Nick Bailey has spent 23 years in the real estate industry. He was a vice-president at Zillow, the CEO of Realogy brand Century 21, and for the last two years the chief customer officer at RE/MAX.
Bailey, who agreed to an extensive on-the-record Zoom interview with HousingWire, is RE/MAX’s no. 2 behind CEO Adam Contos. He ensures that the company is providing support to RE/MAX franchises across the country – the franchises whose fees are RE/MAX’s main revenue source.
Besides hot air balloons, the 48-year-old, Denver-based franchisor is known for “professional, full-time agents” Bailey said. That is, agents who don’t mind the company’s upfront fees, because they keep about 95 percent of their commission from each home sale.
“We’re likely the most expensive company to be with when you don’t sell houses, and the least expensive company to be with when you do sell houses,” Bailey said.
Indeed, in explaining RE/MAX’s limited role in providing agents health care, the agent’s ability to negotiate commissions, and even the agent’s ability to affect home inventory, Bailey spoke of the real estate agent as maker of their own destiny.
RE/MAX, Bailey said, is simply providing a “gym membership.”
Here’s a version of our interview edited for the sake of brevity and clarity (“clarity” here is a euphemism for this reporters’ “ums” “ughs” and parade of dependent clauses to begin each question):
HousingWire: You mentioned at last week’s RE/MAX convention that you were offering a way for employees to sign up with Aetna health care. Could you explain that more?
Nick Bailey: It is a challenge for real estate agents who are independent contractors to find quality, affordable health insurance options. It is easy to solve for the employee portion, just like it is for all of our headquarters employees. But for independent real estate agents it is a challenge for them.
If an office signs up all their agents, they can eliminate requirements wrapped around pre-existing conditions or age and health. And we have been searching for a partner that takes all those objections out of the equation.
HW: Does RE/MAX subsidize the health care cost for its agents like it does for RE/MAX employees?
NB: No, and that’s been the challenge the entire industry has had. We don’t subsidize it because they are independent contractors. They don’t work for us.
The agent is purchasing their own health insurance from the company that we’ve just structured and made available to them.
HW: Thank you for clarifying that. Taking a step back, RE/MAX is one of the oldest established brokerages in the country. Who are your chief competitors?
NB: We have a lot of competitors. I mean there are essentially 85,000 brokerages in the United States. Our main competitors are the Realogy brands of Coldwell Banker, Century 21, Sotheby’s, Better Homes and Gardens. And then they are the independent brands like Keller Williams, Compass, and eXp. Those are probably our largest most direct competitors.
HW: Is Berkshire Hathaway [HomeServices of America – the no. 1 national real estate brokerage by transaction sides, and no. 2 by sales volume, per RealTrends 2020 figures] a competitor?
NB: They would be one.
But I think where people get a little bit confused is with Zillow, and many different companies that offer technical services or things of that nature but are not franchise brokerages. So even though we’re all in the same industry space it’s not apples-to-apples.
HW: That’s interesting that you don’t see an apples-to-apples comparison with Zillow (and a different opinion from that of Glenn Sanford, CEO of eXp, who sees Zillow as perhaps his company’s no. 1 competitor). Zillow has been spending so much of their money on iBuying, and it is now going into brokerage. When a company with that kind of money enters brokerage does it lower the ceiling for all the incumbent brokerages?
NB: The short answer is no, because the entire industry is really running a better end-to-end solution for the consumer. All of us are using technological innovation to create a better buying and selling experience.
And for us the real estate agent is centered at the transaction. And we’ve still got a lot of room to innovate on that.
HW: The tech component is difficult for me to understand in terms of which company might have a competitive advantage. Do you see there being that significant of a difference between your tech platform or Keller’s or Compass’s? And does a RE/MAX agent care?
NB: I think it depends on what’s important to you. There are some agents that are a lot more tech savvy than others. The average age of a real estate agent is like 56 years old. There are a lot of very successful real estate agents who are not very techie. They’re great at online lead generation and see an art to it.
What we try to do is the heavy lifting: What are the best pieces of tech, and what are the best pieces of AI and how do we put them together so that it takes the heavy lifting off the agent, so they can just go sell real estate.
I think an agent does take into consideration what services a brokerage provides, and tech is only one of them. But it is one that I think most look at carefully.
HW: The discount brokerage REX filed a lawsuit this month challenging the standard commission rate structure [which is that the listing agent charges a 5-6 percent commission on their sale, and then splits the proceeds 50/50 with the buyer’s agent]. Do you see a threat to the commission rate structure right now?
NB: There are multiple lawsuits flying around, a couple of which we are party to [as defendants] so I can’t speak to any ongoing litigation. But I can just tell you, in general, the commission between the agent and the consumer have always been negotiable and continue to be negotiable.
So, I think consumers and agents will continue to negotiate the commissions and the consumer will decide on what they’re paying. There’s always been extreme flexibility in pricing.
HW: Do you think that consumers are aware they can negotiate the commission?
NB: I believe those that are selling the home are because it’s part of the contract they’re signing. It is something that I believe they walked through with their agent and learned about.
HW: You’ve mentioned that there are more real estate agents than homes available for sale right now. What would you say to a RE/MAX agent that is feeling discouraged right now?
NB: Inventory is only low when it isn’t yours. There’s still extreme, pent-up demand for people wanting to move.
Also, we have [an] app that forecasts for an agent who is most likely to sell their home in the next 6 to 12 months. We acquired this company last December called First that uses around 750 data points based on the homeowner’s behavior through AI and machine learning to determine if they’re likely to sell. And then we put that in a rating system and serve those names right back to the agent. It helps you identify maybe who you need to call, text, and say, “Have you been thinking about selling?”
And agents need to be contacting all the people they know in their database and ask the question, “Are you happy with your house?” Because there are a lot of people that say, “No, I’d like to move.”
The demand is out there – you just have to go find it.