In real estate, changing tides and market cycles are expected for those around long enough to navigate their share of market changes. While agents and brokers are typically left deciding which career moves would best suit their business, those at the highest levels of a brokerage may also face a similar decision.
The industry got a front-row seat to that phenomenon throughout 2022. The housing market flux influenced prominent real estate brands—to one degree or another—to make significant changes in their C-suites.
RISMedia spoke with Craig Cheatham, president and CEO of The Realty Alliance, in December as the leadership shakeups flooded headlines. At the time, he expected more to come in 2023 as he predicted a growing need for leaders to be “even more agile” as the market shifted.
“We’ve seen more volatility in our industry over the last 10 years than in previous decades combined, it seems,” says Cheatham. “I have also felt a restlessness in the last 10 years in our space that may have prompted many of these changes, borne perhaps out of unrealistic expectations or from a new sense of what is a standard tenure for executives.”
A common thread among the brokerages and companies that have undergone executive changes in the past year is that they are all publicly traded.
Ken Johnson, an economist at Florida Atlantic University, suggests that the shifts aren’t as surprising, considering that public companies tend to be more sensitive and responsive to downturns or market changes.
“This tends to happen when you’re at the peak of the cycle,” he says. “Things that were winning before will be losing now.”
According to Johnson, the departures and resignations across several prominent real estate brands in the past year also serve as an example that the “heyday” that many brokerages experienced during the pandemic—and earlier to some degree—has ended, which he attributes to the spree of executives stepping down.
With new faces at the helm of several big players in the industry, onlookers, pundits and the leaders themselves unpacked what the moves could mean for each company’s future.
Re-evaluating in a slow market
To a certain extent, industry expert Russ Cofano, CEO of Collabra, thinks the challenges of the changing market have forced some companies to reassess or revamp parts of their businesses that may not be faring as well as they did during the height of the frenzied market of 2021.
Looking at Opendoor, which saw former CFO Carrie Wheeler step into the CEO role after Eric Wu resigned, Cofano suggests that the move indicates the pressure to pivot amid headwinds and find more sustainable models for the business.
“I think that is the realization that they are coming to,” Cofano says. “They’re not giving up on iBuying, but the whole Marketplace approach is essentially another startup within a startup. Who is the best person to run that? Eric (Wu) is.”
Johnson echoed similar sentiments, suggesting that the shift at the prominent iBuyer is an example of the toll the market shift has had against Opendoor’s primary business model.
“(Opendoor’s) strategy seemed to work best when you’re on the upside of the housing cycle—particularly a very steep housing cycle wherever you are,” he says.
Opendoor was able to buy homes as price appreciation was ramping up during the pandemic, which helped them turn a profit on their inventory. In many cases, Johnson notes that the iBuyer didn’t have to worry about overpaying for homes at the time, which also helped them build their cache of properties.
“That’s changing now as prices settle, and in many parts of the country, they’ve already started to come down moderately,” he says.
It showed at the end of the year as Opendoor and its last remaining large-scale competitor, Offerpad, struggled in the second half of 2022.
During a recent earnings call outlining the company’s performance last year, Wheeler indicated that the company has been focused on “stabilizing our core business.” That includes some belt-tightening for the iBuyer and finding additional ways to bring in business.
The company launched its partnership with former competitor Zillow to allow the portal’s users to accept an Opendoor offer on the platform. At the same time, the company is rallying behind its new Marketplace and Opendoor Exclusives platform, which makes the iBuyer’s listings available to consumers for 14 days before they are listed on a multiple listing service (MLS).
Balance sheet balancing act
Compass is another company that was forced to rethink its gameplan as the housing market turned in the second half of 2022.
As market headwinds started taking hold, the company embarked on a belt-tightening mission to help it weather the storm and make good on the promise of becoming free cash flow positive in 2023, meaning money coming in will exceed funds flowing out.
That included several waves of layoffs that started in June 2022 when the company announced that it was firing 10% of its staff amid signals of a slowing housing market and economy.
Among the hundreds of people fired at the New York-based brokerage was Chief Technology Officer Joseph Sirosh, who is largely responsible for the development of the brokerage’s agent-facing platform, which has long been touted as a significant factor in the company’s recruitment efforts over the years.
Since parting ways with Sirosh, Compass COO Greg Hart has led the brokerage’s tech department as the company has continued to restructure and refocus in recent months.
“When it became apparent early in 2022 that revenue growth could be challenged, we paused our expansion into new markets and also halted all M&A activity,” Hart said during Compass’ latest earnings call.
Compass announced in August 2022 that it would cut back on its investment in technology while eliminating the use of equity or cash incentives to recruit new agents in the future—arguably one of the more significant aspects of the company’s recruiting strategy in past years.
According to Hart, the intent was to drive a more profitable approach to growth for Compass.
“We always intended to move deeper into our existing markets by attracting the agents in the top 50% in those markets,” he said.
Hart and Compass CEO Robert Reffkin have maintained their confidence that the firm would continue reeling in new agents and retaining current ones because of the strength of its existing tech platform and presence in markets across the U.S.
However, during the company’s last earnings call, Reffkin hinted that franchising could be on the table.
“At a high level, we’re focused on profitable growth, and profitable growth means still expanding in our current markets,” he said in response to a question during the investor call.
“When it comes to new markets, instead of having to hire a bunch of people and build out an office space in advance of having the revenue to cover it like you mentioned, franchising is definitely a more profitable way to grow, so that is something that we are exploring,” Reffkin added.
Reffkin also explained during the call that the brokerage plans to be free cash flow positive in the second quarter of the year. Still, he also cautioned that cost-cutting could continue if market conditions remain uncertain.
Getting back to what works
As the market cooled last year, experts suggest that many companies were forced to return to the fundamentals that helped their brands thrive before the pandemic.
It’s been nearly 18 months since RE/MAX Holdings announced the imminent departure of former CEO Adam Contos. This led the real estate giant to make several leadership audibles, including placing RE/MAX President Nick Bailey in the driver’s seat of the company’s real estate franchisor.
The brokerage was riding the wave of momentum from one of the best years the industry has ever seen. Admittedly, Bailey tells RISMedia that he prioritized several goals last year to position the company and its agents for success in the anticipated market shift.
“I kept saying the market a year ago was not sustainable, and my speech a year ago to agents was to have a savings account because ’23 (was) going to look different,” Bailey says.
RE/MAX Holdings—parent to RE/MAX and Motto Mortgage—had made it clear in the middle of 2022 that it was focused on bolstering agent growth and accelerating the expansion of its mortgage business with different initiatives.
This included launching a pilot program designed to attract teams with a flexible and competitive cost structure for teams of six or more. According to Bailey, RE/MAX has also focused on bringing in independent companies.
“I thought it was very important that we play matchmaker,” he says. “We’ve got people that are reassessing their value that maybe they don’t have the tools, systems and brand as an unaffiliated or independent company, and they’re looking for solutions.”
According to Bailey, RE/MAX also looked hard at its tech investment.
“I didn’t think we should be a software company, because as I see the future of where technology lies, No. 1, tech isn’t going to replace agents, but agents that don’t adopt tech will get replaced, and those are two vastly different things,” Bailey says.
Before his return, Bailey acknowledges that much of the industry felt pressure to invest in tech through acquisition to keep up with the investment of other companies and portals.
And while he admits that the tech is all about efficiency for agents, Bailey didn’t believe that RE/MAX needed to be the creator of its tech tools.
This ultimately led to the brokerage’s announcement last year that it would be sunsetting its booj products after years of developing many of the software and agent-facing tools that it offered. Instead, the company announced that it would partner with Inside Real Estate to bring its new MAXTech in as a total replacement.
In his speech at the company’s annual conference, Bailey touted RE/MAX’s investment in tech as a catalyst for the franchisor’s projected growth in the coming years. He also declared a forward-looking goal of reaching 200,000 agents globally in three to five years.
Bailey has, on several occasions, suggested that RE/MAX is keeping its sights on what the future will bring in the tech space and how agents could benefit. That includes artificial intelligence (AI) and its role in generating business for agents.
“I think an agent wants more transaction-ready consumers,” he says. “Ten years ago, there were 4 million real estate leads in the United States. Last year there were 250 million leads, yet we still only do about 5 million transactions, give or take.
“What you have is this huge, huge cloud of hundreds of millions of leads and agents going, ‘Who’s real?’” Bailey adds. “This AI world of knowing consumer behavior and figuring out who is truly the closest to being a buyer or seller is absolutely in my mind where the efficiency of tech is going to lead agents’ business in the next couple of years.”
Agent count to marketshare
Under harsher market conditions and economic uncertainty, some companies have brought back well-known leaders to rally the troops and guide their brands to greener pastures.
That is the case for eXp World Holdings, where Glenn Sanford, founder, chairman and CEO re-took the reins of eXp Realty to navigate the company and its 85,000-plus agents through a more competitive market after it thrived during the pandemic.
“One of the reasons why I came back as CEO of eXp Realty was to really continue our focus on the agent-centric nature of the real estate brokerage,” Sanford said on a February conference call following the release of its latest earnings report.
While the virtual brokerage posted growth in agent count and revenue during 2022—increases of 21% and 22%, respectively—the company wasn’t exempt from the hurdles the second half of the year presented. eXp saw transactions fall 13% in Q4, transaction volume down 20% and flat agent counts over the last few months.
Despite the second-half hurdles, eXp snagged the No. 1 transaction ranking in RISMedia’s 2023 Power Broker Report. The firm reported more than 397,000 residential transactions in 2022 and over $159B in sales volume.
On several occasions, Sanford has sat down with RISMedia to highlight his focal points as he looks to guide the firm through choppy waters and deliver the “exponential growth and innovation” he promised upon his return.
“We shifted the language in the company in 2022 and into 2023—we talked about it being about marketshare,” Sanford said in a previous interview with RISMedia. “We know that a lot of agents are going to leave the business, so what we can do is focus on marketshare versus agent count.
Sanford continued, “When the market improves again or flattens out, I think the agent count will be the metric that most people will recognize, but right now, we’re focused on marketshare.”
That push for agent and brand growth will also be coupled with more investments in virtual tech as eXp is currently transitioning to a fully browser-based metaverse platform with VR capabilities. Overall, Sanford has made it clear that the firm is doubling down on the core aspects of its business model.
Sanford’s return to the CEO role, while touted as a “growth and innovation” catalyst for the company, airs more on the side of a prudent return to the “nuts and bolts” at a time when the market demands it, according to Johnson.
“I agree with Sanford, but he knows it’s time to get back to the meat and potatoes of the business, and he wants hands-on,” Johnson says, adding that the move exemplifies a refocus that many companies may need to undertake in the new market cycle.
“I don’t care if there is brick-and-mortar involved or not, but if you don’t get back involved with the agent force, then you’re going to have trouble doing well,” he says. “We’ll shed a lot of licensees in the next year or two. A lot of firms will go by the wayside. My gut feeling is, and I don’t have any predisposition of which one of the five, but at least one of those five (companies) will not be around in 24 to 36 months.”
Listening and learning
Cofano suggests that many brokerages may be looking to return to their roots as the housing market tightens up, pointing to Ryan Gorman’s departure as CEO of Coldwell Banker as an example.
“From the outside looking in, I think Anywhere is saying, ‘We’ve got to get back to our roots and grow the company as a traditional brokerage company,’ which begins with recruiting and doing the things that support the existing agents,” says Cofano.
Anywhere announced that Gorman was out as CEO of Coldwell Banker toward the end of last year, indicating that the move was a strategic decision to “accelerate” its goals of integrating and simplifying the home-buying and -selling experience.
Not long after Gorman’s departure, Anywhere announced that former brokerage president of Sotheby’s International Realty Kamini Lane would be his successor, leading the “next chapter” of Coldwell Banker and its 55,000 agents.
Within that chapter, Lane tells RISMedia that there is an opportunity to modernize how agents do business by listening more.
“Much of the way that homes are bought and sold, the processes that our agents and clients use to do business every day haven’t changed meaningfully in decades,” she says. “We need to listen to our agents and build for them the products that will help them deliver meaningful and invaluable service.”
With a leadership history and background in brokerage strategy, agent relationships and operational excellence, Anywhere leadership indicated that Lane would be “well-positioned to lead the Coldwell Banker Realty business and brand into the future.”
While she is still getting her feet under her as CEO, Lane is focused on tapping into the minds of the agents at the firm.
“I believe that our agents belong at the center of the transaction, and everything we do must support them in building their book of business and ensuring that they are exceeding their customers’ expectations,” Lane says. “They are the heart and soul of our organization and deserve the resources to realize their dreams.”
Leveraging what works
With one of the more recent leadership shifts, Long & Foster Companies and its newly appointed executives tell RISMedia that they are “doubling down” on their all-inclusive business model to connect its businesses and team members—agents and employees alike—even better.
“Our all-inclusive approach to real estate is what has propelled our company forward for the past 50-plus years and what we’ll continue to focus on,” says Patrick Bain, the new president and CEO of Long & Foster Companies, which is part of HomeServices of America.
The company announced in March that Bain would be Jeff Detwiler’s successor at the helm while also disclosing that Jackie Thiel would replace Boomer Foster as president of Long & Foster Real Estate.
While the change marks a turning of the page for the real estate brand, Bain tells RISMedia that it’s “business as usual” for the company heading into the spring market and beyond.
Bain touted Long & Foster’s history of offering several services vital to the transaction process, like mortgage, title, insurance, inspection and more. He notes that the diversified service options will help keep the company stable in the shifting market.
“As we look to a more normalized market in 2023—a market that some brokerages may not survive—we’re just as dedicated to our all-inclusive approach,” Bain says.
“The past few years were outliers—the pandemic induced a buying frenzy that drove up prices and demand,” Bain says. “We’re in a more normal market now, full of opportunities for our company and agents.”
Among them, he explains, is the broader Long & Foster family of companies, like its mortgage and property management businesses. For example, Bain says the companies could also support their partner brands across the HomeServices of America family.
“Developing those relationships not only benefits Long & Foster and HomeServices, but also builds stronger partnerships within the HomeServices network,” Bain says. “Our agents will have closer connections with REALTORS® at other HomeServices brokerages, which drives referral opportunities.”
Re-imagining their use of office space is another focal point, as Bain notes that in the wake of the remote work trend that started during the pandemic, Long & Foster offices “can no longer just provide a desk and a computer.”
“We need to create places to learn, collaborate, network and grow,” Bain says. “It’s about creating a space to connect us with the communities where we live and work.”
To that end, Bain adds that the company is adapting its approach to workspaces and investing the savings into resources more conducive to mobility and supporting agents, employees and clients.
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