In May of 2018, the brokerage eXp realty entered Nasdaq trading with a splash. On it’s very first day, it reached a 1 billion dollar market cap. On top of that, eXp nearly doubled its amount of real estate agents from January to June 2018, reach. This made real estate companies from all over the world sit up and take notice. What has allowed eXp to reach such exponential growth in such a short time? More importantly, how can this company change the workings of real estate brokerages in the long term? The answer lies in the virtual technology eXp has been using and new innovations in business model.
Realtors in Virtual Reality
One of the major innovations of eXp reality is its online campus. While the company does have an official headquarters, it is mostly used for storage. The true hub of the company is housed in a sims-like app in which realtors can log on, attend live lectures, speak with each other, and hold meetings in their virtual offices. This feature was brought forward by founder and CEO Glenn Sanford, who had experience in several tech start-ups.
This may seem like more of a kitchy appeal to tech-lovers than a practical business model, but eXp’s virtual campus has numerous benefits. Firstly, overhead cost is massively reduced for a company that does not need to buy or rent physical locations. As a result, their agents do not have to pay desk costs to join their agency.
Furthermore, eXp has not had to franchise to expand throughout the US, Canada, and India. Their expansions can be spontaneous, without needing funding from previous operations in order to make large leaps. The company also has more control in the absence of franchising.
One more advantage of working online is that for those agents who want to break into a new market, the process is entirely simplified. EXp agents do not have to find a sign with a new brokerage in order to operate in another state. They can simply begin doing business in that state.
Agent Ownership
Another groundbreaking feature of eXp is its availability of shares. Because of this, the company proudly touts itself as “agent owned”. Every agent earns shares upon completing their first transaction, “fully reaching their cap” (paying fees from commission of $16,000 a year), and by recruiting a new agent to the company. It is clear that eXp has used this as a way of attracting new agents to their company as well as incentivizing recruitment.
It should be noted, however, the shares are on a declining scale. The more agents that join, the fewer shares available for each agent. This could be a problem for the company going forward, although the agent ownership program is likely to be phased out as the company continues to grow.
Revenue Sharing
Another huge incentive for agent recruitment is revenue sharing. When one agent recruits others, they actually earn a percentage of commission from those that they recruit. Furthermore, as they recruit more agents, they can progressively earn a percentage of commissions from the recruits of their recruits, and so on and so forth until 7 degrees of separation. In other words, eXp has 7 levels of earning from recruits.
An agent can earn 3.5% of their recruits’ gross commissions up to the company cap of $16,000. In other words, each agent can earn up to US $2,800 dollars from each recruit. Furthermore, the more agents one person recruits, the more percentage they can earn from higher levels.
The company boasts that a person can earn US $80,000 of passive income should they recruit ten agents who each in turn bring in one person. This is not an insignificant chunk of change. This has been extremely helpful to motivating rapid growth.
What’s Next for Other Brokerages?
It is exceedingly clear that in the short term, eXp’s strategies have been incredibly effective. But how may the technology advances and new business models reach beyond their own company?
There are several emerging and established brokerages who want to incorporate tech into their business models. Keller Williams founder Gary Keller is promising new tools and new tech. They are, however, sticking with their traditional strategy of selling trainings to its agents. New tech could be a great selling point.
The truth is, however, that eXp is likely to remain unique in its overall strategy. The company has experienced immense growth and success. Too much of good thing, however, can mean failure. Rome fell because it could no longer manage its expansive empire. Whether eXp will follow suit or rise to the challenges of rapid expansion remains to be seen. No matter what, the brokerage community is sure to be watching closely.
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