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Realogy Idea Proposal (RLGY)

Realogy Idea Proposal (RLGY)

Are technology-enabled real estate brokerage competitors like Redfin and Compass taking agents and market share from Realogy?

Report Available: January 24, 2018


Blueshift’s initial research shows that RLGY, the largest U.S. real estate brokerage, is under fire from upstart disruptors like RDFN and Compass who are taking advantage of the market’s increasing propensity to use online platforms for buying and selling a home. These competitors are leveraging their technology platforms and paying up to get agents to switch from traditional brokerages. RLGY is also threatened by the growing number of buyers and sellers looking to represent themselves as information flows so freely online. RLGY is pivoting as it adjusts to these trends, focusing on agents and technology.



  1. RLGY suffered a difficult Q3. The real estate brokerage company, made up of Century 21, Coldwell Banker, Sotheby’s, and others, not only missed earnings expectations but experienced a 12.5% year-to-year earnings drop despite a 2% increase in revenue from a year ago. The poor performance was attributed to the higher commissions being paid as part of RLGY’s effort to recruit and retain agents, fewer-than-expected home sale transactions because of the hurricanes, and lower revenues in its relocation division. RLGY did report success with its recruitment and retention effort as the agent count in its NRT division grew 4.5% and the retention rate exceeded 93% at the end of Q3. It also announced that its Zap technology platform will be deployed to all its eligible franchisees by the end of 2017.
  2. RLGY is shifting its focus to aggressively serve real estate agents and upgrade its technology. A new CEO and several new executives were recently hired and tasked with reinventing the company during a time that is highly competitive and ripe for disruption from technology and AI. RLGY has talked recently about having to increase commissions to retain agents. As home buying and selling increasingly relies on online platforms, new-age brokerages are popping up to disrupt traditional firms, luring agents with higher commission splits, larger signing bonuses, and a better tech platform to take advantage of the 95% of all buyers who use an online website as an information source for their home search. In October, RLGY posted an opening for a Commissions Supervisor job at NRT.
  3. Compass is one of these rapidly growing online brokers disrupting the traditional agent broker business model. It was founded in 2012 and operates in 11 markets, relying on technology-driven data to improve efficiency in real estate, while also possessing a top-notch mobile app for buyers and renters. Compassjust raised $450 million from SoftBank at a $2.2 billion valuation to fund its plan to partner with top agents in every major U.S. city. This also gives the company the means to pay up for agents and lose money to gain share.
  4. Newly-public RDFN has been in business for a decade, operates in 84 markets and is the #5 most visited online real estate site, yet it sells under 1% of homes nationwide. RDFN touts itself as the low-cost high-volume brokerage, charging only 1% to 1.5% commission on home sales, about half the standard 3% taken by most Realtors. But RDFN hires agents as full-time W-2 employees complete with salary, healthcare and other benefits. It also recently began originating mortgages as it looks to build a comprehensive real estate business.
  5. The 6% model, with 3% to buyers’ agents and 3% to sellers’ agents, is under attack, brought on by the undercutting of price from the likes of RDFN’s lower commission model. Buyers and sellers are also more likely and more equipped to represent themselves given the flow of information available on the internet, another potentially troubling trend for RLGY.
  6. In Blueshift’s Dec. 6 report, sources said Z’s 2018 growth would not be slowed by any current or potential headwinds. These findings were in line with our March 29 report in which sources expected Z premier agents to continue to allocate budget dollars to the company despite their negative views or concerns about its service and support. RDFN and NWS/NWSA’s were identified as significant competitors Z must navigate. Sources also said there is a possibility AMZN could be entering the online real estate space as the company posted but then quickly removed a “Hire a Realtor” page in July.


Are RDFN and Compass real competitive threats to RLGY? What commission splits, incentives, signing bonuses are RLGY competitors offering to build their agent numbers? Do agents really find the RDFN/Compass business models and technology better? How much is the traditional 6% commission model under attack? What is happening with discount brokerage price undercutting? How are home buyers and sellers responding to the new business models of RDFN and Compass? What is going on with fee compression and where does it stop? To gain insight into these and other trends in the real estate industry, Blueshift will gather data and issue a market research report from independent sources in the following areas: Traditional real estate brokerages, Online brokerages, Real estate agents, Home buyers and sellers, and Industry specialists.


Companies: Realogy Holdings Corp. (RLGY), Redfin Corporation (RDFN), Re/Max Holdings Inc. (RMAX), Zillow Group (Z/ZG), News Corp. (NWS/NWSA), Inc. (AMZN)


Research Begins: January 8, 2018