Why eXp is opting for ‘consumer choice’ over ancillary revenue
While many brokerages are looking to boost profits through consolidation and attached services, eXp leaders want consumers to know they have options.
Key points:
- eXp Realty’s “Consumer Choice” approach comes during a time of accelerating consolidation and a push by many firms to funnel clients to their own ancillary services.
- Leaning into ancillary services is “not one of my talk tracks,” eXp Realty CEO Leo Pareja told Real Estate News. Instead, he’s focused on the core brokerage business — and its clients.
- Holly Mabery, SVP of brokerage operations, argues that brokerages can move fast on updating forms and policies while NAR is a “big ship that is very tough to navigate.”
The current consolidation moment in real estate presents major opportunities for investors and leaders of the firms that stand to come out on top — but how does an industry-wide compression of businesses affect regular consumers?
One area of opportunity — and potential concern — is how ancillary services are bundled and presented to clients during the home search and transaction process. The CEO of Rocket Companies boasted in October that acquiring Redfin — and a direct line to its millions of site visitors — is "bringing end-to-end integration to housing at a scale the industry has never seen." Many large brokerages and portals have also expanded their offerings to include services such as mortgage origination, title and insurance.
In some cases, growth in these services is outpacing growth in a company's core business — a metric often highlighted during quarterly earnings calls. One prominent example is Zillow's mortgage division, which continues to see double-digit revenue gains as residential grows at a slower pace.
But don't lump eXp Realty CEO Leo Pareja in with the bunch.
"That's not one of my talk tracks," he told Real Estate News ahead of a livestream presentation on Dec. 1 detailing the firm's updated forms and new "Consumer Choice" framework.
Staying focused on what's profitable
eXp's brokerage business — "our core, most essential business," Pareja emphasized — "is sustainable. It's profitable." That's because the company hasn't relied on "outside money to build our business," he noted.
"We do have auxiliary relationships, and we've always disclosed them in our [affiliated business arrangement], but if you go back through all my talk tracks, I've never telegraphed that that's where our holy grail of profitability comes from."
Competitors who "took a lot of institutional capital" to become publicly traded face "a different level of pressure that we don't experience" to bolster revenue by attaching ancillary services to transactions, Pareja argued — and that can create a potential conflict of interest.
Agents at those brokerages may feel pressured to bundle profitable mortgage and title services with a home sale, but they also have a fiduciary responsibility to their clients and an obligation to serve their best interests.
Doubling down on transparency, choice for buyers and sellers
That commitment to serving clients helped drive eXp's new Consumer Choice structure, Pareja and Holly Mabery, SVP of brokerage operations, explained during Monday's livestream.
eXp agents are expected to offer their clients at least a couple of different options for service providers, and consumers are encouraged to explore those options and more. The approach is designed to provide an enhanced degree of transparency and a "clear competitive advantage for our agents in a consolidating market."
Pareja and Mabery also discussed the company's referral fee disclosure form — something both eXp and Benchmark Realty updated last week after NAR's delegate body failed to adopt a more robust referral fee disclosure during this year's NAR NXT conference.
Brokerages more 'nimble' than NAR
But Mabery — who was in the room when the vote was narrowly defeated — argues that individual brokerages can move faster than the trade association and other governing bodies.
"NAR is a very dynamic, big ship that is very tough to navigate because they are so large. We are much more nimble. We can bring a form to market in days, where even a state association is going to take 30, 60 or 90 days to bring a form to market," Mabery told Real Estate News.
"NAR will continue to refine and do what it needs to do as a trade organization, but when it comes to business and to taking care of the consumer, that is squarely in our hands to do the right thing and be that proactive fiduciary, and we won't stop there."