Rocket-Redfin Deal & Keller Williams Private Equity Analyzed | Title Agents Podcast Ep39

In a world where change is the only constant, Mo Shamil stands at the forefront, guiding title professionals to not just grow their businesses, but to master the art of innovation. With every episode, you're handed the keys to unlock unparalleled growth and stay ahead of the curve. Get ready for a transformative journey. Hello, everyone, and welcome back to the Power of Agents podcast. I am your host, Mo Shamil, CEO of Alltech National Title.

Today, we have a returning guest who always brings sharp insights into the ever-changing real estate landscape, as you all know, Mike Mann. Mike runs some of the largest brokerages in California, and so he has really massive and deep insights in the brokerage world, especially in the residential side. A lot has been happening in the industry, as you're all aware, from the most recent rocket mortgage acquiring Redfin to Keller Williams taking on private equity investment, plus the latest developments in the NAR lawsuit. What do these shifts mean for real estate professionals, and most importantly for you as a title agent? Mike is here to break it all down and help us make sense of the opportunities and challenges ahead.

Let's dive in. Hello, Mike. The real estate world is shifting fast. Before we dive into the details, what's your overall take on the industry right now? What's the energy you're sensing from agents, brokers, and title and mortgage professionals?

Well, Mo, I think there's definitely what I would refer to as an evolution going on in the market today. There's been a number of different announcements. We're coming out of the settlements with the NAR, the class action suits, and things along this line. There's a lot of what I would refer to as energy in the market, but there's also a lot of misinformation going on in the marketplace. I think people are having a difficulty determining what's the truth and what's false optimism that's being put out there to try to continue on as people have always went on.

Okay. I know we're going to dive into more depth and have a bunch of questions for you. How do you mean by the false positive, I forgot what you used, the term you used, optimism? You see out there in a lot of different stories, especially from the trade groups, trying to portray, well, if interest rates are going to come down this year and it's going to open the floodgates of the overall market and really loosen it up and things along this line. There is no hard facts that would substantiate that.

When you're dealing with a market that has never had the level of housing, literally single family home housing stock owned by investors the way that it is today, that is really what's controlling a lot of this pricing that's going on in the marketplace and it's controlling the supply and demand. Even if interest rates come down quarter point, half point and things along this line, all indicators in the market show that this today is what the market is. There is no virtual flood that's going to happen. Unless a major economic incident or outlier like a black swan event is going to happen. There is one brewing.

I was on a podcast the other day. One of the things that's not being talked about is the back end defaults that are going on right now in the mortgage market. On FHA alone, there is over 1 million defaults in that pipeline right now that are all being kicked down the road that FHA is not acting on those defaults as of yet. They're letting people stay in those homes by paying half a month's payment, things along this line or just as long as they stay within 90 days and that's not sustainable. Something's going to happen there and that could trigger something different in the marketplace.

Let's move to one of the most recent top news is that rocket mortgage acquisition, Redfin, which was a huge move. What do you think is the ultimate goal with this and it's just simply about a vertical integration or are they playing a bigger game? I think they're playing a bigger game. What's the old adage, Mo? When somebody tells you what they're going to do, you probably need to believe them.

I've seen a lot of noise out in the trade journals and things along this line of trying to minimize what this merger has been about that, well, Redfin only had so much market share and the whole rocket mortgage guys, they're not that big and UWM outweighs what they do and things along this line. A lot of people are missing the bigger picture and to your point, when they come out and they tell you in their press releases, this merger enables us to literally for consumers reduce the cost to consumers on purchasing a home by 50% or better. I think we need to believe them that that is their intent. It falls lockstep with exactly what rocket mortgage has been about in terms of them owning their own brokerage operations previous and leveraging brokerage operations and mortgage together on a smaller scale when it was just rocket mortgage. They were offering $10,000 discounts to consumers that use their brokerage services and mortgage services.

Well, now Redfin takes that to a whole different world for them. Now you have not only national access across all these different MLSs and these different states to be offering a consolidated program on brokerage, mortgage, as well as they own their own title. So they're looking at a total package. So how do you see the acquisition changing the home buying and mortgage experience for consumers? I know you touched a little bit on this.

Will this simplify the process or create new challenges? I honestly think it's going to simplify the process and that's where this bigger play that nobody's paying attention to is occurring, Mo, is when you control the level of data that Redfin truly controls, it's opening up a whole different schematic as to how to handle a real estate transaction. What I mean by that is we've got to understand the evolution of real estate as to how we got to where we're at today. That was way back when the formal traditional real estate industry started. It was the brokers controlling the data in terms of the data flow.

They controlled the listing, sold information and things along this line before the internet really came on strong. So then the next phase became the brokerages in an effort of cooperative transactions and things. So the MLSs and the brokers controlled the MLSs type of thing. They weren't independent at that time. And then the independents came to the MLSs and then the MLSs became really controlling that data as more of an independent state.

So then the next phase is you have an independents occur with the agents type of situation and the agents insert themselves in between the brokerages and the MLSs and the consumers. And then the agents start controlling the data because of the on flow of the internet. Well now we're in a whole different world in terms of consumers and that is the portals that are out there in terms of information overload to the consumers is what's really controlling the data and controlling the consumer flow. And that's the importance of this deal between Redfin and Rocket. Think of it this way.

When you control that level of data that that conglomerate now controls, it makes it real easy to really come up with a very easy passageway for consumers to literally not even have to worry about selling their home. Because you've got capital sitting here with Rocket to where they can basically go on to this type of collaboration and trade in their trade in their home directly online. They trade in the car. Bypass all of it. controls okay it makes it real easy to really come up with a very easy passage way for consumers to literally not even have to worry about selling their home okay because you've got capital sitting here with rocket to where they can basically go on to you know this type of collaboration and trade in their trade in their home directly online in a car bypass all of them and you know basically know okay I'm gonna get this much for my home and all I have to do is go out and find where I want to live sign me up and I mean that was you know what the iBuyers were trying to do you know back a few years ago but they were taking in all that inventory and you're dealing with price you know valuation and ups and downs you don't need that in this type of model I mean these guys are positioned extremely well to create that type of model and that makes not only it more cost-effective for consumers it makes it that much more convenient absolute so should real estate agents and title professionals be concerned by this kind of consolidation or oh these do you see this squeezing out independent players or creating new opportunities I think I think it's gonna squeeze out some people I think from the title professional perspective you're still gonna need that in the equation but from the real estate professional real estate agent professional I think there's gonna be a dynamic change in terms of you know I mean we're already seeing it just because of the class action suit law you know settlements and things along this line you know when the MLS is have to get rid of having compensation as part of the MLS there's no real value to an MLS any it's dead you know regardless of all the debate that's going on in the marketplace today over clear cooperation you got to put your listing on you know as soon as you get it and things along it they're they're they're wasting their time that they're talking about a group and an industry that's dead okay the portals have access to all of that data already and they just don't need the MLS inputs and things along this line like they once did so now you know as we progress and things along this line from a real estate agent perspective if you don't have that controlled data at the MLS and things along this line and it's an open free system you know it's hard to justify that value of the real estate Commission and things along this line and especially when you've got a government you know you spoke of regulatory earlier that is basically saying you know commissions are too much and you know each party has to pay their own Commission and things along this line you know and it's even been stated at the regulatory level that you know the DOJ really is looking at the fact that they believe that real estate agents are not independent contractors but should be employees so all of those dynamics are going to consolidate the real estate industry from an agent perspective and is what I think we're headed towards and you know and that's not a bad thing because agents who are producing will still produce but you know you're talking about getting rid of I forget what the stat was no but last year 60% really yeah 60% of the illest real estate industry didn't do a transaction so you know I think there's gonna be some serious consolidation is the the new administration's kind of a following path of the prior administration as far as that what lowering costs and and kind of want to more professional professionalize the industry as a whole I I think they will to a certain extent I mean if you look at Pam Bondi's track record in Florida you know she really didn't didn't show too much mercy on those businesses that were based in Florida when it came to the real estate industry there were a number of lawsuits that she had brought up against you know different players in the industry from mortgage to title to brokerage over you know this you know payment of you know unregistered fees things along this line unfair competition non-disclosure issues I mean they're looking to clean up the industry there's there's no question about it and they're equally looking to create a better value for consumers than what's there today and you know so you know how all that shakes out don't know you know I think we're all gonna be you know eating the popcorn and watching but you know again when somebody tells you what they're going to do I think you got to believe them and you know there was a what was it a not a class-action stud a restriction of trade suit that the previous DOJ underneath the previous administration had brought against rocket and you know one of the first things that this DOJ did around now two or three weeks ago they dropped they dropped the whole the whole suit and things along this line and that right there is basically showing you the green light to rocket we believe in the consolidation that you're in search of you know go out and create that value for consumers let's ship gears the next topic which is Keller Williams Keller Williams bringing private equity is a big shift for the company that's a long been Asian centric what you take why now and what does this mean for the future of a brokerage model you know that was that was an interesting play in the marketplace in terms of private equity the in a certain degree they almost had to just because of what the level of competition is if you're going to still stay in the traditional real estate space you've got to have capital and you know you've seen the capital on the brokerage side just continue to get diminished diminished diminished because of the whole class action suits now that you're now we've seen the pressure come in on the buyer side compensation in terms of that you know is continuing to be pressured downward and agent requests for splits continues to go this way you know it takes capital to keep the doors open but the same token is if you listen to Gary Keller he's looking at you know he understands the importance of that data that the overall franchise brings to the table and you know I really look for them to be utilizing that that private capital access in a different methodology than where Keller Williams has been in the past that I think they're gonna look to try to do the same thing that we know we're talking about here with Redfin and rocket you know through private capital can they create that consumer portal that creates ease of use convenience value but still yet have their producing agents in the middle of that schematic and those agents could be doing more than just representing the the brokerage side and things along this line I mean they could be involved in you know brokerage mortgage you know what have you yeah title to turn their to earn their compensation but you know definitely there's there's change of foot so what private equity is often seen as a double-edged sword access to capital but with pressures of for returns you see this pushing Keller Williams into more aggressive growth strategy or could it change the culture or the company which is as you know Keller Williams always kind of been by culture and I think with Keller Williams the additional private equity gives them the capital to cherry-pick brokerages that they would consider wanting to bring into their fold in terms of an M&A strategy but I also think it gives them the ability to go out and acquire title service providers as well as mortgage service providers of creating that umbrella of having that all underneath the Keller Williams brand as this moves forward so if big brokerages and mortgage companies continue to consolidate power where does that leave independent agents and what should they be thinking about in response to these shifts you know I think you've got to look at what your niche in the marketplaces if you try to be everything to everybody and especially you know just trying to continue to grow the traditional way you're gonna find that hard because the pressures are just too great and expenses that are associated with it you know it's just a profitability challenge type of situation so you know if you have a niche like you're really focused on commercial transactions you're really focused on builder transactions or something along this lines I think you can carve a niche for yourself from an independent perspective and you know make you make a good living make some profitability and things along this line but and expenses that are associated with it, you know, it's just a profitability challenge type of situation.

So, you know, if you have a niche, like you're really focused on commercial transactions, you're really focused on builder transactions or something along this lines, I think you can carve a niche for yourself from an independent perspective and, you know, make a good living, make some profitability and things along this line. But this whole jack-of-all-trades and things along this line, there's this pressure is only going to increase out here in the economic environment of, you know, wanting these expenses consolidated as much as possible on the consumer's behalf. And when you talk about consolidating expenses on the consumer's behalf, that's coming from title, it's coming from mortgage, it's coming from brokerage. That's where it's coming from. Now, let's talk a little bit about the market conditions and trends.

Are you seeing certain regions outperforming others? Are there particular markets where title agents should be paying extra attention to? I mean, definitely we're seeing, you know, because of this, you know, you've got a certain level of demand that is out there. And, you know, with that said, the new construction market has been picking up some steam. Now, the tariffs could cool that off just as quick as it started, type of thing, in terms of, you know, talking about lumber, you know, lumber costs going up, steel, aluminum costs going up, and things along this line.

So, I mean, there could be a temporary setback there with some of the stuff that's going on with the current administration. But overall, you know, those markets where we're seeing construction really starting to take off, I mean, you're still seeing, you know, that across the Carolinas, for instance, you know, very much hustling, bustling, growing. You're seeing a number of different sectors in the Midwest that you're seeing that same level of growth and things along this line. And, you know, it's at the cost of the coastlines that you're seeing a number of these different manufacturing companies, things along this line, relocating, you know, their operations back, you know, from the coastlines back into Texas and things along this line. And with that comes construction, comes development, and, you know, those are definitely, you know, causing transactions that those title agents can enjoy.

Have you noticed, or I don't know if you've paid attention to it or not, like the DMV in the DC area with the recent Doge layoffs, and has that had any impact on inventory or pricing? I know some people within the first week saw it on LinkedIn, people just really propaganda, like, hey, prices went down by 15%. In the first week, nobody had even been laid off yet. What are you looking at? I mean, that's what I, you know, I was laughing about earlier.

I mean, you know, people get out and just express their opinions on these, you know, and I mean, unfortunately, these trade news groups pick up on opinions just because somebody's running, you know, another trade group or things along this line. They act like they know what they're talking about, and it's nothing but an opinion. It's hyper air. You know, the reality is, you know, yeah, I mean, there's a lot of talk there in the DMV zone about layoffs, you know, government cutbacks, things along this line. Absolutely, there is.

You know, will it overall change the, you know, the dynamics of the real estate market and things along this line? Not that much. I mean, history itself, if you look at the DMV marketplace, it's a very consistent market. You know, those pricings, the unit volumes and things along this line, they don't move between, I mean, it's three to 4%. You wouldn't go back 25 years.

So, you know, all of this hyper stuff about, you know, that noise overall, you know, Doge is going to wreck the DMV. Or real estate's in the market. Yeah, I mean, it's crazy talk. And the same token is back to, you know, what I said earlier. You also have to understand, you know, a lot of those properties were rental properties, things along this line.

I mean, the level of, you know, real estate that's controlled by institutional investors and things along this line across DMV is pretty substantial. And that right there is enough to preserve that price line. So how are institutional investors behaving in this market? Are they pulling back or doubling down or shifting strategies? You know what?

It's interesting because it goes back to your question previously. I mean, they're investors. You know, they've got certain rates of return they're looking to do and things along this line. And you're seeing them really follow the manufacturers that, you know, those markets, like I spoke up earlier, they're all in. I had just saw, you know, a week ago, BlackRock literally just bought out, you know, partnered with a new homes developer and basically took this community that this new homes developer was going to build in North Carolina and basically told them, you go build the community, we'll buy all 150 units.

So, you know, it's still alive and well. You know, there's certain markets that you're seeing them scale back. You know, there's concerns over some pockets in Florida that they're starting to scale back on. In Texas, probably. Yeah, Texas is, you know, you're starting to see that, you know, that's slowing down to a certain extent in terms of the overall state of Texas.

But there's still pockets of Texas that they're very robust in. Now, the last topic of our conversation would be the NAR lawsuit or NAR lawsuit update. There has been a lot of movements in the NAR lawsuit, as you're fully aware. Can you give us the latest updates on where things stand? I mean, it's been interesting.

An interesting time for the industry, without a doubt. I think the sad part is there's still this huge disconnect across the industry as to what the class action lawsuits were about and why NAR lost and things along this nature. You still have a lot of agents out there doing their TikToks and on social media, you know, blasting the attorneys, you know, who were involved in the lawsuit, saying it's also NAR's fault and things along this line. And again, it's an evolution, not a revolution. Adapt.

Yeah, it's where the market has went. It's where the data has went. And, you know, these agents, they don't control the data. OK, the data is sitting out here in the World Wide Web, up in the cloud, and the consumers have access to that. And, you know, so that MLS is not the access point anymore.

And if you really boil all this down, that's what all of it's about. And, you know, and that diminishes the commission. Flat out. So, you know, I saw an agent do a TikTok, you know, around a song or something. And, you know, she was out dancing and saying, you know, you know, pay me my six percent and everything.

And I'm thinking, oh, that is just the wrong thing to be out there saying with everything that's going on. And, you know, it's consumers expect more. So, you know, it's not done yet by any means. On the lawsuits, you still have Gibson out there. I had saw where, you know, one of the brokerages filed a suit this week to basically try to refuse the judge.

I mean, that's how desperate it's gotten type of thing. I mean, sooner than later, there's going to be the settlement that's there across the board, and it is going to diminish the buyer side of the action. It's just, you know, it's inevitable. So, basically, there's still there's a good amount of denial from the agent world and kind of still fighting all the way of doing things instead of adapting. And this is the new world.

Let's adapt and move on. No, but you see data like the top producers doing even better. It only helps that the true business top producers, realtors and teams. No, that's it. Exactly.

I mean, the top producers are going to go out and do what they do and, you know, leverage the relationships, earn the trust of the consumer, and they're providing value. But this low producer who sells one home a year, if they do that, or even two or three, you know, mid-tier, they're just not going to see. I mean, the MLS is not the value point. It's the service you provide as an individual or a team that is going to make the difference if you're going to earn revenue at all. Because, again, I think what we're getting ready to see is, you know, we're going to see a lot more of that.

and leverage the relationships, earn the trust of the consumer, and they're providing value. But this low producer who sells one home a year, if they do that, or even two or three, mid-tier, they're just not gonna see, I mean, the MLS is not the value point. It's the service you provide as an individual or a team that is gonna make the difference, if you're gonna earn revenue at all, because again, I think what we're getting ready to see is through this consolidation that we're talking about, you're gonna see a whole different level of consumer value that is less expensive for consumers and way more convenient than where we've been as a traditional real estate industry, and that's not bad, because it still is gonna take companies to facilitate that, but how people get compensated in the transaction is gonna change. So with all these changes and shifts in the market, so us as independent title agents, how do we show top two or three things for us to navigate these changes and kind of adapt and prepare for the future? Well, bringing donuts into a real estate office isn't gonna get you anywhere.

I still struggle with that with some of our salespeople, I'm like, that doesn't work anymore. How can you add value? Yeah, I mean, for us as independent title agents and everything else, it's what you just said, Mo, it's about how do we bring value, okay? Everybody is gonna claim to provide best in service, you can rely on me to get your transaction closed and things along this line, but it's gotta be how do we work together in creating value together? It's not only what the value is that the independent title agent's bringing to the table for the real estate agent and the mortgage loan officer, but it's how do we together, in terms of all three of those parties, bring value?

And that, with the independent title agents, through technology, there's a lot of things there, but it's also the network of who you know, what you know, and how you bring that together that creates a whole other level of value and things along this line. And that's one of the things I'll give your organization kudos for, Mo. I mean, you guys are definitely leveling technology at a whole different way in support of your consumers, but it's also that network that we see you building across the United States of tying all these people together is really creating, it creates value in terms of not only those people learning together, operating together, but I'm seeing you guys turn up opportunities in the marketplace that are very unique and definitely getting a great follow. Thank you very much for saying that. As they say in chaos, there's opportunity.

So where do you see the biggest opportunities for title agents and also for real estate professionals and workers professionals the next year and years to come? I think because of a lot of what we've talked about on the call today, there's just so much misinformation out there that consumers get challenged and things along this line. They're looking for people they can trust with helping them to make decisions and more importantly, implement those decisions in the marketplace. And I think that's what we need to focus on in the industry. Now, when we talk about focusing on that, though, we have to be willing to go out and talk to those consumers and meet with those consumers and prospect to get in front of those consumers.

The old day of them calling us, you're not gonna see it. There's too much misinformation. We have to be proactive and that proactivity, that's where you see the top producers that despite of all this that's going on in the marketplace and the challenges in the marketplace, they continue to grow. That's awesome. So as we're getting to a close here and this is the last two questions I always ask, do you have a recent favorite quotes or I know you shared one with us on a prior call?

Um, you know, I think the quote of the day is the quote I mentioned earlier. When somebody tells you what they're gonna do, we need to believe that's who they are and that's what they're gonna do. Especially with deep pockets. Yep, exactly. How about a favorite recent book you read?

You know what, I've been so busy, I haven't had time to read anything. Busy on your podcast and sharing your wisdom. Yeah, I mean, it's been a busy year and it's been a good year. Again, change is not bad. It's how you adapt to change and provide value yourself as an individual is what really drives producers, leaders and things along this line.

So as long as you're willing to learn, whether that's through reading, podcasts, what have you, you're always gonna be able to grow. Well, thank you so much for, it was very, very insightful. I learned a lot and hopefully our audience is gonna take a lot of lessons on what's going on and share that knowledge with their realtor clients and lenders and I just said, when there's chaos, there's opportunity. So how do we adapt and take advantage of the change instead of kind of being scared and a hungry dog? Thank you so much.

Thank you, Mo. Well, that was a powerhouse conversation with Mike Mann. The real estate industry is evolving really fast and staying informed is a key to thriving in this business. To get value from today's episode, be sure to subscribe, leave us a five-star review and share this with a colleague. Thanks for tuning in to the Title Agents Podcast and see you next time.

And that's a wrap on today's journey with Mo Shamil from the Title Agents Podcast. Reminding you that mastering the art of innovation is key in the title industry's fast-paced world. If you're finding it tough to keep up with the changes and challenges, remember, you're not alone. Our calendar is open for you. Find the link in the show notes and let's connect.

Make sure to hit subscribe to not miss out on strategies that elevate and insights that empower. Together, we'll navigate the future of the industry. I look forward to our next meeting in the upcoming episode.