eXp exec talks rev share, ‘attraction’ and agents’ No. 1 job
Chief Growth Officer Michael Valdes says eXp doesn’t “recruit” agents in a transactional sense, but seeks to “attract” for long-term growth and success.
- After three years at eXp, Michael Valdes was promoted to Chief Growth Officer last month.
- Valdes said eXp’s core business is selling homes, and rev share is for those who “share the eXp story with others.”
- “The Compass model has pretty much stopped,” Valdes said, and rather than buy brokerages, eXp incentivizes them to join.
Despite a year of stagnating home sales, cloud-based brokerages with revenue share models have found success in recruiting new agents and teams. The summer brought new initiatives and changes as eXp and others moved to create opportunities for more agents and get the upper hand against competitors.
Real Estate News recently spoke with eXp Chief Growth Officer Michael Valdes about his company's revenue share platform and why he believes "attraction" rather than recruiting is the right strategy for long-term growth. This interview has been edited for length and clarity.
Why is revenue sharing important to eXp agents?
Our number one job is to sell real estate. When you're talking about revenue share, there is no revenue share without revenue. You only get revenue by selling homes.
Because we don't have offices, we've turned the sales manager position to our agent population. If anybody would like to share their story of why eXp is the place for them, we compensate them through a revenue share model for doing that. That is not our core business. Our core business is real estate sales. But if anybody wants to step into that role as an adjunct to what they are doing, it is certainly a lucrative thing to share the eXp story with others.
Is it harder to recruit people in a down market, and has it changed the way you bring people on board?
I just did a talk about the idea that "recruiting" was a word I wanted to take out of our vernacular. It's actually all about "attraction," because when you recruit, it becomes transactional. So for us, we see the long term as attraction. The nuance of that is you attract people by doing the right thing, and people want to emulate what your actions are.
When you have been in the business for two decades as I have, and you see that the market is extremely cyclical, you understand that this is actually very healthy for our market. To have this down cycle will now take those who were less than professional out of the space, and then it allows those who are trained to truly serve their client base well.
What about bringing entire brokerages on board?
The "Boost" program enables independent brokerages that are culturally aligned with what we are trying to do at eXp to move their entire brokerages over, and we are giving them a financial incentive in order to do so. Michael Bean was our first Boost recipient. He is in the Northeast, covering over four states, has 600 agents and over a billion dollars in production. The Bean Group built their company for 20 years. And now they're saying, okay, joining eXp makes sense.
The Compass model has pretty much stopped. We're not buying brokerages — we are offering incentives. You have to have a conversation from the full op-ex perspective. You have to look at the whole P&L. You start looking at your bricks and mortar, your E&O insurance on your agents, the listing distribution for your properties, the photography, the marketing, etc.
So now you have a large organization below you, as though you were still the broker of the organization, but I'm taking the responsibilities of broker off of your plate and onto mine. Now you have the opportunity to come in and have all of your agents be empowered to have not just revenue share, but stock options, to really participate in a larger story, and to now be part of a global brand, as opposed to a regional or a local brand.
We'll have more news soon with other Boost program leads in final contracts, one on the West Coast and one in Canada.
According to a recent eXp investor presentation, only 20% of eXp agents participate in the revenue share model. What is eXp doing to increase that number?
We're spending a lot of time developing new agents and bringing them in so their organizations can get wider and deeper. By making these changes and allowing "Accelerate" — which unlocks larger revenue share for levels two and three — that gives somebody a taste of what it could look like had they shared their eXp story while still focusing on their main business of selling real estate.
Now that agents can qualify for level seven with 30 FLQAs (front-line qualifying agents) instead of 40, it has allowed them to nurture their organizations deeper so that those folks can go out into the marketplace and sell more. And it allows us, as a net effect, to have more sales and thus more revenue.
We'll be crossing the 100,000 agent mark by next year. We haven't made that as a public statement yet, but we're going to be crossing the 90,000 mark very shortly. So as we continue to grow on this trajectory, we continue to expand globally, and we'll be announcing new countries soon as well.