Data Driven Real Estate
Data Driven Real Estate
PropTech Trend Predictions for 2021 with Jack Miller, T3 Sixty #ddre21
As the President of T3 Sixty, Jack Miller is responsible for client relationship development and management of T3 Sixty’s consulting team. He has nearly two decades in the real estate industry and has held management and executive roles in real estate franchising, franchise ownership, brokerages, and management consulting organizations. What is PropTech? And when Gary Kellar says he's investing $1 billion in technology for agents, what kind of technology and what does the future look like?
00:00 The Data Driven Real Estate Podcast Welcomes Jack Miller, President of T3 Sixty.
1:21 What keeps Jack Miller motivated and excited about the real estate industry?
2:56 What is T3 Sixty?
7:18 What is The Almanac and why did T3 Sixty create it for the real estate industry?
13:57 What is PropTech?
15:08 What are the top three technology most requested in real estate and what problems is proptech trying to solve?
20:05 Why is the real estate sector so bad at technology?
26:01 Is competition from ibuyers like Zillow and Opendoor forcing mega real estate brands like Keller Williams and Realogy to invest in technology?
29:47 The Opendoor IPO is coming up and it appears these flips don't make money. Can that last?
38:27 Will Realtor brands like Keller Williams and Realogy launching ibuyer initiatives work better than Opendoor, Offerpad, and Knock?
42:03 Will real estate teams continue to be a theme in 2021 for Realtors?
45:35 Is there a team structure that works best?
52:38 Is big tech like Amazon and Google getting into the real estate industry?
54:32 - What are some real estate trends we should expect in 2021?
Welcome back to the Data Driven Real Estate podcast Episode 21. This week we have Jack Miller with T3 Sixty. Jack Miller is the President and he is responsible for client relationships, development and management and T3 Sixty. If you're not familiar with that company, they do consulting work, but they also produce the Swanepoel Trends Report and The Almanac, and the Trends Report is something I look forward to every year. It's a very large report covering PropTech and all the trends happening in real estate. And that's what we covered this week on the podcast, What is PropTech? And when Gary Keller says he's spending a billion dollar on technology for his agents, what does that look like? And what exactly are they investing in? to sell, make his clients and his agents money? And, how are disruptors and COVID-19 changing our industry in the residential real estate space? That and much more on this week's show? All right. Hey, welcome back to the Data Driven Real Estate podcast, the podcast for real estate professionals dedicated to driving business using data. I'm Aaron Norris with co-host Sean O'Toole from PropertyRadar and today, we are very excited to have Jack Miller with T3 Sixty. How you doing, Jack?
Jack Miller:I'm doing great. Thank you very much for inviting me. And I really, really appreciate when you reached out and knowing the domain that you guys are in, it seems like really great, really great audience for all these topics.
Aaron Norris:So I've been, I've been fanboying. For several years, I've been chasing you. So I've been looking forward to this interview, actually, for a very long time. Our CMO, David Leplante came up, he and I were chatting about the podcast and a better way to maybe start and maybe this is an interesting place to start it. What is it that keeps you motivated in this business in real estate? What gets you excited about the data and staying active?
Jack Miller:Well, we're just we're in an industry that is in massive change and transition and creativity and capital and spontaneity. And I've been this will be my 20th year in real estate industry. And, it's never been a more dynamic time in terms of business models capital, the capability of the technologies we have today. We were you know, 20 years ago, when we were launching IDX websites and things for franchises it was, we had to carve our own forks, you know, there was nothing that you could get off the shelf. That was there's wasn't anything off the shelf. So, we had to make everything and now there's just so many great tools. And we actually have an understanding of how to use some of them fairly well. It's taken us two decades to figure out user interfaces and to make things simple, and you know, so we're at we're at a time of great creativity for the industry and a lot of innovative opportunities. So, I think, you know, any entrepreneur that's working in real estate right now, what a playground you're stepping into, it's got lots, lots of things that you can do.
Aaron Norris:If somebody is listening and has no idea, hasnever heard of T3 Sixty. How do you describe it?
Jack Miller:Yes, so, T3 Sixty is a we're a research and management consulting company. We focus exclusively on residential real estate brokerage industry, and kind of the related industry. So, we do, we do a banner set of research. Every year, we publish a trends report, which is wonderful trends reports, and this year, it's in its 16th edition, this is the prior year, you can go to T3trends.com and see that. What we write about in the report, we're not news, we're not media, we're analysts. And so what we put in our trends report is what we think should be on the executive agenda of leaders in the industry. And so, if you're running an organization, it doesn't matter if it's a real estate brokerage or franchise, you know, a big, you know, an MLS or an association, any any of the connective tissue of residential real estate brokerage industry, you're leading an organization, then these are things that we we think that you should be thinking about. And we typically take about a three-year view on what a trend is. So, we look at things that we think are going to impact the industry, they're probably impacting now, you're probably gonna continue to have impact for another two to three years. So, we're not, we're not trying to go way out in the future because that's hard. We're trying to look at what are the issues that belong on your executive strategic planning, you know this for this year, and we published a report every year in December. We also do research on the industry itself. So, we we publish a compendium, which is the real estate Almanac is about a 400 page publication that goes through the top 1000 brokerages, the all the MLS and associations, all the technology companies that serve the industry, the top 200 leaders in the industry, that's all you can get all of that it's on realestatealmanac.com. We also have a print version as well for those that might Desk Reference, and we really step on Swanpoel....Oh, yes?
Aaron Norris:I was raising my hands. I like a Desk Reference. I mean...
Jack Miller:You like the desk reference? Yeah, yeah, we can get you that, we got this one. So, this one comes out in December we ship in the first week in December. This one, we shipped the print versions in May. Oh, I have both, Jack. Yeah, I have both.
Sean O'Toole:The December one's your 2021 Trends Report. So, that's coming up right now. So, it's just a couple of weeks away.
Jack Miller:Yeah.
Sean O'Toole:And we have a lot of investor.
Jack Miller:If people, if people want to get it for a little bit less money, we offer pre-publication discounts, it's$30 bucks off, go to t3trends.com get a copy. So right. Yeah,
Sean O'Toole:We, you know, I first came across Stefan Swanepoel as an investor.
Jack Miller:Ah.
Sean O'Toole:And so, you mentioned, you know, real estate brokerages and I realized all those folks are your, your, your bread and butter clients. But we do have a lot of investor listeners too. And there is a lot of good stuff in there, for you as well, especially the Trends Report, I think it's probably a worthwhile was it$100 and some odd dollars or something?
Jack Miller:Yes, usually $200. This year, it's $169, if you order before December. So, but we do have very strong, excellent secondary audiences with investors that want to know what's going on in the, you know, the resale industry, because if you, you know, if you want to catch up into what's happening, resale, this is this tells you what's going on resale industry, and also a lot of people from mortgage and finance, who are interested in what's happening in brokerage industry, because this is we're tracking kind of what are the conversations, what are the things that leaders are having to handle in their businesses right now. And I would also say product people, anybody that's building products for the industry, this gets you into what the executive conversations are, right now, in the industry.
Sean O'Toole:I think the only one that doesn't like directly talk to is the commercial side. But I still think it's valuable for the commercial folks to know what's going on in residential, because that ultimately impacts the commercial market, as well. So I just want to set it up, because we have a lot of different listener types. And I just want to let them know that if, you know, if you're not a realtor, you still may want to listen in here as we continue on and talk about trends because it does impact everybody.
Aaron Norris:One of the things I was, tell me why you decided to use, to create the Almanac, I was surprised when that came out this year. And it's huge. And I think my favorite part is getting to go through all the categories of technology, I consider myself a little bit of a tech nerd. And I was surprised with how many companies I had no idea existed.
Jack Miller:So honestly, both of these publications, I would say, came from Stefan, who's our founder, on his desire to have better intelligence for himself and for the people that he was working with. And when he, when he moved in, he started the company 20 years ago, we rebranded it to T3 Sixty, 5 years ago, when he started the company, a core piece of it was he said, there's really not great, um, you know, intelligence about this industry. And so, he said,"Well, I'm gonna make it". And so, he started researching and writing about the industry. And I would say that's true today. I mean, we, we study and research the industry so that we can be better advisors for our clients and have a, you know, a strong body of work, where it's like, hey, we've spent 400, 500 hours talking to industry leaders to understand what's going on right now and have developed a perspective on it where, we don't operate a brokerage, we don't operate a national franchise, or we're not in the game, but we're students of it. And that lets us be a fair and neutral resource. We're looking at what the issues are in all acquisitions, similar reason, there really wasn't, you know, when you're talking to the private equity company, or, you know, a company that's maybe looking to acquire other companie? There really wasn't great resources, they will, Hey, who are the biggest players in the space? Who are the companies that operate within certain regions and geographies? What are their high level market stats? you know, if you're, if you're really studying the industry strategically to make better decisions, you need a resource like this, to understand it better. And so, we needed it for us, but we needed it so that we can be better consultants and advisors to to our clients and both, you know, people in the industry and people coming into the industry and asking us those kinds of questions, so.
Aaron Norris:One of the report is dedicated to PropTech, and I developed my list and you emailed back and one of my questions was, you know, your journey from a hardware engineer into PropTech and you're like, maybe we should say real estate because PropTech didn't exist back.
Jack Miller:Yeah, yeah. PropTech's a new that's that's new lingo. I mean, that's, it's, it's, you know, four or five
Sean O'Toole:Quick question. I mean, you started with RE/MAX years old, I started, I came into real estate, from engineering, computer, electrical engineer. I went to go work for a national franchise based here in Austin to build their technology, and was there for five years and yes, and I fell in love with this industry. So this is amazing.
Jack Miller:With Keller, with Keller Williams here in Austin. right around the the dot-com. Yeah, RE/MAX up in Denver.
Sean O'Toole:Keller Williams, but so you made that was that a? Was that a result of the dot-com crash? And like, Oh man, I gotta go find another industry?
Jack Miller:You know? Um, I'll say yes and no, because I was a serial entrepreneur in the 90s. When I came out of college went to go work for a startup, we had a billion dollar IPO, I made some money, not not like silly money, I made reasonable money for a junior person at a company that has, it wasn't ridiculous. But then I said, Hey, this is really great. Like these, this company, had an idea went to market. So I did the same thing. And we promptly went out of business two years later, what did it but it's some of the best money I have. Because, you know, you learn, as you gentlemen know, on, you know, being an entrepreneur teaches lessons that I don't think you can learn any other way. And so, so when, when that happened, I didn't have to go find a job immediately, we were fine. But I was very interested in businesses that were that had a very high degree of sales, focus, and work, you know, weren't as necessarily impacted yet by technology. And I'd always had an interest in real, I'd always had an interest in real estate. And a friend of mine who was working with Keller Williams at franchise he was operating in Sarah, Interim Chief Technology Officer at while they were looking for a permanent person said, Hey, you should come and look what these guys are doing they're really innovating this particular industry, which the company I came from was innovating in another industry. So, I love that concept. Like I want to be part of a company that's changing the model or the dynamics. And so that's how I came to real estate. And then once I got here, I mean, this industry, so full of interesting people interested in the problems of, you know, new business models, it's got, it's got a lot of things for a person who gets bored easily to, to study and learn from. So, that's, that's my personal journey. Stefan is my partner in T3 Sixty. He's been an industry executive for his entire career. I mean, he's been the Chief Executive, I think, 13 times he's running national, National Association for South Africa. He started the MLS in South Africa. He's built multiple brokerage companies. And you'll find that's a trend. We have 20 employees now, our senior consultants that work with staff, they tend they tend to have come from significant industry experience, they run brokerages they've been in franchise they've been, you know, they've, they've worked for with tech companies and industry they've been, they've got a perspective, because they've actually, you know, been in the industry and have done the job before. So, that's that's me, I think you find...
Sean O'Toole:And correct me if I'm wrong, but I know at least I believe he at least used to do some M&A work in the space as well. Is that still part of the business?
Jack Miller:Yeah, still, we're still we've done, we did two transactions in the last 12 months. What you know, was fairly sizable one. And we currently represent probably between eight to 10 companies right now. And I think there's several of those. I mean, we expect to do you know, a handful of transactions in the technology space annually. Because that's, that's just where we've been more active in the technology space.
Sean O'Toole:And so it said, the M&A stuffs in tech mergers and acquisitions in technology versus in brokerage or.
Jack Miller:We've done some like, yeah, we've done some...
Sean O'Toole:Merging MLSs?
Jack Miller:Yeah, we've done some brokerage work, we've done some MLS work, we've done some merger and consolidation work in MLS. So, we have, we've had some significant experience in all of those categories. I just say right now, the the hot space for us is technology is where we're seeing more activity right now on our M&A team.
Aaron Norris:How would you define PropTech?
Jack Miller:So, I think PropTech broadly is the, you know, the application of technology into property and property-related industry. So, it's pretty broad category. I mean, it's a lot of stuff in PropTech. And, you know, we have we have on the Tech 500, which is part of that home. And on the website there. We identify, you know, hundreds and hundreds of companies, many of them we knew, and some we didn't, we're like there's a lot of players in the space. So there's, there's about, you know, six to 700 companies that serve the real estate industry in one form or another. Some of them are very small, by the way, some of the little tiny companies. And so out of those, there's probably between 250 to maybe 300 that are, you know, significant companies that provide more than one product and certain space. in residential space. You go into commercial, like some of the people that are listening in on here, while there's a bunch of stuff in commercial. There's a bunch of stuff over a mortgage. There's lots and lots and lots of PropTech, but we've really focused on the PropTech that serves the agent, the broker, the MLS, you know, the Real Estate Association and all of that constituencies there.
Aaron Norris:What would you say would be the top three technologies that most of the people asking you to do consulting is really, what's the problem they're trying to solve?
Jack Miller:So, I think based on the engagements that we have to do a lot of these, there's a lot of competitive pressure to keep up with the big boys of tech. Right? So if you have, you have the Zillow's, and the Redfin's, and to some extent, the campuses, and some of these companies that are have made very substantial investments in technology, marketing systems, you know, consumer systems, so, there's a degree of pressure to compete with them. So, we do a lot of work in what I refer to as like, enterprise front office, where it's like marketing systems to keep the agent, to keep your listings, to stay in front of the consumer and attract people to a company and brand and an agent. For the larger companies. For smaller companies, it's, you know, lead generation and marketing systems. Those are the ones we see, that is a constant, a constant hot space. There are, there's a, there's a few other areas that are interesting. I think one of your one of your questions you sent over earlier, Aaron was like, what are some of the surprising areas? And I'll say this is both one of the top three and surprising to me, and to our team is that over the past two, two and half years, there's been a real renaissance in what I would refer to as like, technology staples, accounting systems, back office, even, even, there's some work being done with one solutions right now, it's quite innovative. So, some of these staple technologies were think, Ah, accounting, so boring, back office so boring. Actually, turned into a little bit of hot space, where we're seeing a lot more interest there. I think mainly because A, the technology's got a lot better, there's some investments have been made, there's better. B, there's a real search in the broker, market for efficiency. And for scale, because we need to do more, with less, we need to be able to process more transactions at a lower cost. And so, I think there's much more focus being placed on those areas. So that's, that's another area that I'd say, we're we're doing a lot of that. And then the other is kind of like, what I'll call, you know, specific issues where a brand or company wants to be really great at something, and they need to build something that gives them the competitive advantage. And I'd say we do a fair amount of that, where companies come to us and say, hey, there's this thing, that is really we have to be the best at. And that's a that's a fun space, because sometimes that's non-industry, technology we're working with or, you know, new ideas, or no real, you know, new thinking or new thoughts. And that's a that's a constant we've had that when the entire the entire last seven years of running consultancy, we've always had agents like.
Sean O'Toole:Can you give us an example of one of those?
Jack Miller:So, usually not. You'd have to talk to our clients.
Sean O'Toole:But anything that s out in the wild alread
Jack Miller:Yeah, but I mean, there's, you know, as, as examples, like, people saying things like, you know, I really want, I want to, I want to stay in touch with my clients, in a way that's unique, novel and different. Like I want to, I want to have follow up systems that are not just the same old, same old, like, we don't want to send the same material. And like, so that's where you see specialty products, I'll give you some examples out of that space, like low low gifts, and move in time, some of these where they're, they're using a combination of data and integration tools, in order to provide a more unique client experience. We've seen that too, in that in the post transaction market, which we wrote about last year in the trends report, where, you know, agents who do a lot of business, one of their biggest sources of business is the people that they've done business with before. And so, that's an area where we've seen a renaissance of different technologies. And so you can look at like, what, you know, what active pipe does, and how they do, you know, follow up and incubation, you can look at any of the transaction concierge type companies and how they are saying, Hey, we're, we're gonna stay in touch with you post transaction, and having this white label for the company sorts like, Oh, this is our, this is our specific way that we incubate that consumer for further transactions or repeat referral, over a long period of time, because agents are not great at that. And that's hard to do without a system in place. So, those are some examples where there's some, there's some work we did earlier, and now you can look at and say, hey, that's a product. That's a company, that's a that's a space that is there where you can you can see how It's come into the landscape, it didn't exist that way, five, seven years ago, so.
Aaron Norris:Is it me or is, is residential real estate just really terrible in general at technology.
Jack Miller:Um, so, it's not a technical market. So, it's a sales driven, market sales driven, and its people relationship driven. And our my former startup was we sold into school districts. And so our customers were people that work for school districts, and we're usually teachers. And so, I've had a real fascination with that, like, that's a human who does not spend all of their day in front of the computer, right? But they're highly relatable. They, you know, you know, people like this during your life, right? And realtor, the realtor industry, the agent industry is, is a lot of that. And these are not people that want to spend their whole day in front of the computer, they're not going to figure it out on your own. They, they need something that's simple and works well. And, you know, the top top people don't figure out anything doesn't matter. But the people that, you know, bulk of the agents, you know, they, they do 6 to 7 transactions a year. And they, they appreciate technology, where they don't have to go to a class every time to learn it, they can just pick it up and use it. And that's actually harder to build takes a lot of skill to build that kind of technology. So, I'd say that's my, my personal fascination with it. But I'd say as an industry, we struggle with tech, it's it's hard, we spend a lot, we spend a lot of money on it. And we have a lot of things not been successful. In terms of the adoption and the use of technology. It's just taken a lot longer. I've got some great examples if you want some examples. So, so my partner Stefan wrote a book about transaction management systems that he published back in the late 90s. And he's like, Oh, this is coming, this is going to be here. And it was 15 years later, before we really saw that happen that it took it just we didn't have the software wasn't mature enough for it. And we also had an agent, population, enemies in the population that just didn't, they didn't adopt software tools. That's not a good business. They did business, paper pad, pencil, filing cabinet. That's what they were used to doing, and.
Sean O'Toole:That's actually an interesting example, too, because I think that some of what gets in real estate's way, in that right is some of the, I'll call them fiefdoms. But the the the, you know, power centers or whatever, so, you take something like transaction management, the California Association of Realtors has a investment in zip form, develops all these forms has an exclusive thing. We're now a Dotloop, or somebody who's a challenger, maybe you have to use a simpler user interface, can't get access to the forums without the forums. It's kind of a useless tool. Right? So there's this almost every time in real estate, there's some sort of dynamic like that, like, Oh, we've got this great idea. But we can't get the data from the MLS or, you know, there's some other I don't want to political is probably the wrong term, but some other hours there would play.
Jack Miller:Yeah, then. And I'd say that's, that is that's been a theme in this industry, and a lot of different forms is a great example. I mean, the listings data itself, is a great example. But I think that era is really coming to a close and a lot of different ways. It's not completely over and it's ever going to be over. But in many, there's many examples where like, it's a lot easier to get foreign licenses today. You know, I had this, I had this conversation, by the way, I had this conversation this morning, talking about form licenses and going into new states and all that. I mean, this is bread and butter for us right now. And I know like some some of our industry consultants have been working in the force space forever. So it really is, it's just, it's slowly slowly gotten better and better and better. So, are there five things? Absolutely. But there's less of them today than there were 10 years ago. It's improved. We stopped wasting now, we still ways to go.
Sean O'Toole:The forum's was especially interesting. And I've had probably two calls in the last month of like relatives like, I'm going to sell my house to my sister, but we don't really want to hire a real estate agent. But how do we do the form?
Jack Miller:Yeah, yeah.
Sean O'Toole:Those ones aren't available to you.
Jack Miller:It, it's so interesting to see like some I live in Texas, and Texas actually has a very progressive, like we have one set of forms, for the whole state. And if you do business in Texas, I can, you can write a contract in Dallas. It's good in Austin, it's good in Houston, there may be some local addendums for you know, whatever, you need but...
Sean O'Toole:If you're an agent though, right? If you're not an agent, you don't have access to those.
Jack Miller:Yes, yeah. But I mean, you got to solve it for the agents otherwise you can't even begin to solve for the consumer. I mean, if the agents are using all different stuff. It's a nightmare, so.
Sean O'Toole:California has that benefit, I think Florida, you know, those are where the big associations are. And so, they've invested in that. Whereas, in a lot of states, it's still kind of the Wild West in terms of people using their own stuff and crazy.
Jack Miller:It is. It is. And it's, it's, you know, again, the industry because of the local nature of real estate. That is one of the persistent, it's the backwards, the persistent background industry, just like our market is a little different. We have different local law, we have different local customs. You know, in Florida, you you can sell a boat, a deed, there's a deeded boat dock, it's a document. Like, you don't have that everywhere else, right? So, it is a little different. So, you have to solve for the local market in all instances, it's not a, not an easy problem, but it's one where technology is now getting more mature and be able to get data and handle more complex, you know, unstructured data sets has improved. So, we're, we're gonna get there, it's just gonna take time.
Aaron Norris:Do you feel like maybe some of the big players coming in is really forcing a lot of the mega brands to pay attention and to grow up a little bit when it comes to technology?
Jack Miller:I think it's placed a competitive pressure in the market. I think when you see you know, companies making significant investments when you see Zillow, doing I mean, Zillow. Well, there's a lot of people that won't shake their fists and stamp a beat and are upset with Zillow. And I perfectly understand why, at the same time, they got us out of the dark ages that we were in, in terms of the consumers experience with real estate, and the frustration that they had and not being able to get to the data easily or not have a good user experience. So, they really, it's a it's a gift that they gave the industry to up their game in that area. Because, I ,we've done business in parts in places that don't have a Zillow. And I have to tell you the consumer experience, it's lacking, sorely. And it's, I think that competitive pressure is good for the market, and it's good for the consumer. But yeah, to answer your question, I do think brokers and franchises have felt that pressure and I think they're feeling it as much more today as they have for a long time.
Aaron Norris:I love Gary Keller's Inman talk where he told the audience about him spending a billion dollars on technology for the Keller Williams brand. And describing the tech enabled agent versus the agent enabling tech. It's one of my favorite YouTube videos of the last couple years. For $1 billion. What are these mega brands investing in? Like, what are they focused on?
Jack Miller:Well, I think principally, it's two areas, and it kind of almost always two areas in real estate. It's either customer acquisition, or its efficiency. And that those are like the broad themes you see and where they're choosing to make those investments. And then within those, then you go, Okay, well, let's talk about, you know, what is their philosophy towards customer acquisition determines where they spend their dollars? You know, you have you have companies that have spent massive amounts of money generating, you know, inquiries from online, you know, billions and billions of dollars have been spent there. There's been a quiet renaissance in the brokerage industry about, Hey, why don't we spend money on our clients? Why don't we spend money on our stay in touch technology? Why don't we spend money on things that consumers who used our brand before will find useful and valuable. So, there's been a quiet renaissance there the past, you know, 8 to 10 years. So we see, that's where you get companies like Moxie works that have have really invested heavily in that. That's where you see some of the companies that are building technology that just makes that consumer experience of working with your agent much better, like RealScout, and they've invested a lot in making that whole experience of I'm shopping with an agent, even Homesnap, which now powers broker public portal, has some of that DNA of like, let's make the process, you know, the customer experience work a lot better. So, but those broadly are the two areas. Efficiency is what we talked about back office, transaction management, forms, compliance, making it simpler, cheaper, easier for the agency business for the broker to manage the business that's happening and understand what's going on. So those are broadly if you look at if you look at any eXP Realty. I mean, they, they, they had to centralized services to build this national virtual brokerage. So, that meant that's where some of their investment is into that how can we operate efficiently at scale without offices? Okay, well, they're they spent a lot of money solving that problem for themselves.
Aaron Norris:Well times and well played.
Sean O'Toole:Well times for sure.
Jack Miller:Yeah.
Aaron Norris:Holy cow. Opendoor IPO is coming up. And it's it's been disclosed now that there's very little money being made on these transactions, and it seems like they're going to be relying heavily on the auxiliary services. How long can these companies not make money with these buy-sell transactions before investors are like, we're gonna pass?
Jack Miller:Yeah, I don't know. I don't know, Idon't know if I can answer that question. Maybe we can, because it, I think it comes down to the the appetite of the investors that see a, you know, a market share, maneuver, and is like, Okay, how much market share can we go after to take before we can, you know, change our rates and and have inducing profit take? So I think it's a really hard question to answer because it comes down to, really the appetites of these both institutional in some cases, singular investors that have a lot of money that they can put into that segment of the industry, I think the experiment of will consumers pay for convenience? I think this has been the grand experiment, like will consumers pay a little bit more for convenience in the housing sector? We know they'll do it for for food delivery. We know they will do it for you know, clothing. You know, we'll know they we know they do it? We know they do it for a lot of other things. Will they do it for a very large sale or a very large purchase? And I think the answer is yes. Based on what we've seen, I think there's enough consumers, it's a it's more than maybe the industry thought it was that will do it. And such the extent where a traditional brokerage industry is now responding to that by creating your own Opendoor like programs, or even partnering with some of these companies that do open door types of programs, so.
Sean O'Toole:There's all of a sudden the industry is recognized that, right? That's how we've made a living for many years that people will, you know, take a discount in order to say, have certain terms leave all their junk behind or, you know, whatever. There is, I do think, you know, I do wonder, there is a lot of unknowns in that, though, in a lot of risk where the investors have traditionally demanded a decent margin, that the Opendoors, you know, aren't leaving themselves. And, I think that the bigger question to me is not is if there's consumer demand is whether or not they can really do it on as thin a margin as they're trying, successfully, to the point where it actually is a business.
Jack Miller:Yeah, I mean, I think that's everybody's criticisms of these business models. But I think we also forget is that they can change their pricing when they need to, I mean, Redfin, did, you know, Zillow makes has made adjustments the entire time, everybody thought they were gonna go, they're not making money there, that means they're going to go away. And that's actually been a bad bet.
Sean O'Toole:Yeah, no, no, no.
Jack Miller:You know, so so it's not, I mean, I'm not arguing in favor of like, Oh, well, their business model is perfect, because that's a ridiculous argument. But the point is, like, oh, they've raised they have an enormous amount of capital, they have some pretty smart people that tend to get involved these companies. I'm not saying they're, we have very many smart people in traditional industry, too. I'm not degrading these intelligence at all. But they're smart. And when the market shifts and changes they're going to do, and they're going to do different things. And so I think that's where I think that's where people get hung up is they say, Well, you know, if they're going to do that forever, they're going to go broke, and that's probably right. But they're not going to do that, right? They're gonna they're gonna change and shift and adapt. And it just makes more. This industry does not have a history where new competitors come in, and, you know, destroy the old models. That's not if you look at the history of real estate and Stefan and I have talked about this many times. You look at the history of real estate, you go Okay, well, you know, RE/MAX came in the 70s, with this flat fee desk model. And actually, they copied Realty Executives actually did it first, right? That didn't destroy the industry. But boy, people, they wouldn't let Dave Liniger be a member, a member of the National Association of Realtors, they were really mad, right? And then, you know, you know, when Realogy or formally Senec came in and said, we're going to apply our way we're going to, we're going to be the only company they own more than one brain. People said, that's insane. And they did it via acquisition that'll never work. Realogy's here today. I mean, we can say lots of pros and cons, but the history of the industry. If you look at it closely, what it shows you is that when a new model or new offering comes in industry, it just adds another option on the shelf for consumers. And, you know, once the operators figure out how to run it sustainably, it sticks around, it doesn't blow up the old models, it maybe steal some of the market share. It takes away some of the non performers, right. But that's what this industry when we talk about innovation in this industry. That's the history of what it looks like. It doesn't look like a movie. That's what we're not we're not doing when we think, hey, there's this huge industry, there's a lot of room for people to to be involved in residential.
Sean O'Toole:Aaron's done a lot of work on the buy box with, you know, of what are these guys actually buying? And you see it's a pretty small box of stuff that actually willing to take this risk on. And so that alone, you know, not only is it just certain markets, but even within those markets, it's a certain square footage range, a certain price range, a certain number of beds and baths, you know, like, they have a pretty tight formula they're following. You know, there's a lot of transactions in that formula, a lot of room for growth, but this whole hot leftover?
Jack Miller:Yeah, there's plenty of room, there's plenty room. So we're pretty, when we work with our clients, we're pretty optimistic in terms of like, Hey, this is, you know, if you're innovating to you will move on, you know, there's no, there's not a doom and gloom situation, you just need to be innovating too in advance.
Sean O'Toole:Changes the only constant. So, don't if you're just sitting there, you might be in trouble. But if you're changing as well, and moving with the times you will be fine.
Aaron Norris:We interviewed David Hicks with the HomeVestors the We Buy Ugly Houses, brand on, I, I started saying that the iBuyers of the we buy easy houses brand at least here a lot of markets in Southern California, they're not rehabbing at all, you're lucky if you get new paint. And it's all about speed. So, it's speed and liquidity in the market. That's innovation. So, okay.
Jack Miller:And there's actually the iBuyers in general, I think what most people think of the Opendoor model, when you say iBuyer, you know, they go well, they're going to make an offer on the house. But actually a lot of the innovation that I think has been very impactful with consumers on the other side, where they say, Hey, we're going to, we're going to give you the money to go buy the house you want while we sell your house, whether we buy it from you, or we list it or whatever. And there's a lot of there's a lot of that, that actually for that, you know, freeze, freeze up consumers who might otherwise say, I'm not going to sell because I don't know that I can provide I don't want to be in a situation where I'm waiting for my house to close and my home, I want that actual financial tool now solves that problem for them. And that's a legitimate problem. I mean, that's a legitimate problem that locks up a big part of the inventory in the market, if you can unlock that inventory in the market. And that's, that's, that's good for everybody. That's more transactions for everybody to do.
Aaron Norris:I have to say.
Sean O'Toole:Sorry, lots of different ways that could still happen besides the offer, etc. Right? We can sort of bridge financing terms. Other. I mean, I think there's a lot of innovation that can happen in that space. But I totally agree that's a core, a core problem, right? Especially now with inventory so tight, you may want to move but to take that risk, test, sell and be homeless. Yes. is too much for most people.
Jack Miller:Yeah, I think for many consumers that this is a legitimate problem. And companies like Knock and these other companies are really trying to solve that, that intermediate, intermediate situation problem with financing and you know, Opendoors now doing that, where it's like, hey, we'll, we'll let you go, go start making offers will will back you, you know, Oh, okay. That's great. We couldn't do that by design. That's, that's more and more options on the show for consumers.
Sean O'Toole:As an investor, I've done those deals where I've bought somebody's house got a good, great deal, but they wanted to rent back until they had, you know, something else ready. And so, I mean, yeah, for sure. I mean, there's clearly demand there.
Aaron Norris:Yeah. I'm most excited about the the realtor brands coming out with their version. Keller Williams have been threatening and said they've been testing for a while. And Realogy just came out and said that they're creating their version of the iBuyer partnership. Because I look at Opendoor competing against Redfin, and Zillow, I mean, Zillow, they've had a lot of things in play for quite some time. So when Opendoor comes into a market as an unknown entity, and has to spend so much more on marketing, when you know, the Zestimate is just top of mind. I mean, that, that's hard. That's a lot of money to spend in the market for brand mindshare.
Jack Miller:Yeah, it is, although I know the messaging from the broker industry, which is true is you have, you know, 1.4 million boots on the ground, that have their personal networks, on average, an agent has, you know, 400 people in their contact database, and if they're supplied with the right tools, they can be, they can be the market, you know, they can be the first person that is contacted about, Hey, I'm thinking about buying or selling. And that's been the traditional industry secret weapon the whole time, is that those relationships that they have in their communities. So, that that's, that's the counter. And that's Gary Keller's playbook. By the way. That's been the playbook for most traditional brokers forever. Is that.
Aaron Norris:Well, I hope they roll it out.
Sean O'Toole:Different though for Opendoor competing with Zillow, right? Like, I would not want to be Opendoor competing with Zillow. You know, there were everybody's on Zillow side already right Openndoor has to go earn each one of those.
Jack Miller:Yeah, that's tough competition, as well, I think Opendoor has got its own like they're they, they have an approach where they're like, Hey, we're gonna work more closely with the industry, we want to, we want to be part of that network, right? And they want to be a solution. And so. But it's tough for them. And it's tough for anybody to go head to head with Zillow in terms of just consumer awareness and market share. Nationally, I think that's a that's a difficult play. In a local market? You can do a lot, you know, with the local brand and there's plenty of
Sean O'Toole:You kinda have to, yeah. independent brokerages and franchise brands that I see that, you know, in given markets, they go head to head all the time. And it's because they're, they're not trying to win the United States market, they're focused on Houston or Dallas, or, you know. And they have a person there locally, right? It's, you know, I don't think the big brands, you know, the Realogy's and the rest could do it without that local presence to write that person who knows that market better than Zillow is ever going to know it, that I can have personal contact with the folks, Zillow can never have, right? They can do things that don't scale, like direct mail and other things that Zillow never makes sense to do. Right?
Jack Miller:Yeah, yeah, I keep, that's another that's a fun one people that, you know, what is what this direct mail is like, Oh, this pencils out for that person that works that neighborhood? Very nicely. It's something Yeah, we've we've done over and over and over again, with our broker clients. It's like, oh, if you're, if you don't have a program for that, here's how you can take a good agent, and double their business by building a really solid local market program with direct mail is a core component. So it's over. It's kind of I love that it's one of those things, everybody writes off, they say the same thing about billboards to billboards gets a bad rap. But if you use billboards properly, very effective, we have several top teams that we can work with. And I mean, I don't think there's a secret in in some of the team part of the industry, a lot of people look at the word and go, why would you spend money on that, but very effective, if done properly, so.
Sean O'Toole:Speaking of that, getting local and getting done properly, right, let's talk about teams, because teams has been the big story now here for a while. And it really seems like you know, it's it's just where still things are going and I don't know where you guys have putting out your trends report. Do you? Are you still pretty bullish on teams? Do you see teams as being kind of a driver still?
Jack Miller:Yeah, we, we write about teams fairly frequently. And trends within the teams. I mean, we're very strong chapter two years ago that really went into the structure of teams and like the different kinds of teams because people say, team, but that can be, you know, a mom and pop team that can be for people who just kind of cooperatively use an admin, it can be what we refer to as a High Performance Team, which has roles and you know, there's a there's a lead generation program, there's, you know, that, so, so But I, and this year, we're writing about it, a chapter on the 2021 report coming out about the lead generation oriented business opportunities are exploited really heavily by teams, teams that really made tremendous advantage of lead generation more effectively, because they're able to establish standard practices, and accountability for what happens with leads. And so we've got a whole chapter going into what that looks like, but if your team or brokerage, so they, they they have grown in market share. Every year for years, they've they have grown consistently faster than the top producers and industry teams are gaining more transaction count per person on the team and sales volume per person on the team that's been consistent. And it's because they're really capitalizing on that efficiency that you get by, you know, these high performance teams by having people in roles. They can just focus on being great at one job. And that is the that's what they're capitalizing on. We're seeing some of that being applied into the brokerage space. It's always had some application there. And there's more than that, that we see in some of the new model insurance companies. They're like a Houwzer that is running basically a big team model. You've seen some big teams turn into brokerages like Ron Spain. And what I will tell you is they're a, if you're running a traditional brokerage, and you look at the performance of teams, and you look at your net profit percentage, and you look at their net profit percentage, you want their net profit percentage, like it is it's astonishing. I mean, it's 3, 4, 5, X what you can expect in traditional brokerage and and and lots of people say, oh, can't do it. Not real. There's lots of naysayers. But I've, we looked at these P&Ls, we're looking at these performance numbers. It's very impressive. Now I will say the challenge is talent. The challenge is having the right operators and hiring and talent getting the right people in place. If you can do that. It isn't vary, you have to invest on the front end with a team, you have to build the team, you have to invest in the marketing, you have to do the lead generation, you have to invest in the brand, you have to do those things. But if you do that the return is very attractive, very attractive. So, we're still, I think our company still believes teams is a very viable growing model will continue to be so there's some, you know, very talented entrepreneurs running teams in this country. And, you know, it's a compelling model from a profitability perspective. In our industry.
Sean O'Toole:Is there a particular structure there, you mean, you've talked about high performance teams, but is there a particular structure or kind of org chart or, etc, that you see that's outperforming others?
Jack Miller:The ones that that we've observed, that tend to be high performance, in terms of net net profitability do really well, I tend to as quickly as possible separate out the non dollar productive activities from the ones. So they'll focus the set of licensed agents who are really meeting with clients signing contracts, showing buyers who really engage in the activity of selling real estate, and then the paperwork, the transaction details, the listing marketing, the you know, all of that is being managed by staff members, who can, you know, do that for $25 to $30 a day on depending on the market. So, that is the that is the consistent theme is that whenever you can take an agent who is dollar productive when they're working with clients and give more of that time back to them to do that dollar productive activity. That's, that's what, that's that's a big element. The other element is, is team or inappropriate content, context pumping, controlled business, where the the team, the company is generating the business, they are investing in the lead generation efforts in the brand efforts, and the things that result in the consumer doing outreach. And that's another like, that's another consistent profit, profit component, because a business that is given to an agent, you can take a referral fee or an advantage split, whatever it is, and those you know, so if you have specialization, and you have the capacity to generate high volume of company control business, that that's those are the those are the pieces of the formula, probably most important, we've got a pretty good description that in the chapter that we wrote this year, mainly because we want it we have clients that are trying to do this, and I wanted to be able to send them and say, here's a chapter that tells you how. And there are some people in it in the chapter that talks, they talked about their team and their operations, how they set it up. And, you know, there's some real lessons to be learned from that, how they built the brand and how invested like that's, that's really good as an entrepreneur to have a map to follow and say, Okay, I can see how to do this. And now I can learn from that, to do it the hard way, so traveling...
Sean O'Toole:I'm a big believer in that, even if you want to do something totally new, right? Like if you want to make history like it doesn't repeat, but it rhymes. And so if you're not, if you're not learning and paying attention to what others did that was successful, you know, you're not gonna have much chance.
Jack Miller:Yeah, we have we have that with our clients, you will learn the easy way, the hard way, is the easy way, the easy way it comes by the way, it comes with a price tag, you usually pay up front, right? Paid up front, but it's the easy way. Whereas the hard way, comes with a bigger price tag, and usually a lot of time that you pay out of luxury, and you may or may not get the results. I mean, that's the problem.
Sean O'Toole:And you're going to be black and blue at the end regardless.
Jack Miller:And you're gonna be black and blue, and you're gonna go I don't know. So, the easy, we tell people I know there's a price tag involved, but take the easy way, you'll feel a lot better, you'll get the results quicker, you know, you'll get the results, you may not get the results in that way. S,o that's, that',s that's what knowledge, that's what knowledge is. That's part of that's why we do consulting is for that is to help people like, let's, let's give you the industry knowledge that we can and have developed over, you know, two decades of research by my partner in the last seven years and building this into a consulting team so that you don't, so people don't have to go do that on their own. It's very expensive to do.
Sean O'Toole:I always like being a consultants, most recent customer because they're not using my learnings for their next customer. Yeah.
Jack Miller:Well, I think that's true. I think the industry has a has a has a difficult history with consultants because a lot of people that were bad at their jobs didn't strategy consulting, it's very different when you have I don't think we've had a professional management consulting firm like ours, and I can say that there's some other great consultants spacepilot I'm not denigrating any of our peers, but i don't i think it's, it's, it's not, we haven't had one like the way we're set up, we're integrated and we can do everything from help you start the company, to help you grow it, to help you evaulate, to help you, you know acquire other companies or help you sell your company, like there's a pulse, help you pick the technology, help all of that. So, that's been not really an offer in our space. And so, that's, that's what's different from people that have been in practice for people. You know, I've run brokerages our Dean, in charge of our brokerage consulting, he's had 10,000, thousands of people work for him. So, it's just very different when you're working with operators. The investor space, that's true to like, you want to work with an investor that's done like this is not their third or fourth or fifth flip. It's their, you know, 50 that's a different operator.
Sean O'Toole:It's my Yeah, that's my number one piece of advice for somebody coming in, investor coming in is like, find a mentor that's already done it and go work with them. And, but you know, agree up front of when you're gonna, like, break off and do your own thing. So there's no hard or weird feelings. But you know, there's no better way, that's how I learned the business after being, you know, like you as in tech through 2000. And then, you know, made this side direction off into real estate. And, you know, but that that's definitely the easier way, right? work with somebody who's done it been there.
Jack Miller:Absolutely, save yourself a lot of time and hassle, and money in many cases, we interviewed a climber we interviewed an independent broker that had built, she built a very impressive business. And the interview, I said, How much did you spend building this business? And she's like, Oh, I spent a quarter of a million dollars making mistakes in the first two years. Like, wow. But she was very upfront about it. She's like, yeah, I didn't know what I was doing. I didn't really have any. I didn't have anybody who was advising me. It was a quarter million dollars. Yeah. So that's, that is and sometimes you don't have a choice. If there's not a good if you don't have somebody a consulting firm trust or a mentor, things like that. Sometimes you just have to pay the price that way. But wait, avoid it again.
Sean O'Toole:Yeah, how big is a firm is she?
Jack Miller:That is a company out in California has about 150 agents firm that was 50 took over, she took over an older company, it was in a brand in Spain. Vanessa Bergman, Red Realty. And she had a partner and they the Red brand, they acquired Red and kind of rebuilt it. But, But yeah, she was one of our she's our, we had her as a advisor, you know, our broker mentor program. We had different people, different people that have been there done that, you know, built something in our industry, as advisors for our broker development program, so.
Sean O'Toole:Impressive stuff.
Aaron Norris:We've, we've seen Amazon sort of touch around the outsides of real estate with the turnkey program that magically disappeared this year with Realogy. There's rumors that Google is looking to get inside of real estate somehow. Is there anybody on the peripheral Microsoft, IBM that we should know about now?
Jack Miller:I'm Yes, there is they're not talking to us? And if they were talking to us we'll have signed a pile of non disclosure documents, so I can't no. No, no, no comment, I guess? I honestly tell you, I, I'm unaware of any of that. But I we all thought, yeah, I think this is a hard industry to, to make the thing go in, to come in as an outsider without a lot of help, I believe. And I think we've got evidence to prove that. It's just hard, hard work, because it is a service industry. It's that there's a person who has to work with clients. And that's different from, you know, something where it's like, oh, I can I can write an app that will replace the person's entire job. Not saving parts of real estate can't be replaced without, absolutely. But, but I think it's still at the end of the service industry and a unique product, every house is a little different. It's not the same. So, that that is, you know, anything that's modified, we've seen can be technologically clean, you know, accelerated, but houses straighten people very tricky. We're all so individual.
Aaron Norris:I thought a Realogy's move was very funny because they dropped Amazon's turnkey and then they signed a partnership with the AARP. I'm like, those are on opposite ends of the spectrum. That's hilarious.
Jack Miller:When you're that big, I think you do a lot of different things. You know.
Aaron Norris:You're one of them. Yeah, yeah.
Jack Miller:Lots of you know, different different angles and approaches to the consumer market because likely to customers.
Sean O'Toole:We're getting close to the end now. Just wondering if we should, like if there's a big like 2021 news coming, you're working on your trends report, obviously you don't want to give it away. It's, it's available for sale and should get it now if you want the discount. Um, but But uh, leave us with something, you know, some tidbit for 2021 of, you know what all these folks should be thinking about or you know, out of your report? No, not, you know, don't give away the big surprising report. But just something.
Jack Miller:I, you know, I don't know that you had this as one of the questions earlier about, like, what are the big surprises coming trends. And what I, what I can tell you about trends, and this is I get straight from Stefan, he has done more work than anybody in industry. And he will tell you that it's not hard to spot the trends to say, Oh, you know, we see teams, like people been talking about teams forever. So, it's usually not hard to see that the trend and say, Hey, we're, you know, hey, we're looking at this stuff that happened in New York out of Long Island, and some of the current the the subpoena hearings with the state senators there, it does not take, it does not take brilliants to go, Hmm, there might be some regulation related to diversity and housing and how people are treated, there might be some regulation coming up. So that doesn't take brilliance. It takes just smarts, just plain old smarts, observing the truth. But the hard part is timing is how soon are these things going to happen?
Sean O'Toole:Transaction management.
Jack Miller:And task management is exactly the example. You can go like, hey, digital transaction, which makes everything better 15 years later, because you just it's hard to tell. But what I what we can tell you that I would say, again, it's a it's a surprise, but only if you're not been watching, right, is how quickly the pandemic reconfigured our industry for digital adoption. Like that has been an enormous change. That I don't think it's fully it. I know, leaders have talked about we've talked about it, we've had industry leaders on our fireside chats with you every Friday. And we've talked about that. But I think the impact, there's a tale to that, where it's like we are crying the whole group of people to learn on zoom meetings to show up and communicate digitally, to show houses with, you know, with without the client there. Like, there's a lot of people that do a fair amount of business. They hadn't figured all that stuff out this year. And it drove adoption of technology, it accelerated that technology adoption, which by the way, was already speeding up. I mean, we're already going through a speed up. So, it's driven down, it's driven the trends and office space, people are saying, Do I need the same office space I had before? The answer's no for a lot of them. So, I think the big takeaway, and you'll see that in the report we write about it is how the COVID pandemic has really pushed the speed at which these kinds of changes are being accepted into our industry, and not just ours, and a bunch of other trees as well. But real estate, very specifically had a lot of things that drove it faster, because of the way that we do business. And it was more business models. So, I think you'll see that you'll see that more and more.
Sean O'Toole:We've definitely seen that at PropertyRadar, right? Because all these folks that are used to going to, you know, whatever, it is a Kawanis or, I don't know, church or whatever, and meeting new clients, and then they can't anymore, right, you know, to use public records to find potential clients and find their phone numbers and the rest right, has been, you know, kind of necessary for a lot of, a lot of folks that lost that normal place where they make those relationships. So, we've definitely been a benefactor. And I'm sure lots of other tech companies have as well.
Jack Miller:You know, there's going to be a tail on where we all had to learn new skills this year, the realtors, you know, just as much as anybody. And that's going to change the way the business operates. And, and I think monitor ways we do write about that report on but I also think it's one of those things where if you look at it, you can start drawing some conclusions and say, Okay, yeah, that's good to know that thing over there. That's going to be different because of this, persistently. Yeah, so but for those interested, you know, we we write this where every year is a key returns calm, if you preorder copy $30 off up until December, our ship date in December. We ship that first week in December. And you know, we're going to do it, we'll do some webinars, we're going to do some overviews of it as well, we typically do some content around the release. So, we'll we'll do some additional materials, and be hosting some guests and talking about a lot of things related to trends because that's,that's, that is a space. That's where we are. And that looks that...
Sean O'Toole:Is the Almanac a yearly thing too?
Jack Miller:The Almanac, yeah, that comes out every year. We published digital versions of the list starting in January. So, the first list we'll release is the rankings of real estate industry leaders, which is out in January. And then we work our way through. We do enterprises, the very largest companies, and then we do MLS's and associations and we do the top 1000 brokers. bridges. That's the last list we released digitally, and it was a print publication. We ship those in May and that's also available, available for pre-order if people want to print copy of that as well.
Sean O'Toole:So, the Almanac also includes your top 1,000 agents and your top brokerages.
Jack Miller:Yes, all of our lists. All of our lists in one place. And then there's a digital, there's digital, you can go online, go to realestatealmanac.com, it's, it's searchable. It's all there. The publication has some additional analysis and charts and graphs. It's kind of cool stuff. It's only for the print publication, but the the actual raw data in terms of searchability you can go there and learn a lot. I mean, especially if you are adjacent to the real estate industry, and you want to know like, Hey, who are the top leaders in this real, I know, one of the top you know, Keller Williams franchises really were the biggest independence. Like it has all that that's all online, you'll look for that. And the book, the book itself also has some, you know, your, your trends and are big movers and changers and who's you know, who's, who's going up? Who's been down? That, that's all in the report. So, there's additional material there in the print, which is very interesting. If you are in industry trends person.
Aaron Norris:I am, mine already ordered, I will make sure to link it and all the places that we published this, and I just really appreciate your time. Thanks for joining us.
Jack Miller:Yeah, I was delightful is my favorite topic to talk about for hours on end. So, you gave me a legitimate excuse to talk about real estate more.
Aaron Norris:Sounds good. All right.
Jack Miller:Great. Thanks, gentlemen. I appreciate, the appreciate you guys having me in. Have a great day.
Aaron Norris:All right. Bye. Thank you for listening to the Data Driven Real Estate Podcast, you can find show notes and links to some of the resources mentioned in the show at datadrivenrealestate.com. Click that join the community. And you'll be forwarded to the PropertyRadar community where you can ask questions about the current show and even see upcoming guests and ask questions there. We'd love to engage with you in the community. So, check it out. Please don't forget to like favorite, subscribe and share on your favorite platform where you're listening to the show. It helps us out a great deal. Thanks for listening and we'll see you next week.