For Leo Pareja, the wheels of change started churning long before the Aug. 17 NAR mandate deadline. During a special one-on-one conversation with RISMedia Founder & CEO John Featherston at RISMedia’s 36th Annual CEO & Leadership Exchange, the eXp CEO shared how his firm got ahead of the curve in order to mitigate turmoil.
“On March 15, we collectively found out around mid-afternoon that the world was going to significantly change,” he told the crowd of more than 400 real estate leaders who gathered in Washington, D.C., earlier this month for the iconic think tank. “I spent the entire weekend responding to texts, emails, direct messages, where my agents were collectively terrified.”
After spending the weekend huddling with eXp’s executive team, a decision was made to get in front of the situation. That Monday, Pareja went live on YouTube to an astounding audience of 53,000 agents. He said the turnout was not because he’s “special or smart.”
“I think it’s because everybody is starving for information,” Pareja said. “Our cheese is being collectively moved. And Glenn (Sanford, chair and CEO of eXp World Holdings) gave me the green light to be as loud as I need to be, because our agents need to hear from actual leadership that we are here for them.”
Pareja and his team got right to work, creating a single-property buyer broker representation form, which has since been lauded by many both inside and outside the industry. “I put myself in the driveway, which I did 4,000 times throughout my selling career, and I knew if I shoved a 12-page buyer agency agreement in front of a consumer that I was trying to build a rapport with—it’s a horrible experience,” he said. “That’s a lot of friction. So for us, our North Star is the consumer experience because that’s how we empower agents. This is very confusing for everybody, and we’re trying to remove as much friction out of the process as possible.”
eXp made the somewhat controversial decision mid summer to go further than what was required in the settlement and disallow broker-to-broker commissions. Pareja explained his thinking.
“We are in an interesting rock and a hard place because the settlement says X,” he said. “The DOJ has been very clear, not mincing their words with their opinion, and then our fellow MLS executives are going to interpret and enforce the rules as they understand it. So we decided to go a step further than the actual settlement and said, ‘no more broker-to-broker commission share.’ I did not say we weren’t going to entertain working with buyer’s agents. I did not say we’re not going to do seller to broker. So my world got very loud five weeks ago. Luckily, some folks like James Dwiggins and Anthony (Lamacchia), and other folks who kind of take the same approach (also) got loud.”
While Pareja initially got flack for the decision, once the details were better understood, agents became very receptive. “First of all, I’ve been around agents for 23 years and this is the first time they’ve all actually wanted to hear what I had to say,” he joked. “But the cool part is my agents all said, wait, what did you say? And they internalized it. And then once they actually heard the words coming out of my mouth, they said, this makes a ton of sense. We should do that. This is the way.”
According to Pareja, many industry leaders are impressed with the preparedness and understanding of the issue among eXp’s more than 87,000 agents. “MLS and association CEOs have said, ‘your agents are more well versed in this than my staff.’ Some folks threw rocks at us—me personally and our agents—so (agents) had to become experts in it. So it was a really interesting moment.”
Weighing in on Clear Cooperation
Featherston seized the opportunity to garner Pareja’s opinion on comments made by Compass CEO Robert Reffkin earlier in the conference where he called on NAR to issue an “emergency” repeal of the Clear Cooperation Policy (CCP).
Pareja’s response was succinct and strong: “I fundamentally disagree with Robert and I am a substantially bigger net beneficiary than he is—(eXp) sold twice as many homes as them last year and (eXp has) three times as many agents as them. I fundamentally believe in organized real estate and how it functions in North America.”
Detailing his arduous experiences in buying and selling real estate in 24 different countries, Pareja described the residential real estate business in North America as “the envy of the planet.”
“I sell homes in a whole bunch of other countries,” he said. “So I think what Robert’s saying is pretty words, but it is selfish and it’s not good for the consumer. And every decision I’ve made is for the consumer being the North Star. I think we all need to stop worrying about our margin and our stock price and take care of buyers themselves.”
Pareja underscored the reliability of the MLS and its role in facilitating effective real estate transactions in the U.S.
“We have a capital T truth database that I think we take for granted,” he said. “In Portugal, a house could be listed nine different times with non-exclusivity, with different price points. We have rules of engagement that make our data very trusted. We have these beautiful rules of engagement that I think we just take for granted like a lot of things in this country.”
With this in mind, Pareja is helping eXp’s agents approach the rule changes with calm and perspective.
“When the rules came out, people read them and said, this is a brave new world,” he said. “And I said, it’s really not. All buyer’s agents are now listing agents. Expect that appointment to be competitive, expect to be able to articulate the service you’re willing to render for the fee you’re willing to charge. And now expect other business models. I always say, you don’t have to imagine a distant world. Just look at what works on the seller side.”
Pareja said he has done more interviews recently than ever before, including through consumer outlets like CNN and CNBC. “The ‘got-you’ question everybody asks me when the mic’s hot is, ‘what’s the new fee going to be?’ And I go, the new fee’s going to be what the new fee’s going to be. The beauty of capitalism is if I try to do a business that is unprofitable long enough, you go out of business. And if I try to stick to an old way of doing things that’s not sustainable or appealing to the consumer demand, you go out of business.”
Featherston asked Pareja to look into the crystal ball and predict where the industry will be 12 months from now.
“First of all, I fundamentally believe that in our functional lifetimes, we’re not going anywhere as an industry,” he said. “The last 10 years we had 50 billion-plus dollars come and try to move our cheese and get rid of us. Most of them went under and the rest of them are still here, partnered with us for the last mile because you still need professionals to hold people’s hands through the most expensive, highly frictional, highly emotional, but infrequent transaction of their life. So 12 months from now, we will be at a new normal. What that fee is, we will see. What I do know is I think buyers and sellers at very high proportions, 80% to 90%, will choose representation because this (process) is expensive and painful.
“When we think back at this discussion, it will seem as ridiculous as wiping down our groceries during Covid,” he added.
Pareja referred to what’s next for the real estate market as a tail of two cities: those agents who go to work and even anticipate earning more, and those who stay mired in “woe is me,” longing for the old way of doing business.
Pareja’s philosophy? “Life is 10% what happens in 90% how you react to it.”
“I think it is an amazing industry. We are in the business of people raising their families and living their dreams, and I firmly believe we’ll be around for the (long term).”
