The parent company of Better Mortgage is rapidly building out its real estate brokerage and title insurance businesses, claiming that the integration of those services into a single technology platform will help it out-compete rivals who are more focused on individual segments of the real estate transaction.
Better HoldCo Inc.’s best-known subsidiary is probably Better Mortgage Corp., which launched in 2016 and funded $25 billion in loans last year. With the addition of Minnesota, Vermont, and Virginia in April, Better Mortgage is now licensed in 47 states and Washington, D.C.
But the Better family of companies also includes Better Cover LLC, a provider of homeowners insurance policies, and Better Settlement Services — which, having recently opened up shop in Virginia, now provides title insurance in 24 states.
Christian Wallace
Better’s real estate brokerage subsidiary, Better Real Estate LLC, has largely been flying under the radar. Earlier this year, Better Real Estate had “just a handful” of in-house agents, said Christian Wallace, who took over as Better’s head of real estate services in March.
Today, Better Real Estate has about 150 active agents in the field in 12 states, and is adding another 50 to 100 agents a month with a goal of employing 500 agents in 20 states by the end of the year, Wallace told Inman.
Currently licensed in Arizona, Colorado, Florida, Georgia, Illinois, New Jersey, New York, North Carolina, Pennsylvania, Texas, Virginia and Washington, Better Real Estate is planning to add California, Connecticut, Maryland, Massachusetts, Michigan, Ohio, Oregon, Tennessee, and Washington, D.C., by the end of the year, and be licensed in all 50 states by the end of 2022, Wallace said.
Better is currently seeking regional managers, real estate agents, and transaction coordinators. Wallace said one thing that’s helping Better Real Estate grow so rapidly is that agents are W-2 employees who are paid a salary, rather than commissions. They also enjoy benefits like company equity, health insurance, and retirement.
Other real estate brokerages — Redfin and ZipRealty among them — have experimented with paying agents as employees rather than independent contractors, but a large chunk of each agent’s pay is typically based on incentives (Redfin says first-year agents typically earn 30 percent of their pay from base salary and 70 percent from transaction bonuses).
Better also offers performance bonuses, but base salaries are typically around $75,000 to $100,000 a year, depending on the market. That compares to median gross income of $43,330 for the typical Realtor in 2020.
Wallace said Better Real Estate is hiring people with a range of experience, from veterans who can manage and train incoming agents, to relative industry newcomers who are willing to embrace the company’s philosophy.
“We look for people who have hustle and grit, and truly want to build something,” she said.
For consumers, Better Real Estate offers a 1 percent commission rebate to buyers, along with $2,000 in lender credits from Better Mortgage. Better Mortgage also offers an appraisal guarantee that lets Better Real Estate clients waive the appraisal contingency when they make an offer, and keep the same loan terms if the appraisal comes in lower.
About 90 percent of Better Real Estate’s clients come through Better Mortgage’s preapproval process, Wallace said. Agents receive 30 to 45 qualified leads a month, and while there are no sales quotas, are closing about 3.5 deals per month.
While many real estate brokerages have mortgage lending partners or affiliated businesses, the “attach rate” — the percentage of clients who obtain a mortgage through their real estate broker — is typically only about 20 percent, according to industry expert Mike DelPrete.
Better Real Estate’s historic attach rate is almost 70 percent — and that’s without FHA and VA loans, Wallace said. “We’re going to have very close to 100 percent” with the addition of FHA and VA loan products, she predicted.
Better Mortgage clients often have an existing home they need to sell, so Better Real Estate will also have a steady supply of listings, Wallace said. To attract sellers, the company is piloting a zero percent commission listing model in Dallas, with Better waiving listing fees for sellers who also use a Better Real Estate agent when buying a home.
Wallace said it will be up to sellers to decide when listing their home what compensation to offer buyer’s agents when listing their home. If the buyer is represented by Better, the seller pays no commission fees to the listing agent or the buyer’s agent.
On the sale of a $500,000 home, that’s a savings of up to $30,000 compared to the traditional 6 percent fee charged by listing brokers and split with the buyer’s agent.
Better Real Estate plans to roll out the zero percent listing fee model across the rest of Texas this fall, and in other markets where it does business as it staffs up to meet demand.
Wallace said she expects the zero percent listing offer will attract many sellers, and “we’re trying to get an idea what it looks like capacity wise. I don’t want to roll out a product I don’t have the staff to support.”
In a recent investor presentation, Better HoldCo — which announced plans in May to go public through a merger with a special purpose acquisition company (SPAC) — said it was involved in $691 million in real estate transactions last year, including deals closed by partner agents.
Source: Better HoldCo investor presentation.
With its rapidly growing in-house real estate agent team, Better expects to close $2.4 billion in real estate sales this year, with sales projected to keep ramping up to $17 billion in 2023. That would put Better Real Estate in the same company as more established real estate brokerages like @properties and William Raveis.
Better maintains that the key to delivering a better customer experience at a lower price is integrating mortgage, real estate brokerage, and title and closing services into a single, tech-based “homeownership enablement platform.” Companies that tackle each part of the transaction separately will be at a disadvantage.
“It’s all about helping the customer,” Wallace said. “We’re just expanding [Better founder Vishal Garg’s vision for mortgages] into real estate. People want to understand what they’re paying for and what they’re getting, and the key is making the process seamless and affordable.”
Real estate brokerage Compass is also touting “a seamless and transparent experience for agents and their clients” as its motivation for launching OriginPoint, a joint venture with retail mortgage lender Guaranteed Rate, which powers similar joint ventures with @properties and Realogy. And eXp Realty’s parent company is forming a joint venture, SUCCESS Lending, with mortgage provider Kind Lending.
A growing provider of title insurance and settlement services, Doma, sees real estate agents as a key area for growth, offering an unbranded “white label” version of its digital title insurance, escrow and closing platform.
