Mike DelPrete: Disruptive brokerage models gaining traction

Publish Date: August 09, 2023

Written by Craig C. Rowe

- Originally published at Inman News - Craig C. Rowe

The CEO tract at Inman Connect Las Vegas on Tuesday wrapped with proptech adviser and strategist Mike DelPrete telling an audience of his peers that legacy brokerages are facing an “innovator’s dilemma.”

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The CEO tract at Inman Connect Las Vegas wrapped with proptech adviser and strategist Mike DelPrete telling an audience of his peers that legacy brokerages are facing an “innovator’s dilemma.”

DelPrete is referring to, The Innovator’s Dilemma a popular business tome by Harvard professor Clayton M. Christensen, which introduced the idea of disruption and how established companies address its impact on profits. In this case, should legacy and enterprise brokerages change course to ensure (relatively) new models — eXp, Real, etc. — don’t erode their foundations?

Using Compass as an example, DelPrete explained that there isn’t a lot of incentive to change when you can cut “half the company away,” and still stay on top of the industry.

“You typically can’t do that and still survive as a business,” he said. “How do you maintain culture? Still, even at that level, they’re still exponentially more op-x in that business than a company like eXp or Real or some of those 100 percent commission models.”

In essence, companies invested in a century-old business model can’t abruptly change course to accommodate the competition. “It has to be from the ground up,” said DelPrete.

Inman’s Jim Dalrymple II asked why a brand like Anywhere couldn’t merely acquire one of the rising upstarts.

“They could have, they can’t anymore,” DelPrete said. “Let’s say Anywhere starts a low-fee brand, well, why would every single Coldwell Banker not go to that brand?”

The truth is, according to DelPrete, it would be “close to impossible” for a legacy brokerage to start or acquire a disruptive model and still “cogently operate as a business.”

Dalrymple asked if that means legacy brokers will eventually come out in second place. Will the new players win?

DelPrete said it’s not about winners and losers in terms of the brokerage, but some models will be winners and others losers.

“Look at where agents are going and who is gaining market share, gaining more transactions or losing more transactions,” DelPrete said.

There are clearly two camps, and one is out-gaining the other in terms of market traction, according to DelPrete, who analyzed brokerage performance in a June 2023 report on his website. His research clearly backs his consensus that the newer business models are succeeding, despite facing stigma-laced headwinds.

“In a shifting market, the low-fee brokerage models are structurally designed to thrive and are operating much more profitably than legacy brokerages,” he stated.

Shifting to another form of alternative sales model, on the topic of iBuyers and agents now working together, DelPrete said it only makes sense. Naturally, Opendoor is the center of that universe, and the alternative buying and selling platform has worked with agents since 2017. But it still seems like a new concept.

The industry’s vast network of intersecting stakeholder connections, from agents to title companies to loan officers all working together, all interacting on countless deals year after year, makes it exceptionally challenging to conduct transactions without getting caught in that net.

“They’re all connected,” DelPrete said. “If 95 percent of consumers use an agent, and you’re Opendoor, why would you forget about them and only focus on the 5 percent?”

DelPrete explained that while new models aren’t for everyone, they’re great for the agents that “get it,” and who see value in working with them.

Asked what he would do if one of the “legacy brands” sought his advice on addressing the rising tide of competition, DelPrete’s advice was sharp and simple.

“Compete where you can win.”

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