After spending a decade building a proprietary technology and productivity platform, United Real Estate Group is seeing its growth explode, according to Q2 2021 earnings report. Is technology finally providing the key to success?
In the past, when brokers thought about low-fee brokerage firms, they thought of low service. But, there’s a new breed of low-fee brokerage (not to be confused with a discount brokerage which offers a low commission to buyers and sellers), that is a hybrid between a 100% model and a traditional brokerage.
United Real Estate Group is a leader among these new hybrids. But, make no mistake, they are not a traditional brokerage model. They only offer services that traditional models offer. But, like many 100% companies, they charge a monthly affiliation fee and a transaction fee (disclosed to all parties.)
On the heels of their Q2 earnings report that showed total revenues increasing 472% year to date over the same period as before, and the number of agents almost doubling in that same time period, RealTrends spoke to Dan Duffy, CEO of United Real Estate Group. about their growth and technology platform. Much of their growth is due to several key acquisitions, particularly Benchmark Realty in Nashville and Virtual Properties in Atlanta. But, says Duffy, “About 22% of our growth was organic. As you grow a strong toehold in a market, agents see your signs in yards. It’s a natural network effect.”
Because United is not a public company, their earnings can’t be verified. However, based on RealTrends 500 verification data, we believe these to be accurate. “I think you’re going to see us remain private for a while. We don’t have any sort of burning wick that says we have to go public in a certain timeline. Now, might there be an opportunity a few years down the road? Sure. But, it has to be the right decision for our agents.”
Secret sauce? A proprietary tech platform
“It’s been almost 10 years of effort building our tech platform,” says Duffy. Indeed, United Real Estate Group flew under the radar for the past nine years, bringing on about $35 million in institutional capital to accomplish the construction of the platform. “We didn’t start buying companies until our technology was ready.” He credits this technology platform with allowing the company to truly take on the competition, stay profitable and grow quickly.
He notes that, “Zillow has one website and they pay for tons of SEM (search engine marketing) to get traffic to their site. They index on the property level, and that’s not easy to do on a large scale. We have thousands more websites, which in aggregate (on a per-listing, per-agent basis), drives exponentially more traffic and more consumer engagement than [Zillow] does.” However, Duffy is quick to point out that United Real Estate only integrates with MLSs where they have a market presence.
Duffy knows his tech. He was the CEO of ePartners, “the world’s largest Microsoft channel partner in their business solutions division,” he says. “We had 13,000 enterprise clients. Because of margin compression, we started writing vertical applications.” After a buyout, Duffy transitioned out, took some time off and did a deep dive into, he says, “14 companies, inside and outside of real estate.” He decided to purchase rural land brokerage United Country Real Estate, where he saw the opportunity to build operational efficiencies via tech. “We made United Country exceptionally strong and then took that tech-enabled business service, and centralized delivery of everything from marketing to technology, and brought it to the residential market.”
Duffy says the company’s Bullseye Agent and Brokerage Productivity Platform is a true cloud-based system. “When people throw around the term cloud-based, they generally mean hybrid cloud. What having a true cloud-based system means is that we can take one developer to solve a problem at the same time that a group of developers is solving a bigger problem. Another group can fix a broken widget. We have a lot of flexibility and efficiency with our tech.” He notes that because they built their system, they have a variable cost per agent of about $4. “What that means is that we can eat the cost and give it to [our brokers and agents] for [an extremely low cost].”
And, he says, other real estate firms are playing catch-up by piece-mealing together a platform by buying it. “I see it all the time. Without that legacy investment, the capital and the know-how to do it, you can’t do it. If you buy a technology company, over time, the tech people will get frustrated because they’re working in a real estate brokerage culture, but they’re a technology culture.”
Q2 2021 results
According to RealTrends 2021 Market Leader Report, flat-fee brokerages are gaining momentum around the country. “Because of their low margins, this business model relies on economies of scale to make money,” says Scott Wright, RealTrends advisor and a partner with RTC Consulting. And, they’re growing quickly. Last year, United Real Estate wasn’t listed on the RealTrends Market Leaders report because its company-owned brokerage was just in Dallas. But, since it acquired Benchmark Realty and Virtual Properties, it has entered into the top 10 in Atlanta and Southeast Florida, and become No. 1 in Nashville.
Today, United Real Estate Group announced their Q2 earnings:
Key Financial and Operational Performance Metrics Through June 30, 2021
|YTD June |
|$ Transactions (billions)||$4.032||$8.465||110%|
|Agent commissions earned (millions)||$17.726||$118.166||567%|
“The scale of our business now allows us to double down on investments in innovation with a regular cadence and enhance our value proposition to our stakeholders,” says Duffy. “We are adding new resources, tools and core services to our already robust technology-enabled business services platform. All these efforts are made more efficient with greater effectiveness as a result of moving our technology stack to the cloud.”