Damn good real estate advice from leaders around the nation.
Part 2 of our interview with former Zillow outreach director, Jay Thompson. We talk about the over-leveraged real estate disrupters such as Redfin, Compass, Better, Rex Homes, and other real estate technology firms that are showing signs that they may be in trouble if the market continues at this pace. We also talk about the DOJ investigation into claims of anti-trust violations
Let’s talk about what is going on in the real estate industry and what’s happening with these disruptors. What’s gonna happen with Zillow, Redfin, and Compass? We have a lot of things shaking up in this market with the so-called disruptors. This is part two of our interview with Jay Thompson where we’ll discuss the future of the real estate industry. Watch the first part of Jay Thompson’s Journey to Zillow and Inman.
TABLE OF CONTENTS
- The Future of Real Estate
- Venture Capital in Real Estate
- REX Homes
- DOJ Anti-Trust Investigation
- Are There A Lot of Real Estate Agents?
- Connect With Jay Thompson
The Future of Big Tech Real Estate
We interviewed Jay Thompson, former Director of Industry Outreach with Zillow, to know his thoughts on the future of the real estate industry. In one of my podcast episodes about REX Homes, Better.com, and Compass Real Estate, what we’re seeing is the days of valuating companies based on the capital are over with. Valuations and Wall Street are crazy insane. Jay says that he’s baffled and mystified frequently. It’s both inside and outside of real estate and how valuations come up for these companies.
Zillow is a big tech company in real estate that got hammered along with other stocks, but it’s a multibillion-dollar valuation company. Zillow has a track record. Despite what some people think they’ve had profitable quarters, and several of them have lost a lot of money too, but at least they have a tangible product.
There are always companies that are basically vaporware. They have nothing, no track record other than starting bounders and they’re getting hundreds and millions of dollars in venture capital and they go public with crazy valuations.
Venture Capital in Real Estate
VCs are starting to wise up a little bit, says Jay, we all wish that we had put money into Uber, Twitter, and Facebook when they were starting because everyone wants that big giant success. You have to remember that for every Uber and Facebook startup, there are hundreds, if not 1000s of bodies laying out there that weren’t successful.
Real estate is special to the VC mind because there’s so much money involved. It’s a multitrillion-dollar business where about $80 billion dollars were a pain in commissions to agents last year and that’s just the commission side of it.
With 5 million homes sold a year, trillions of dollars in real estate exchanges hands, and there are the ancillary and support functions for real estate title inspections. There’s a lot of money made in real estate and a lot of money to be made. It can be a bit of an archaic industry.
Stocks in the last six months for Zillow were down 35%, Redfin is down 73%, and Compass Real Estate is down 41%. It’s going to be harder and harder for these companies to keep going back for rounds after rounds of VC money. Jay says that VCs could eventually go, timeout, or stop if something’s not working. We can’t just keep writing you checks, it seems inevitable.
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REX Homes has been much of a mystery to Jay. The only headlines that REX has grabbed in their history are about either suing somebody or getting sued countersuits and lawsuits and they are very litigation-happy. REX Homes closed their doors and hired David Boies, the attorney for Theranos. Brokerages that close down are not reasons to freak out and think that something bad is happening.
DOJ Anti-Trust Investigation
Jay finds all legal things fascinating. It’s not the technology side, so much of real estate, but if some of these bigger antitrust cases for the wrong way against NAR and the real estate establishment, it could fundamentally change how buyer’s agents are paid which is not insignificant.
It will be a huge potential change that would have cascading effects on companies like Zillow and Realtor.com because who knows what if consumers have to directly pay their buyer’s agent rather than the buyer’s agent is paid by the selling broker. Jay doesn’t think that’s the disaster for real estate sales that some people have prognosticated because he thinks that lenders are going to come in and they’re gonna go, You know what, we’ll just roll your commission payment into your loan.
People are still going to buy and sell homes and will want their own representative, but being how buyer’s agents are compensated is ripe for change and Jay has this feeling that lawsuits are not going to go away. Most people think they’re going to settle rather than go to trial, but you could be talking settlements in billions of dollars.
Are There A Lot of Real Estate Agents?
With every disaster, there’s an opportunity. What we could do is rewrite the way that real estate is done. There will be people that will embrace the change and flourish. There are a lot of real estate agents out there and we need to step it up. Maybe
Connect with Jay Thompson
Jay loves talking to people about business. He can be reached through email and will answer questions or debate in a good, healthy manner.
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