For two decades, real estate tech companies (PropTech) have been proclaiming they’re innovators and game changers.
In some cases, they are. They’ve propelled real estate into a more effective practice that meets consumers where they are.
In other cases, they have not only changed nothing, but dipped into Realtors’ pockets while criticizing them, then dream of exterminating them.
Few voices have a solid understanding of the many moving parts, but in conversation with broker Anthony Phillips, we knew we needed to include him in our conversation, because what we share is a deep concern for Realtors, the honest, hard working folks serving their communities.
What follows is an introduction to Phillips, and what you’ll soon read from him – it’s compelling. Buckle up!
Q: Could you start by telling us a little bit about your background and career in real estate?
My entrance into real estate began as a Project Manager for homebuilder Del Webb which ended in 2008 during the real estate crash. I then obtained my real estate sales license thinking I would buy fix and flips; however, the market was deteriorating so quickly that buying anything was too risky, so I started my sales career representing tenants seeking to rent luxury high-rise condos.
In 2012, I founded Luxury Real Estate Advisors/Management, and in 2013 I was fortunate enough to represent the Seller and broke the record for the highest price/sf sale in Nevada history. This transaction was publicized and provided a springboard for my career.
Since then, I have had the pleasure of representing Heads Of State, Multi-National Conglomerates, and CEOs worldwide.
As for education, I have completed Executive Programs at Cornell and MIT.
Q: What prompted your interest in PropTech?
Tech is a game-changer, so I continually evaluate new tech and new companies claiming to use various technologies.
My firm was one of the first in Nevada to use IBM Watson to analyze 100,000+ real estate transactions to glean insights and deploy advanced marketing techniques.
Q: What is your opinion of the current lineup of PropTech firms?
It is mixed; I admire Glenn Kelman from Redfin as I believe his representations made in public and on investors’ earnings calls appear to be humble and truthful.
On the opposite end of the spectrum are companies like Zillow and Rex Homes, who, in my opinion, knowingly mislead.
Moreover, many bring an aggressive and dubious approach to gaining market share. Realtors often tout recent sales or marketing capability, but they rarely target their competitors in ads.
PropTech’s sole marketing message is comparing their services versus traditional Realtors; however, they often make misleading claims about their capabilities versus a Realtor’s lack of capabilities and exaggerate Realtors’ fee structures.
Q: What are some of the examples of knowingly misleading claims?
One pervasive claim on PropTech websites that may mislead a consumer is using the term “savings.” PropTech firms display calculators on their websites to show how much the consumer “saves” when using their firm vs. full-service Realtors. “Savings” is not a deciding factor to transact, Buyers’ and Sellers’ net proceeds are the preeminent factors, and discount PropTech firms often do not disclose to the consumer that their home may sell for a lower price due to limited marketing exposure.
It is nice to “save” $4,000 in fees but not at the expense of selling your home for $12,000 less.
As for specific companies:
Rex Homes and their CEO Jack Ryan. Ryan admittedly initiated the DOJ complaint, which resulted in the DOJ declaring a statement of interest. Ryan published a series of articles about Realtor “Cartels” and may have colluded with some of the class-action firms currently bringing anti-trust claims against NAR and its 1.4m members.
I am not an Attorney, nor do I collaborate with NAR, any other Association or named Defendants in these lawsuits; however, I understand case law, and one of the first claims made, in my opinion, included allegations that were patently false, knowingly misleading, misleading by omission of critical variables, basing claims of excessive commission structures on skewed data that is 16 years old and in some cases, legal conflicts of interest which could be actionable. Jack Ryan was cited in this lawsuit.
Most cases usually claim the Seller is damaged because they pay the Buyer’s Broker commission; however, a recent lawsuit claims the Buyer is damaged because the commission is “baked” into the sales price. One can argue who pays the commission, but it is irrelevant since net proceeds are the deciding factor in a real estate transaction, and they can be negotiated in several ways. It would be nice if these “high-power” law firms would elect a position on this matter.
These cases also reference lower Seller commission structures in foreign markets like Singapore or the U.K. but conveniently omit that Buyers often pay their Agents in these markets, so the overall fees are similar to transact, ~5%. There also appears to be a hyper-focus on commission percentages; however, consumers bank dollars, not percentages, and average home prices in markets like Singapore are significantly more expensive in the U.S.
In the U.S., any Seller deemed damaged by paying a Buyer Broker fee would be remedied by the lack of fee when they acquire a subsequent property.
Subsequent cases appear to be inferior regurgitations of initial claims.
Ryan is currently suing the state of Oregon, and in my view, the complaint makes several misleading claims.
If it is proven that Ryan filed a lawsuit with knowingly misleading claims and subsequently broadcast these assertions via press release to 3000+ websites and over 20,000 journalists, it would be an unprecedented violation of ORS 696.301, which states:
696.301 Grounds for discipline. “Subject to ORS 696.396, the Real Estate Commissioner may suspend or revoke the real estate license of any real estate licensee, reprimand any real estate licensee or deny the issuance or renewal of a license to an applicant who has:”(1) “Created a reasonable probability of damage or injury to a person by making one or more material misrepresentations or false promises in a matter related to professional real estate activity.”
(4) “Knowingly or recklessly published materially misleading or untruthful advertising.”
If found in violation of Oregon statutes, Rex Homes license could be revoked. Moreover, most states have similar regulations, so there could be a domino effect.
Regarding Zillow, I believe they make misleading claims on a range of issues. The most significant, in my view, involves disclosures of alleged violations of RESPA (unlawful kickbacks.)
There is a shareholder lawsuit against Zillow, which was disclosed to shareholders stating: “On February 28, 2020, our motion to dismiss the consolidated shareholder derivative complaint was denied. We do not believe a loss is probable related to these lawsuits.”
Zillow claims, “We do not believe a loss is probable related to these lawsuits,” despite Judge John C. Coughenour of the U.S. district court in Seattle claiming, “the court can draw a reasonable inference that Zillow designed the co-marketing program to allow agents to provide referrals to lenders in violation of RESPA.”
RESPA is a criminal act, and if affirmed, their privileged Brokers licenses could be in jeopardy. Zillow’s iBuyer and Flex programs require a privileged permit in each state.
Q: Why did you decide to speak out and take on the risk of confronting well-funded companies?
If I don’t, who will? I am uniquely qualified as I understand real estate, finance, marketing and have massive discovery capabilities. Furthermore, I have Commissioner-level contacts at the FTC and SEC, and connections with a minimum of four class-action firms seeking to file claims against PropTech firms when we discover anything actionable.
Q: What is your plan going forward?
I am going to tell the other side of the story.
I plan to assess EVERY PropTech company, including their TOS, and publish my opinions. If I discover egregious acts, I will file claims at the FTC, SEC, the relevant State Real Estate Divisions and share evidence with class-action firms.
NAR has been a punching bag and playing mostly defense against claims, and I have yet to see any significant counterpunches against the opposition.
Now that changes.
