AI is worthless unless you feed it with data. And the more data that you have, the smarter AI can become. So if we want to create the biggest real estate brain that exists on earth, you need to have as much visibility into actual transactions, into actual conversations that agents are having with our support line, with our brokers, maybe even with their clients. Leo can actually have that initial conversation again, a voice conversation as if it was you. It's using your voice and Leo will have the conversation about, you know, what kind of properties is that buyer interested in, what's important for them. Leo will start sending them listings. Leo will schedule the showing. If consumers expect a different kind of interaction when they're buying or selling homes because they're used to interacting with technology in a different way and they expect the same level of transparency and control and speed and convenience when it comes to real estate, and we do not provide them this — and when I say we, I mean the real estate brokerage industry — it leaves an opportunity for somebody from the outside who's well-funded, knows how to work with AI, to come in and potentially build that experience which will not include agents. If we're not diligent, if we're not building what's necessary for agents to be successful, somebody else will try and do that and there's a risk of all of us going out of business.
So today we're talking with Tamir Poleg, the CEO and co-founder of Real Broker. We're picking his brain about where the company is at today, what the future vision is of the company, and how AI is going to play a role in that vision. Tamir, how you doing today?
I'm great. Thanks for having me.
Yeah, of course. Really excited about this. And so, Real just released their Q2 financial reports and all really positive numbers in there. So, I saw that Remax reported, I think, a 7% loss agent count year-over-year. EXP was down 5%. Somehow Real is up 40% year-over-year agent count when everybody else is contracting. What do you credit that to?
First of all, I credit it to the amazing community of agents that we have here. I think that energy attracts energy and then the fact that we have amazing human beings just building this company just attracts more and more people. That's number one. Number two, I would say that the model itself is very compelling and everything that we offer. So typically we ask our agents who just recently joined why did you join Real and it starts with the freedom and flexibility that our platform offers and just building their businesses the way they want to. We do not dictate anything. It's your business. It's your brand and we allow you to just, you know, do whatever you want as long as it's within the boundaries of regulation. So that's number one. Number two is obviously the compelling economics. Number three is the technology that really helps agents save time and make more money. We just power their businesses with that technology. We save them a lot of money on not needing to purchase third party tools. Number four I would say is the community that as I started it just attracts more people, that energy, that vibe, that perception in the industry that really is different and we're doing things in a different way which maybe is compelling to some people and maybe it isn't for others. And number five, I would say it's the opportunities because at the end of the day, we look at agents' businesses not only as commissions. We're trying to teach agents that you should look at the potential of your business and not necessarily just in terms of commissions. You can monetize your business in multiple ways, right? And the platform allows you to make money in different ways aside from just commissions. And I think that this industry was so focused on commission only for so many years and people just need to open up and understand that there are better ways to make money and there is a way to actually build a sustainable, long-standing business and a financial legacy.
Well, speaking of, you know, financial legacy, you guys recently made some changes to the revenue share model where you've now added essentially five new ways to unlock tiers of revenue for agent accounts. What was your motivation behind that? Why did you want to make it easier for agents to receive more revenue share?
Since we started the company, the focus was on helping agents succeed in real estate. And it doesn't matter if you're closing two transactions a year and you want to go to four or five or you're closing 50 and you want to go to 100. We want people to focus on production and we want to be there to help them. So one of the ideas recently was how can we reward the people that are actually focusing on production? How can we reward our cappers and our elite agents? Those are the two groups of the most productive agents. How can we make sure that they thrive and they stay with us. So we decided to just unlock revenue share tiers to those people because we want them to continue and focus on production but also earn revenue in other ways, meaning revenue share. So that's number one. Number two, we started our revenue share program back in 2020, so about five years ago. And at this point, we realized that we have individuals on the platform that demonstrated that they not only focus on real estate production, but they're really good at attracting others. But they're attracting them not through focusing their entire time on agent attraction. They're attracting them because they're doing the right things in real estate and people want to understand how they can become like them. So how can we help those individuals share more of their knowledge and not worry about production on a daily basis? And we decided to just unlock tiers for people who have larger networks so that they can go and teach production to their networks and just people outside of the company.
Yeah. What I like about the changes is that you're rewarding producers by being able to unlock tiers from capping and elite agents. And you're also rewarding attractors by unlocking tiers for hitting certain milestones in your network. But again, those attractors demonstrated for a long period of time that they know how to close real estate deals. So they're very successful in real estate and this was kind of a pre-requisite. And once they demonstrated that, we said, 'Okay, we know that you can contribute to the agent community, not by attracting, but also by teaching, by contributing, by sharing your knowledge about real estate. Let's shift your focus to just sharing that knowledge.' That makes sense. So, you have to be a producing agent at first.
Until you get to these certain milestones and then you can focus on agent attraction. Makes a lot of sense. Now, one of the other really amazing streams of income here is the stock rewards that we receive. And I saw that Real recently announced that they're buying back $150 million of their stock off the open market. Does that help the stock price? And what was kind of the motivation behind that decision?
When we started awarding equity to agents, it was back in 2017 before we were publicly traded because we just think that it's fair that agents own a piece of the company they help build. And currently agents own, I assume, more than 20% of the company. So the largest shareholder group in the company are agents. And I'm super proud of that. So we have a share purchase program that allows agents to set aside a portion of their commission revenue to purchase shares from the company. And we can facilitate that program in two ways. We either issue new stock which means that the number of shares that the company has continues to go up and there's a dilution.
Or we go and buy back in the open market. So we just on a, I don't know, almost daily basis we go out to the open market and we actually purchase the shares that agents purchase with their commissions. So we believe in our stock and I think that that program just generates constant demand for the stock. So obviously demand supports the stock price. Stock prices are not only correlated to the company's performance or demand. It has to do with macro. It has to do with how the industry is doing. I'm talking to a lot of investors on a weekly basis. And right now, anything real estate related is not kind of the flavor of the day because people are expecting rates to go down before they start betting on real estate recovery. But I think that agents that are buying into the company's equity are doing the right thing and just building a financial legacy for themselves and their families. And if we continue to do the right things, we continue to grow, we continue to work on profitability, that equity will become very meaningful for them.
Yeah, I love it. I think it shows confidence in the company. Where other real estate — I know other companies and CEOs are selling their stock at this time right now and I think it probably does help the price for the agents in some degree as well.
Yeah. And we understand that, you know, people have life circumstances and sometimes they need to sell, which is okay. By the way, when it comes to executives, my compensation on an annual basis — about 75% of it is not in cash, it's not salary, it's in stock. So I'm a big believer in the stock. I own more shares today than I owned when we went public.
I'm all in and I've been all in for 11 years. And I believe that even though we accomplished so much and we're very close to getting to 30,000 agents, and we've built so much, you know, in terms of community and technology and all of that, there's so much potential to continue to grow this company. And I believe we can 10x over the next few years.
So, hey, I love that. Love that optimism. You were talking yesterday about how you don't really have interest in building a real estate brokerage. You want to build a real estate technology company. Can you talk a little bit about that and like why this focus and why a shift in how we identify as a company?
Sure. If you're zooming out and you're trying to examine on a high level as an outsider what's happening in the brokerage industry, you could see a couple of interesting trends. First of all, the percentage of commission that's paid on a transaction overall is slowly declining over the past two and a half decades or three decades. So what it means is that consumers will continue to want to pay less. At the same time, agents want to keep more of the commission, which makes sense. So there's a lot of pressure on brokerage gross margins. Now the cost of operating a brokerage is either flat or increasing because of inflation. You have to pay salaries, some fixed costs and all of that. So the situation is that on the revenue side there is constant pressure, on the expense side they keep going up.
And this is a low margin business. If you look at all of the large publicly traded brokerages, there's a glass ceiling around $2 billion. Not too many of them. There's just one that's trading above $2 billion. And I think that if you look at the profitability of brokerages over the past 20 years, you can see that it's hovering around 0%. So on good years when the market is great, it's maybe one to two percent. Years like now it's minus two percent. So why would anyone want to build a business where the trends are clearly demonstrating that it's going against you and at the same time in good years profitability is at two percent? So that's probably not a sustainable business. And I think that there are ways to both change the agent experience, the consumer experience, and create an end-to-end solution for both agents and consumers that will incorporate higher margin services, ancillary services, and some other services in a way that you can actually build a profitable, sustainable business. And this is what we're trying to do. Now, it's easier said than done and nobody else has built something like this, but at the end of the day, I think that the future is not in real estate brokers. The future is in platforms that offer a differentiated service both to agents and their clients in one place. And this is the direction that we're going in.
Yeah. I love the ancillary services. I love that a consumer can work with a real agent and it's the same company for the title company, for the mortgage company as well. It seems like a better experience for the consumer. So, it really is like redesigning that consumer experience. Now, Real has gone in a different direction when it comes to our technology. Instead of relying on third party bolt-on technology, we have over, I believe, 130 full-time developers. What's the benefit to Real and to the agents of owning that technology and building out your own technology rather than relying on third party companies?
It allows you greater flexibility and dreaming bigger. So, I'll give you an example or two examples. We recently launched the Real Wallet and the Real Wallet is essentially a digital wallet that agents can use. They can store their money in the wallet. It's just a bank account like any other bank. They can get paid faster. They can enjoy a line of credit from the company because we have so much visibility into their transactions because of the technology that we have in house. We can predict their future productivity because of all of the data that we have. They can swipe their debit cards and earn points and those points offset their brokerage fees. That product wouldn't be possible unless we owned all of this technology in-house. And we had so much visibility within our systems to everything that agents do. So, that's number one. Number two, I think that when you're thinking about AI, AI is worthless unless you feed it with data.
And the more data that you have, the smarter AI can become. So if we want to create the biggest real estate brain that exists on earth, you need to have as much visibility into actual transactions, into actual conversations that agents are having with our support line, with our brokers, maybe even with their clients. And owning the technology allows you to just build those databases that you can feed AI and then AI becomes smarter because it has a lot of examples to learn from. So those are two examples of why it's essential for us to own our own technology.
