For it. I'm Brad Erickson, cover internet here at RBC. Very pleased, again this year, for the second year in a row, to be joined by Tamir Poleg, CEO and Founder of The Real Brokerage. Thanks for being here. Thanks for having me. Nice to see you. Always an entertaining conversation. We'll try. Yeah. I have a lot to get through, obviously, but obviously always welcome questions from the audience. If you have anything, feel free to raise your hand. I wanted to start, you know, with the industry. Just a lot of interesting moving pieces going on right now. I guess start at, I love that it gets called organized real estate, as though it's like the mafia. What, from your perspective, like, what is it about right now, or why are we seeing sort of the governing bodies, whether it's NAR or the MLS structure? Why are we seeing that under fire from your perspective, from different industry participants? First of all, we're not a part of that organized real estate. No, I know. I wasn't, I wasn't implying. I mean, the real estate market has been a trough for the past three years, and I think that that puts a lot of pressure on everybody, pretty much, on NAR, on brokerages, on lenders. I think that pressure just brings the worst of people. People are trying to find ways to make money. People are trying to blame others for what's not working well in their businesses, and maybe that's driving that, I don't know, that whole narrative. I don't think that it's good. I don't think that it's good for the industry. It's not good for consumers. It's not good for brokerages, but it is what it is. I think maybe there's a fundamental problem in how real estate works. Mm-hmm. There are a lot of things that could change, but eventually we all should cater to buyers and sellers, to consumers. Yeah. I think that if we think about the consumer right now, the way people buy and sell homes is not optimized. It doesn't mean that the alternative is better, but I think that there are some things that can be. Yeah. Improved for sure. When you say the alternative, what would be, as an example? For example, I've looked at homes in other countries. Yeah. I've looked at homes in Greece and in France. The experience as a home buyer there is far worse compared to the U.S. because there is not any centralized MLS. As a buyer, you have to go and visit different brokerage websites, look at listings. Sometimes they're off-market. Sometimes they're not available anymore. Sometimes you see the same property at two different locations. Yeah. with two different prices. I think that it's, it's even more fragmented. Yeah. If this is the direction that the industry in the U.S. is going towards. Mm-hmm. Of replacing the MLSs with something different, with having brokerages control listing data and not sharing it on one central place, I think that eventually it wouldn't be a greater experience for consumers. Yeah. What, and I mean, obviously you're kind of pro-MLS for the future, but you just mentioned the difficulty without buyer's agents. Why is there this, I guess, debate out there of like, what is the validity of buyer's agents? Certainly we've had the commission argument, conversation for several years now. That's kind of come and gone. Why is there a debate around whether a buyer's agent should be there? Why, why do you think that's happening? I don't think that there's a debate that buyer agents provide value. Mm-hmm. I think that there was a debate around how compensation worked with the seller paying 6% to seller agents on, on average, 6% to the seller's agent, and then the seller's agent splitting that commission with the buyer's agent. That has changed, in August of 2024. I think that what we have seen is that the market really didn't change. The commissions are still the same, and people are still paying the buyer's agent and the seller's agent, which is a testament to the fact that buyers do clearly see a value in buyer's agent. Yeah. Efforts to develop them. I don't think that there was ever any problem. Obviously, this industry is not doing a great job at showcasing itself. Mm-hmm. We have seen a lot of shows about, you know, real estate agent, and that is not a good presentation of how the industry works. I think that there is a very small subset of agents that is doing a disservice to the entire agent community. Maybe that takes a little bit of noise. Obviously, when people buy a home and they pay a meaningful commission to somebody, to an advisor, to an agent. Mm-hmm. The question is raised whether, you know, it was worth it or, or not. Yeah. Yeah. Got it. And then you just touched on it, but just to confirm, you said there's kind of been no change from a buy-side commission. Correct. Have you seen any changes on the sell side? No. We've been tracking that, and it's still, on a national average, it's still 2.6% per side. Okay. At least in our price range, which is around $400,000. Yeah. We do have a luxury division where we see that commissions are lower, but. Mm-hmm. There hasn't been any change. Yeah. That's good to see. And then what's, what's the latest? Recruiting is obviously a big, big piece of the organization. Attraction. Attraction. Sorry. Don't wanna use the dirty word. What have you seen from a, what, what does the attraction landscape look like out there? Yeah. right now. We are very fortunate to be an outlier in the industry. We added over 7,000 agents to date this year. We added about 10,000 agents last year. We are growing very rapidly despite the market conditions. A few interesting dynamics. We see large teams just holding in place and not making a change because they're hurting so much in their businesses, and they don't wanna create any additional shock. Mm-hmm. We have seen a meaningful amount of small to medium independent brokerages reaching out to us and just telling us that they understand that in the future they would not be able to compete with nationwide brokerages or platforms, and they understand that they need to associate or join a larger organization, and they want to kind of plan a few years ahead. That has been interesting. I mean, I think that agents are more mindful of this kind of balance between value that your brokerage provides you and how much they are charging you. Agents are more sensitive than ever to. Yeah. To how much they're paying their brokerages. Obviously, as a brokerage that provides a lot of value at a lower cost. Yeah. It's benefiting. You know, a few years ago, I mean, this trend has been in play for a while, just larger and larger teams gaining more market share, and kind of the days of the one-off real estate agent probably withering a little bit. Is that still generally the case? Has that trend accelerated at all, or what's happening there? Yeah. I do think that Teams is somewhat an optimized business model in the industry. Mm-hmm. Because it allows agents to benefit from leads that team leader is generating and a lot of support and systems in place. What we have seen on our platform, that we are seeing more teams closing transactions versus individual agents. Mm-hmm. Definitely the market conditions are affecting the solo agents. Yeah. For the worst, and are benefiting with kind of high-performance organizations as teams. Got it. And then one more, just on the attraction front. There's obviously been some consolidation or appears to be some consolidation coming in the industry. Has that had any sort of noticeable impact on your attraction of new agents? you're probably referring to the Compass- Anywhere proposed merger. Or, or anything. Acquisition. Yeah. Yeah, the few days after that acquisition was announced, we've been getting a lot of calls from agents just, you know, asking questions and just expressing the desire to learn. Mm-hmm. It's funny, I heard about a few CEOs of other brokerages that immediately reached out to a lot of franchisees and agents at Anywhere, which is a tactic that I don't really appreciate. Mm-hmm. I think that it just made people a little bit more aware to the fact that they need to align with a company for the next century. Yeah. There will be more consolidation. Mm-hmm. Some people thought that there will be kind of camps. You are either on this camp or that camp, and you had to choose. A week later, people went back to their business, and everybody forgot about it. Yeah. Yeah, I do think that any kind of consolidation creates opportunity for other companies. Got it. For you guys, new agents, I think, is a big piece of the growth, maybe the biggest piece of growth. Talk about from an organic perspective. How do you guys continue that? What has that continuing lately? Yeah. So we're at 31,000 agents, and 100% of our growth has been organic. We never acquired another brokerage, and we will continue to grow organically. Yeah. It's for us, it's just a matter of building a platform that is valuable and continuously finds ways to make agents' lives better and bring more value to them, save them time, help them make more money, integrate more technology to save them money on third-party tools. Yeah. This is what we've been focused on, and that speaks for itself. Yeah. We're pretty much the only brokerage that's growing in the past couple of years. Talk about some of those internal tools, and obviously AI, I'm sure, factors into this. I think one of the pitches you hear in the industry, of course, is that, "Hey, we've created our own set of software tools, and our agents love them, and it helps them get ahead and all that." What we've found in speaking with agents occasionally is that that might be true in some cases, but then there's still a ton of third-party applications out there that are very good in different ways. Mm-hmm. That get utilized more so in some cases than internal tools. How do you guys think about that in your strategy and your product roadmap? We're a pure tech company that happens to be a brokerage as well. We also operate a lender and a title company. I think that the best way to measure that is ask how many or what percentage of the agents actually use the technology that you provide them. Yeah. In our case, it's 100%. 100% of our agents are using our technology. Yeah. This is something that nobody else can say. On a good day, at a different brokerage, maybe 10% of agents will use the technology that you offer them. That is number one. Number two, I think that we look at agents as small businesses. Mm-hmm. Those small businesses need everything. They need an operating system for their business. They need visibility. They need to see what's happening in their business. They need you to take care of their marketing, make them more efficient, help them save time, provide them the AI to not only get better support and quicker support, but also have conversations with their clients and offer a better service to their clients. This is exactly what we've been building them. I think that the most exciting opportunity right now that exists in the industry is obviously everything AI and how AI can transform the way people buy and sell homes and make that process much more enjoyable, faster, and instill more visibility. If you ask the average American, they will tell you that buying a home is the third most dramatic thing that they ever went through after death in the family and losing their job. Mm-hmm. I think that there's an opportunity to change that. Buying a home should be a great process. It should be something you enjoy. It should be something you're excited about, not something that you cry over every couple of weeks. Everything that we're building with Leo, our AI concierge, is going to help our agents deliver exactly that. Let's go into that. Talk, talk about kind of what the big components of that are. Two weeks ago, we announced Leo for consumers. Prior to that, for about a year and a half, Leo was active on the back office. Mm-hmm. Leo was supporting our agents. Leo had visibility into all of our forms. Leo was able to help agents with support questions, with transaction-related questions, with broker-related questions. Now Leo can have conversations with our agents' clients. We launched heyleo.com, which is a website. Mm-hmm. Buyers can go into that website and have a voice conversation with Leo, and Leo can ask them about their desired property, what's important for them, what kind of areas they're looking at. Leo can get them pre-qualified for a mortgage. Leo can schedule showings for them. Mm-hmm. In a couple of months, every agent will have a dedicated URL and a phone number that will be powered by Leo. The agent can train Leo on their voice so that clients can feel as if they're talking to the actual agent. Mm-hmm. Leo will be able to take them from thinking about buying a home to actually closing in one single place while delivering all of the updates on lending and title. Mm-hmm. and everything that's happening in between. Leo obviously will be there 24/7. Yeah. When you think about the buyer's experience, Leo is going to be putting the power in the hands of the buyer instead of the buyer always looking, reaching out and asking for updates and not understanding what the lender is saying. Mm-hmm. Taking care of the synchronization between the different stakeholders, Leo is going to provide exactly that. I think in that context, right, there would be some that would say, "Oh gosh, like real estate's still a very human interaction. You know, the relationship is important and all that stuff." You know, AI, there's a limit to what AI can fulfill. Maybe help distinguish between those kind of two things. This is why we believe that agents are here to stay because, same way you're still going to a doctor and you're. Mm-hmm. You're not getting help, you know, on the internet. And if you need a surgery, you will not let a robot operate on you. You need somebody, a human to actually. Yeah. Control that. We think that agents are here to stay, but we think that there's an opportunity to turn agents into super agents. Yeah. Instead of an agent closing 20 transactions a year, an agent can close 40 or 50 transactions a year. By eliminating all of those mundane tasks or time-consuming tasks that are repetitive, that AI can take care of for you. Every time Leo has a conversation with a consumer, you will get an update. You will get the next steps from Leo. Leo will create a file about that consumer and will continue to update that file, and that will just save you a lot of time. Think about an agent buying leads from Zillow or anybody else. That lead needs to be nurtured. Mm-hmm. You need to invest hours and sometimes weeks and months of work on that lead. And AI can actually take care of that and nurture that lead until that very second where that lead is saying, "Okay, I'm ready to go and see that specific home. Mm-hmm. At that point, the agent will be there to meet them. Yeah. You know, shake their hands and have that conversation. Yeah. About two years ago, two and a half years ago, when we started thinking about AI for consumers, we asked our agents to specify all of the tasks that they're performing for buyers. Mm-hmm. We came up with a list of close to 250 different tasks. When we analyzed them, we saw that 90% of them can be automated or replaced with. Wow. Or by AI. And since then, we've been, you know, working towards. Yeah. Updating those 200-plus tasks. Does that, at some level, I realize you're never looking to, like, tether your business to lead generation, but if I'm hearing what you just said correctly, in theory, there actually would be scalable benefits. Is that, is that a piece of the strategy at least? Is that, or am I. We're not going to go into lead gen. Yeah. we will continue to rely or our agents will. Why not? Is that what the business would increase the velocity as well? It's a good question. Going into lead gen will require hundreds of millions in investment and many, many years until, you know, that, let's say, portal, takes off. Our benefit is that we have agents that know how to generate the leads for themselves through referrals, through paid, through social media. We can leverage their ability to actually nurture the leads for them and then try and monetize those leads together with them. They will monetize through commissions. We will take a portion of the commission as we do today. Leo, for the first time, we will have a direct contact with the consumer. Everything that we built up to now was agent-facing. It was a platform for agents. Now Leo has a direct contact with buyers and sellers. We will try and sell them additional services such as mortgage, title, insurance, moving services, home loans, whatever it may be. For us, it's a huge benefit. One of the ways for us to incentivize agents to actually use Leo or introduce Leo to their clients is by paying them. We pay. It's funny because AI costs money. Yeah. You know, every minute of conversation costs us money. We try to flip it upside down. Instead of charging our agents for Leo usage, we realize that every time an agent introduces Leo to a buyer, it's a high-intent lead that that agent is sending our way. Yeah. We need to pay for that lead because we can monetize that lead. We are going to pay our agents per minute of conversation between. Yeah. Leo and their clients. Got it. We expect a massive adoption of that. I guess we're, I think I didn't frame the question quite right. Where I was going with the lead question from a minute ago was, if you guys are creating. I'm sorry. You guys are, sorry. You guys are creating this scalable engine, essentially, is what I hear you saying. It would seem like you're in a position where if you got more leads from portals, you are actually in a position to profitably scale that business, right? Like you've got the capacity, you're saying your agents are doing more business. Is that a piece of the growth story here or? We'll be able to improve their conversion ratio. Yeah. I believe. Yeah. When we talk about portals, we have to be a little bit more specific. And if we're talking about Zillow, because. Yeah. Zillow is the gorilla. Zillow is moving towards flex seats. Yeah. They're not selling leads to just anyone. Mm-hmm. They're shutting down that lead program, and they're moving to flex teams where they identify strong teams in every location, and they funnel all of those leads to that specific team. Yep. They take a meaningful portion of the commission. Right. Around 30% or. Yeah. Or more than that. What we will be doing is we will be helping our flex teams or our agents using any kind of. Yep. Lead purchase. Yep. to nurture and close in a better way. Got it. Okay. And then just touch on AI search, right? There, it's still very new, and we don't, I'm having a lot of conversations even today where it highlights that, you know, OpenAI has presented ChatGPT and the app ecosystem, whatever the apps within ChatGPT might look like. They've positioned it very much as like, it's an open ecosystem. They want, they want their partners to thrive. There are early partners. Certainly, Zillow is early in that, in that regard. On the other hand, I'm talking with a lot of folks today who believe that we're just a moment in time and that the eventuality is something more integrated where ChatGPT will somehow retain ownership. I realize this is unique because the MLS owns the data, so we don't need to sort of talk about that. Just in terms of overall AI search discoverability, how do you see that changing? It goes back to your comment about real estate being very human and personal. People still need a human to. Mm-hmm. To guide them through that process. I think that when it comes to search, it's limited because you can take a person through the process of searching for homes. Mm-hmm. Somebody has to take over the process and actually. Mm-hmm. Make that transaction happen. Yeah. Show them the house, negotiate, hook them up with a lender. Making the dream come true. Yeah. For them. Yeah. I think that this is exactly where ChatGPT or any kind of AI platform, including Zillow, fails because they don't own the relationship, the human relationship. Yeah. With the end consumer. Yeah. I think that while this could potentially improve the search process. Mm-hmm. Search is just the first 10% of the way. Yeah. Who takes care of the additional 90%? Yeah. I think the argument I'd heard was that in the legacy search world, right, it's, yeah, 10% of the way. In generative AI search where it was like, "Hey, you can research like who are the best 10 real estate agents," and it can go out and look at a bunch of publicly available data and really like sort of, you know, more rigorously quantify, right, some of those things. Is that something you guys think about in terms of, you know, feeding that engine? Because it's kind of, it's a weird thing, right? It's like on the one hand, you don't want them to have your data necessarily for obvious reason. On the other hand, if they're the discoverability engine, it's like that leverage pendulum shifts. How do you think about that? I think that there's a strong perception component here. Yeah. Because AI looks at, you know, all of the available data out there. Sometimes agents can seem very successful, but they're actually closing a very low number of transactions. Okay. Hang on. You're suggesting everything on the internet's not right? Some of it. What? Social media. This is totally new information. All right. Yeah. What I'm saying is that I think that it's up to the agent themselves to try and stand out. Yeah. They're trying to stand out today. Mm-hmm. In the way people search for agents. Still, a big portion of agent businesses will continue to come from referrals. This is the way it has been, and this is the way it will continue to be. Yep. But, and then there was a shift towards video and content creation and social media. I think that agents will just have to play in, in different fields in order to be successful. Yep. Got it. I'll open it up. Any quick questions from the audience? Anyone? No? Oh. How do, I assume you either compete or overlap with Redfin? Both of us are brokerages. Now with Redfin being a part of a bigger company, do you feel any impact for you, the way you do your business? Yeah. We never competed over agents with Redfin just because their model is that agents were salaried. In our case, agents are independent contractors. The agents that used to go to Redfin were agents that were looking for job security and had some sort of a glass ceiling. The most successful agents did not go to Redfin because at Redfin, they were paid $100,000 a year. The great agents are making more than that. For us, it did not really make any change, but it was an interesting move for sure. One unrelated, but you are the expert to help us on this. Allegedly. Next year, there will be a big change at the Federal Reserve Board. Expectations are there it will be a little bit towards the, you know, easier interest rate initiatives and policies. I'm not saying we know what it will be, but if, if that materializes, can that help your business? I'm not sure. I missed the first part of the, can you repeat the first part of the question? Yes, yes. I'm just a little soft, sorry. It is generally believed, next year there will be a regime change at Federal Reserve Board. Mm-hmm. It's also an expectation it could be more leaning towards lower interest rates. Yeah. At least at the front end of the curve. That is because President, you know, he favors that, coming from a real estate background. If that happens, how does it help you or hurt you? The current state of the housing market is that we're historically, and on average, 5.2 million homes are sold in the U.S. In the past three years, existing home sales were hovering around 4 million. They're 20%-25% below historic average. The big problem right now in the housing market is affordability. Affordability is determined by mortgage rates, by home prices, and by people's salaries. Something has to change in order for affordability to improve. Home prices are probably not going to change because there is a lack of inventory right now. They didn't build enough homes since 2010, so there's just not enough supply. Home prices are not likely to go down. Mortgage rates are the only factor that pretty much can affect affordability. If mortgage rates do come down, obviously we will benefit just because existing home sales or the average agent will close more transactions a year, and our agents are included in that. But we're not counting on that. Over the past three years, we've grown tremendously well, you know, 50%, north of 50% year- over- year despite the market conditions. For us, it's just an added upside into the market, but it's not something that we're counting on. I have one more question, but only if nobody. Jack, go for it. We also hear in the, in the press, the administration is exploring creative means to help the housing industry. One of the proposals is portability of the mortgage. I'm sure you, you know what I'm saying. I mean, I'm a tech guy, so I, I don't know your side of the business. If, if you can, can you comment on the, Yeah. It's one of the suggestions alongside the 50-year mortgage. I think that being able to carry your mortgage to your next property is an interesting proposition. I think that, I'm not sure it will benefit with the U.S. population just because it will continue to make it harder for younger people to afford homes, in some way or kind of increase the gap between people who have 2% and 3% mortgages and people that will continue to pay more on their mortgage. I think that there are better ways to incentivize people, especially first home time, first home buyers. Thank you. One last one on margins. We have not talked about margins. You, you seem like you have kind of two major forces in your model, right? Gross margin-wise, you have got the higher producing agents, you know, they get that, that get capped. Kind of that acts as a little bit of a headwind. On the other hand, you have got, you know, you have got other drivers, add-on products, title, escrow you have talked about, that is a tailwind. Just as we look out over the next kind of one, two, three years, how do we think about those two things netting out in the margin profile? Yeah. On, on the brokerage side, we have about 9% gross margins. On title, we have 83%. On, on mortgage, we have 50%. On the Real Wallet, which we haven't touched, we have over 90% gross margin. Yeah. Obviously we want to skew or focus more and more on those ancillary services. I think that there is an opportunity to change our pricing or increase our pricing in a way that will drive better margins on the brokerage side. I think that the game for us is trying to attach as many title and mortgage and maybe other services to every transaction. That will completely change the profile of our margins. Got it. I think we're out of time, but Tamir, thank you so much. I appreciate it. Appreciate it. It was great. Thank you.