How big can this fast growing real estate company grow?
Many investors see iBuyers, smart home companies, and other disruptive businesses as the best real estate growth opportunities, but eXp World Holdings (NASDAQ: EXPI), parent company of eXp Realty, is experiencing tremendous growth in the traditional brokerage industry. In this fool live Video clip, recorded on November 19, Fool.com contributors Matt Frankel and Jason Hall, as well as Millionacres editor-in-chief Deidre Woollard, discuss how eXp will grow and where the company could go from here.
Matt Frankel: I wanted to talk very quickly about a company that I am and which interests me a little more recently, called eXp Realty. I know you are familiar with this, the ticker symbol is EXPI. I was recently lucky enough to have my first in-person interview since COVID which was weird, I felt like we should all be wearing masks as we were all sitting eight feet away from one of the another at a giant table. I had the opportunity to sit down with eXP CEO Glenn Sanford and also had the opportunity to interview their Global eXP President, his name is Michael Valdes. Deidre, I thought you thought he was a particularly interesting person to talk to you as he was previously senior vice president of Referral. It comes from the traditional brokerage model. I know you follow this business a lot. Before you dive in, do you know eXP, do you know the industry, things like that? Any ideas on that?
Deidre Woollard: Definitely know the job. Interviewed Glenn Sanford last year. I think the idea of ââthe virtual world that they have is really interesting where things have been a differentiator for eXP. Speaking of metaverse, eXP has been in the metaverse for years with its VirBELA system. Where basically realtors do most of their interactions with their management broker and things like that inside virtual worlds. I think this is something really interesting and fun to talk about, given that there is so much attention on the Metaverse right now.
Frankel: Go ahead, Jason.
Jason Hall: I try my best, Monday impression of Matt Frankel leaving me muted as I try to speak there. I know it a little. I learned more about it. I think what I like about eXP Holdings is that they aggressively focus on growth. They really are and I think, Matt, as much as I’m definitely not bearish on iBuying. I think traditional brokerage houses and real estate agents are going to continue to play a very important role for many buyers and sellers, I think iBuying will grow. I just don’t know where on the spectrum it’s going to fall and I think eXP, they’re going to continue to grow because at the end of the day it’s the biggest financial transaction most people will be close to, and a lot. of these people want to work with the professional.
Frankel: I asked Glenn Sanford on iBuying because when I spoke to him it was two days after Zillow unplugged iBuying. It was a good time to be able to sit down with him. He basically said he could see iBuying reaching around 10% of the market. He thinks that would be the cap for the company. He thinks Zillow wasn’t necessarily doing it the wrong way, but he said they saw risks they didn’t like getting out of it.
But one thing we both agree on is that some of the iBuyers are embracing the traditional brokerage model. Like, for example, I think Open door is willing to give a 3% commission to a sales agent who brings him a sale. Which is a smart way to go because it’s really a mistake to think that it’s either / or in iBuying versus traditional brokerage. IBuyers need a flow of transactions, they need someone to direct buyers to them, especially at these early stages when people don’t know iBuying exists or what it is. It’s not really an either / or. I think they can coexist, and that’s something eXP embraces.
Room: Matt, I want to contextualize that 3% because I think a lot of people hear that, they’re wondering, well, why an agent would do that, why a real estate agent would hire someone on this. Here is the thing. Most of the time. If the market pays 6%, the maximum they get is 3% anyway, minus their broker’s share. So, it’s actually about keeping them whole, because there is no representative of the seller or buyers on the other side.
Frankel: It’s an easier transaction.
Room: Totally, yeah. It’s a winning experience for everyone.
Frankel: Here is the Opendoor website and you run them there and Opendoor does the rest with a negative 3% commission. It’s a win-win for everyone, but let me share my screen real quick.
eXp is currently the fastest growing brokerage firm in the world. I kinda pretend I’m growing up too fast. Hope you guys can see that OK. This is a graph of eXp agent growth, which is the blue line, and its revenue growth, which is the black bars. Now you can see that income growth really increased in mid-2021 which is totally understandable as the real estate market has gone crazy. But you can’t really tell the eXP is growing because the real estate market has gotten so hot. The blue line is really a long tail exponential growth trend. Now that represents around 67,000 agents on the platform.
One of the things I ask Glenn Sanford is how far could it go? Because anything that grows so fast when talking about specific people can only grow exponentially for a while. What he was telling me, he said, there are 1.4 million licensed real estate agents in the United States alone, and eXP is truly a global brand. One of the most impressive things for me is that they operate in markets all over the world, I’ll show you a map in a second. There are many different laws and regulations to follow if you do this. The concept of property, property rights is not even the same in some markets around the world. It is really impressive.
India is one of their most recent expansion markets. I didn’t know that there are 2 million real estate agents in India, did you know? I know it’s a big center of population, but it’s a really big market for real estate agents and it’s only one of their markets in the world.
Room: I think that number can get much bigger.
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