The real-estate industry is an outdated, inefficient industry in need of disruption.

With an enormous market opportunity, three companies are leading the charge to disruption: Redfin - $RDFN, Zillow - $ZG / $Z, and Opendoor - $IPOB

Here’s how

First, let’s talk about why the industry is so outdated and inefficient.

Throughout the U.S, there are over 1.4 million real-estate agents, many of them struggling to attain a successful level of clients.

The industry is dominated by large, old brokers, such as Century21...

and Re/Max, in addition to other, more localized brokers.

These brokers charge sky-high commissions. Compared to a rate of 2% in Australia or 1.5% in the U.K., American brokers charge a whopping 6%, 3% for the seller’s agents and 3% for the buyer’s.

Thus, on a $300,000 dollar house sale, the seller is inundated with $18,000 in fees. Add in seller concessions, closing costs, repairs, staging and so on, and selling a $300,000 home quickly becomes a $30,000 venture.

In addition to charging these large fees, real-estate brokers work through the special-interest, archaic MLS. The MLS is effectively a group of local organizations that have access to data related to home sales, with a massive set of bylaws and strict, inefficient standards.

Clearly, this industry is in need of disruption. Now let’s break down the three biggest disruptors:

(1) @Redfin - $RDFN: Redfin’s primary mode of disruption is through its agent and commission models. Instead of hiring agents as independent contractors, who set their own schedules and take on their own workload, $RDFN has hired agents who are paid a salary.

These agents are full-time employees. Importantly, $RDFN has used this model to counter-position itself to the real-estate industry; traditional brokers can not afford to just eliminated all of their partnerships and move to a salary-based model.

Even more significant is Redfin’s commission model. For $RDFN to sell your house, you pay a 1.5% fee, and only a 1% fee you also buy with $RDFN.

If the house needs repairs, $RDFN will fix it up for you and list it for only a 2.5% fee, still less than a traditional broker.

Finally, if your home is one that would typically sit on the market for months or you just want to get rid of it quickly, $RDFN will buy it for a 7% fee. They will then flip and sell that home for a profit.

The average $RDFN customer saves $11,800 on their home sale and sells their home faster and for more. $RDFN also is more efficient, has more repeat business, and has higher customer satisfaction than traditional brokers and is by far the most trafficked brokerage website.

Pre-pandemic, $RDFN was growing revenue rapidly and market share, and they expect to continue to do so afterwards.

(2) @zillow - $ZG / $Z - The best-known brand in real-estate disruption, $Z has over 197 million monthly unique users and had over 8 billion visits in 2019. In fact, “Zillow” is more searched in Google than “real estate.”

$Z allows customers to buy, sell, rent, and finance homes. $Z runs a “premier agent” platform, in which agents can pay to get access to the enormous number of customers using $Z ‘s platform. Since the buyers don’t pay the fees, this is an easy way to match buyer and agent.

$Z also buys houses like $RDFN through their “Zillow Offers” platform, charging a ~10% fee. They also have “Zillow Home Loans” which helps to finance home purchases.

(3) @Opendoor - $IPOB: Opendoor’s platform is based on the idea of buying, selling, and moving at the tap of a button. Like $RDFN and $Z they buy homes directly from people for a 7% fee and sell them. Opendoor is the market leader, selling 4.4x homes than the next competitor.

Currently, they are in just 21 markets, but @Opendoor is expanding rapidly. They estimate that through their platform, sellers can cut tens of thousands of dollars in fees off of the sale of a $250,000 home. Within hours of deciding to list a home, Opendoor will make an offer.

Sellers then have a few days to accept or decline the offer. Then, they can search, visit, and buy from thousand of home options. Buyers can take self-tours of homes, get financing within the app, and make digital offers.

Like $RDFN, Opendoor gets high customer satisfaction rates, and they claim to be 12x more efficient than a traditional agent. With just a 2% market share in existing markets and plans to expand throughout the nation, Opendoor is just scratching the surface.

If Opendoor can achieve just a 4% market share in 100 markets, their revenue will 10x from here. This is a very exciting growth company, and visionaries like @chamath agree, announcing yesterday he was taking Opendoor public through his SPAC $IPOB.

All three of these companies offer exciting opportunities to disrupt a market they value at $1.6 trillion. All three can be winners and I am very excited about their prospects.

Thank you for reading, and feel free to share comments, thoughts, or questions!