How Big Can This Fast-Growing Real Estate Company Get?

Many investors consider iBuyers, smart home companies, and other disruptive businesses to be the best growth opportunities in real estate, but eXp World Holdings (EXPI 3.01%), parent company of eXp Realty, is growing at a breathtaking pace in the traditional brokerage industry. In this Fool Live video clip, recorded on Nov. 19, Fool.com contributors Matt Frankel and Jason Hall, along with Millionacres editor Deidre Woollard, discuss eXp's growth and where the company could go from here.

Matt Frankel: I wanted to talk real quick about a company that I've been following and getting a little bit more interested in recently called eXp Realty. I know you guys are familiar with this, ticker symbol is EXPI. I recently had the chance to have my first in-person interview since COVID, which was weird, I felt like we should all be wearing masks that we all sat like eight feet apart at a giant table. I had the opportunity to sit down with eXP CEO Glenn Sanford, and I also got to interview their president of eXP global, his name is Michael Valdes. Deidre, I thought you think this is an especially interesting person to talk to you because he used to be senior vice president at Realogy. He came from the traditional brokerage model. I know you follow that company quite a bit. Before we get dive in, are you guys familiar with eXP, know the business, things like that? Any thoughts on it?

Deidre Woollard: Definitely know the business. Interviewed Glenn Sanford last year. I think the idea of the virtual world that they have is really interesting where things that's been a differentiator for eXP. Talking about metaverses, eXP has been in the metaverse for years with their VirBELA system. Where basically the real estate agents do most of their interaction with their like managing broker and things like that inside of virtual worlds. I think that's something that's really interesting and fun to talk about, given the fact that there's so much focus on metaverses right now.

Frankel: Go ahead, Jason.

Jason Hall: I'm doing my best, Monday impression of Matt Frankel leaving myself muted as I try to talk there. I know it a little bit. I've learned more about it. I think the thing I like about the eXP Holdings is they're aggressively focused on growing. They really are and I think, Matt, as much as I'm certainly not bearish on iBuying. I think traditional brokerages and real estate agents are going to continue to play a really important role for a lot of buyers and sellers, I think iBuying is going to grow. I just don't know where on the spectrum that's going to fall and I think eXP, they're going to continue to grow because at the end of the day, this is the biggest financial transaction most people will ever come close to making, and a lot of those people want to work with the professional.

Frankel: I asked Glenn Sanford about iBuying because when I talked to him, it was two days after Zillow pulled the plug on iBuying. It was a great timing to be able to sit down with him. He said, basically, that he could see iBuying scale up to about 10% of the market. He thinks that would be the ceiling for the business. He thinks Zillow was not necessarily doing it the wrong way, but he said they saw risks that they didn't like they got out.

But one thing that we both agreed on, is that some of the iBuyers are embracing the traditional brokerage model. Like, for example, I think Opendoor is willing to give a 3% commission to a sales agent that brings them a sale. Which is a smart way to go because it's really a mistake to think of it as either/or in the iBuying versus traditional brokerage. iBuyers need deal flow, they need someone to funnel buyers to them, especially at these early stages when people don't know that iBuying exists or what it is. It's not really an either/or. I think they can coexist, and that's one thing that eXP is embracing.

Hall: Matt, I want to contextualize that 3% because I think a lot of people hear that, they're like, well, why would an agent do that, why a Realtor take somebody up on that. Here's the thing. Most of the time. If the market pays 6%, the most that they're getting is 3% anyway, minus their broker's piece. So, it's actually keeping them whole, because there's not a seller's rep or buyers rep on the other side.

Frankel: It's an easier transaction.

Hall: Totally, yeah. That's a winning experience for everybody.

Frankel: Here's Opendoor's website and you direct them there and Opendoor does the rest in the negative 3% commission. That's a win-win for everybody but let me share my screen real quick.

eXp is the fastest-growing brokerage in the world right now. Somewhat argue I might be growing too fast. Hopefully, you guys can see that OK. This is a chart of eXp's agent growth, which is the blue line, and its revenue growth, which is the black bars. Now, you can see the revenue growth really shot up in mid-2021, which is totally understandable because of the real estate market went crazy. But you can't really say eXP is growing because the real estate market got so hot. The blue line is really a long tailed exponential growth trend. Now, this is about 67,000 agents on the platform.

One of the things I ask Glenn Sanford is how big could this get? Because anything that grows this fast when you're talking about people especially, can only grow exponentially for so long. What he was telling me, he said, there are 1.4 million licensed real estate agents in the United States alone, and eXP is truly a global brand. One of the most impressive things to me is that they operate in markets all over the world, I'll show you a map in a second. There are a lot of different legalities, regulations to keep track of if you're doing that. The concept of property, ownership rights isn't even the same in certain markets around the world. That's really impressive.

India is one of their most recent expansion markets. I didn't know this, there are 2 million real estate agents in India, did you know that? I know it's a big population center, but it's really a big market for real estate agents and that's just one of their markets around the world.

Hall: I think that number can get a lot bigger.