

13:56Right. This is something that we have proof behind it that we can actually successfully do it.

14:00This is the trade off. And and this is why you would pay me to be part of this firm.

14:05And we're really, really good at it.

14:06And then the other items, the other bullet points on our on our website, we're going to remove all the ones we're good at because we're just going to pick the three or four we're going to be great at.

14:13And that's what you have to do is like you have to choose.

14:15We're going to be great at like define exactly what you're going to be great at and abandon the other pieces.

14:20And that's exactly what agents have to do. The exact same thing.

14:22And because these are becoming instead of it being, hey, we have a firm and you hang your license here and we have this weird relationship of I don't even know that you work here because there's thousands of agents that work here.

14:35We're going to have this relationship where I know why you're here and you know why you're here.

14:40And that's the value trade off. And we're partners.

14:42And we're not just going to partner on growing this piece of your book of your business, but we're going to partner on servicing this customer.

14:50Right. We're going to have tools that literally we partner directly on this customer on incubating them and and, you know, reaching out to them and like talking with them and servicing them.

15:00And maybe it's a white glove service cashiers or something that we we offer as a company.

15:05And, you know, that they work directly with your customer.

15:08This is the kind of partnerships that are going to thrive and exist.

15:11And the deeper the relationship or the services are provided to the customer, the more sticky the customer is.

15:16They stick with you and they want to be with you.

15:17So regardless if they find a house on Zillow or they're getting a loan through Rocket, they're still going to say, hey, this is my resource.

15:24This is my person. This is who I'm going to be.

15:26You know, I'm going to work with you, the transaction and brokerage companies, the smart ones are coming alongside their agent saying, hey, I play a role in that now.

15:34You know, and agents are also building their their own little ecosystems around the customer and saying, hey, it's really about like, how do I support the customer at this stage of journey they're in?

15:45Right. It may be very top of funnel. It may be they just close and it's six months after that.

15:49And I'm really going to build, you know, systems around them and partner with my brokerage company to make sure that I'm top of mind and that I get repeat and referral business from them.

15:58And they know that I'm I'm here as a resource. Right.

16:01So we're just going to have to get very intentional, to be honest with you, Tracy.

16:04Like there's no more of this like like, OK, we're OK in the business.

16:08We got a brand and that's all we have.

16:10It's like the brands are relevant now. Sorry.

16:12I totally agree with you. But on the flip side of that, we're seeing this massive growth of these single entity national brokerages like LPT.

16:22And I just talked to Sean. I can't remember his last name from Simply Homes.

16:27I hadn't I never even heard of them. And he told me how big they were already.

16:32They offer mortgage title, you know, just they're kind of I think their model is they offer two caps.

16:40They say they offer a lot of services. I don't know.

16:46I'm having I'm talking to him in detail pretty soon.

16:50But but there, you know, we've seen an even Compass and EXP grew faster and less time than the legacy brands like even a Keller Williams and that, you know,

17:04and obviously growth tends to get capped. Right.

17:08I mean, a lot of these brokerages get to a certain point and they really it's tough to get more from there.

17:17But but that's one of the trends I'm seeing in the industry is this kind of explosion of these choice, you know,

17:24agent choice brokerages or, you know, it's just a play a different play on the same model. Right.

17:29I mean, they're not. Yeah. They want to get public very quickly.

17:34LPT wants to go public very quickly. Simply Homes wants to go public very quickly.

17:38Most of them want to go public because of their investors.

17:41They want access to, you know, liquid liquidity and capital, like things like that.

17:44But if you just take go all the way back to like go on a journey with me back to the 70s.

17:51Right. Dave Linegar came out with a model that I think was actually one of the first evolutions.

17:56Like I got to give Dave a lot of credit is like, you know, prior to Remax,

18:01it was really the relationship with the broker and the agent was the broker was fundamentally the center of all the business.

18:06And agents were kind of assigned to a piece of the broker's business to work the business.

18:10But the broker owned all the business. Right. And the broker interacted with the client like that was like that was the core fundamental of how it worked.

18:17And then Remax came out with this concept saying, hey,

18:20if we all had this universal brand of Remax and then you could just rent a space from me and just do whatever you want to with the client.

18:26And there was this there's this independence that that came out of the idea of a brand.

18:31It's like, hey, it's about the brand. And then you have your own independence.

18:34You do whatever you want to. You just live under this brand.

18:37And if you take that and then the next iteration of it was Keller Williams.

18:41Keller Williams took it to another level by saying, hey, it's not only his brand and you have your independence,

18:45but I'm going to let you participate in top line revenue of other agents. Right.

18:49That was the that was the profit share model. Yeah.

18:52And then and then you take another iteration of that was kind of EXP saying, hey,

18:56we're going to make it these the stock off of it and we're going to lower the cap some and then we're going to remove the office

19:02because we don't feel like that's part of our value trade off.

19:04And Compass, I think, is like falls in the middle of all that, because Compass,

19:10they kind of put a spin on Keller Williams and said, instead of you playing with you participating in someone else's revenue,

19:15I'll buy your book like I know how much you're doing and I'll give you a check for you to bring your book over.

19:21And then you stay here for a period of time. So still letting you share in top line revenue just in a different way.

19:27Right. And so all of them are kind of like this iteration of like we're heading where are we heading to.

19:33Right. Like and that's what the question is like, is it to like a home smart?

19:37Is it to like because you got people ahead of the line that are like, hey,

19:39we're going to be like United and charge like 400 bucks a transaction or we're going to be like smart,

19:44like same kind of scenario. I mean, in Atlanta, there's 4000 home smart agents.

19:49There's there's there's another 4000 United agents. Right.

19:52They're working on models where it is a it's a transaction based relationship.

19:57It's not percentage based. So is it heading in that direction?

20:00I think it is for the majority of the market, like because when you're talking about one point five million agents

20:07and what did NAR had a stat that it was 76 percent of them didn't do anything in 2024 or something like that.

20:12So where did the 76 percent go?

20:15They have to go somewhere where it's very low cost for me to hold my license there.

20:19I want to keep my license. And that's this is something everybody has a problem with is like they don't understand.

20:23Like there's no reason for an agent not to keep their license active.

20:27Right. Like you don't when the market changes, all these licenses don't just fall out of the market.

20:32What they do is they shift from a house where it's very expensive to hold your license to where it's very inexpensive.

20:38And if the market doesn't shift, then maybe they'll get out because they don't want to renew.

20:41But they'll you know, they'll drop NAR.

20:43Maybe they'll do these different things to make it less expensive to keep their license because licenses equal opportunity.

20:49It's just like if I'm going to sell my house five years from now, I want to have my license because I want to collect the commissions on it.

20:53Right. Or I want to make a referral or whatever it is.

20:56So I don't have to get rid of my license.

20:59So anyways, you know, yeah, it's like, where is the where is it going?

21:03That is like that's a big that's a nine hundred thousand dollar question.

21:06But if you're building companies over here, people are like there's already this gravitational pull in that direction.

21:14So like if you're in the middle of like if I don't know the companies you mentioned, I don't know where they fall in that line of like if they're closer to where like a home smart is, there's obviously a gravitation towards there's a lot of agents moving that way.

21:28Like I was saying, this is this is the traditional model in the middle of like a headcount model.

21:33There's a lot of them moving over here.

21:35Like there's a big volume moving over to like the home smarts and moving over to that type model.

21:41And then there's another category that's moving over towards like I'm going to take I'm going to be full time.

21:45I'm going to take I'm going to be very serious about luxury.

21:48I'm going to be whatever moving that direction.

21:50Like your smaller firms, like there's a lot of teams exiting those large mortgage companies because the margins are tight and they say, well, why am I paying my broker anymore?

21:58I should just launch a small firm and be a boutique.

22:01And we have Zillow business.

22:03We have Rocket business.

22:04We have teams that are working our SLI, like things like that.

22:08So like I've seen like a huge, you know, group of teams that move over into boutique and they're like, hey, we're just going to do this part of the business.

22:15We're doing really, really well.

22:16And so there's a lot of that going on.

22:18So like, you know, here's one thing that we have to land the plane on is like there's not any one solution that's going to solve it in real estate.

22:26But but there are like there's very clear indicators that there's exodus from certain models that aren't going to be sustainable.

22:34They become smaller, like those, you know, models that are focused on headcount will become smaller and smaller territories.

22:43They've already lost a lot of market share and things like that because you have all these outside influences are kind of gobbling up that.

22:48business. Right.

22:49Like if you take five percent over here and five percent over the year, five percent over here, there's not enough to sustain your office count, your staff count, your technologies, things like that.

22:58But it's it's it's you know, I think there's there's tons of opportunity for the agents, for the teams, even for the brokerage companies.

23:05Right. There's a there's there's a lot, lot going on with the brokerage companies that are just rethinking, you know, how do I run this firm?

23:13If I have if I have a firm that has three thousand agents, let's say, how do I how do I reorganize it to make it sustainable and make it really work?

23:22Like, you know, a lot of firms are being super smart about it and saying, well, I've got three thousand agents, but I only have fifteen hundred doing anything, let's say.

23:30OK, like 50 percent are doing something and 50 percent are not. Well, if I've got fifteen hundred agents that aren't doing a lot of transactions, maybe I should leverage them for the other fifteen hundred agents.

23:40Maybe those agents should be doing showings and open houses and doing like being employed by the other fifteen hundred to do kind of gig worker environment.

23:48And maybe I can help. And that's the that's the value that you have by being at my firm is you have fifteen hundred agents you can tap into to use for services.

23:57And that's the value for those other fifteen hundred to stay with me is because they have these jobs that they're doing for the other agents.

24:03Right. There's really cool stuff like that going on that I think is going to evolve, like how the firm's leverage and where their ROI comes from.

24:10That's really interesting. I had not heard of anyone doing that.

24:15So that's really interesting.

24:16Yeah, there's a lot. Yeah, that's wow.

24:20Think of like think of like a Xiaomi. I mean, Xiaomi is a really smart model.

24:24You know, yeah, a bunch of agents under contract that can be hired by other agents to do, you know, license needed but not required tasks.

24:34There's a lot of really smart things like that going on.

24:36So like if I was a firm with three thousand agents, I would definitely and we did it at my old firm is like, you know, we definitely set up where there is ability to use other agents for showings.

24:46And for open houses and for different different activities and you create this gig worker environment.

24:51Right. Like it's then the agents that are top producers like, hey, I need to be here because there's this workforce I can leverage.

24:56And that's the value I'm getting from the firm, because if I was to leave, I wouldn't be able to leverage the same workforce.

25:00Right. Yeah. Yeah. Yeah. And, you know, I feel like Compass is very innovative in their M&A as well.

25:07The way they're structuring M&A, I think they were some of the first to really structure it with stock and that as well.

25:14So, you know, I always think that's really interesting.

25:18I want to we're we're getting close to time.

25:21So I do want to cover referral and referral fees that you are you are saying that's a huge trend in something that you're seeing.

25:30So talk to me a little bit about that and what you're seeing out there.

25:33Yeah, it's super interesting and it's not something that just like, you know, this is something that, again, that just it took many decades to to for it to come to full steam on it.

25:44But most people don't have the conversation about like how many units in house you're paying referral fees to a third party.

25:50But the reason why I pay attention to is because somebody controls the client's eyes.

25:55Right. And when somebody controls a client, that means that they could choose to steer them to you or hate using that word,

26:01but they could choose to direct them to you and partner with you on working with them or someone else.

26:06So like you have to look at like how much of your business is controllable business, like how much did I originate myself?

26:11Right. Because that's the business that I control.

26:14The other business is business that was, you know, through a partnership.

26:17But if that partnership goes away, that business could go somewhere else.

26:21It's very important to understand that and make that part of your business models.

26:24Like, all right, I understand what part I have to have in house that we've generated in house versus out.

26:29Anyways, that's a long description to get us to a very simple thing.

26:34And that is that, you know, over the years, we sign these referral agreements that agents can get referrals from Redfin or from Rocket or from Zillow or from, you know, Realtor.com or for whatever.

26:45Because back in, you know, 2015, 16, it became very popular to charge on the rear of the deal versus like paying up front.

26:54So there's all these referral fees being paid out.

26:56Well, there's some different players in the industry that have run some of these numbers, but I find it very interesting.

27:03And this is the way I look at it, right or wrong, is I look at it is, yes, there's 89, 90% of all the transactions close to the real estate agent.

27:12My question is, how did they get to the real estate agent?

27:14Because it's really important, like how they got that business.

27:16And the numbers they're finding are mid to high 30s percent of the deals that are closed on the buy side that are paying an outside third party referral fee.

27:28That's not a team in house.

27:30That's actually a third party out of house.

27:32That means that if one of those sources decided to say, hey, I don't want to send my business to broker X anymore, I'm going to send it to broker Y, his agent's over there, or that agent leaves and goes over there or whatever it is, like that business doesn't hit that brokerage house anymore, right?

27:49A 5% shift in market share on your buy side business is big when you're running on a 3% to 5% margins in your business.

27:57Like that's a really, really big impact.

27:59So it's important just to understand that.

28:01Like I would tell brokerage companies, like if you're going to run a study on your firm, like that's one of the studies you need to run is you say, all right, well, wait a minute.

28:08Like where did these deals come from?

28:10Like because, you know, we all think like, oh, it's the agent, the agent originated, blah, blah, blah.

28:14Like not so much anymore.

28:15Like if you've got a big chunk that's coming from third parties, like how does that look going forward?

28:20Because a lot of brokerage companies were doing rocket business.

28:23Well, if they steer that business to Redfin, you'll never see it.

28:26Like you're not going to see it anymore, right?

28:28So like those closings don't happen anymore.

28:30How does that impact your gross revenue or your net?

28:36You know, same with like Redfin, where you're getting leads from Redfin, like as a partner agents with Redfin.

28:42You know, it's all that stuff.

28:43So as these shifts are happening, as the ecosystem is being created, they're going to create vacuums in certain MSAs as they shift.

28:50And they're going to create some chaos.

28:51And it's important to really, really understand that, right?

28:56Yeah.

28:57That's interesting.

28:57Is there actual data around the, you know, where referrals are coming from?

29:03Have you seen any studies on that?

29:04I think that would be a really interesting article.

29:06I have, and the parties that have given me the information haven't chosen to release it.

29:15So I don't want to put them on like a bullseye.

29:18But I can tell you like it's pretty substantial.

29:23But I'll say the most important study that can be run is you got to run this in-house.

29:28You got to run it with your own firm because it doesn't matter how it impacts Bob up the street.

29:33It impacts, it matters how it impacts your business model, right?

29:36And I tell agents all the time, it's like you have to look at like how much business are you buying and how much business are you creating, right?

29:43Because there's two different categories, right?

29:44The Bob business could go away tomorrow.

29:46And the created business is something that stays with you forever.

29:51You're building a business model with that, right?

29:54So like you have to look at it that way.

29:55Same with the brokerage company.

29:57Yeah.

29:57Interesting.

29:58Very interesting.

29:59You gave me some really good ideas for some stories too.

30:02We could spend hours on that, I'm sure.

30:04You know, there's...