eXp’s CEO on Clear Cooperation: You can’t take but not give 

The events of the past year, culminating in rule changes that took effect in August, sent the residential real estate world into a tailspin. But just as the dust began to settle, another battle was brewing — this time over NAR's Clear Cooperation Policy, which was created to facilitate an open marketplace and provide guardrails against private listing networks.

A prominent voice in the conversation has been Leo Pareja, CEO of eXp Realty, who has also been outspoken on other hot topics, including cooperative compensation and buyer agreements. Real Estate News had an opportunity to speak with Pareja at NAR NXT in Boston and catch up on Clear Cooperation, private listing networks, and revenue share models.

This interview has been edited for length and clarity. 

Clear Cooperation has been a hotly debated topic in recent months, and you took a position early on. Why?

As issues emerge that dramatically affect our industry, I will get loud and take a position that I think protects the consumer first. I think if we start there, if we understand what is best for the consumer, that's actually how we best serve our constituents and our agents.

CCP was not on my mind until I saw outspoken positions that I found nonsensical and contradictory. We have the most efficient market on the planet in North America, and we take for granted that we can pull comps, that I can go to any website that's a member participant of an MLS and I'm able to get all the properties and not have to go hunting from brokerage website to brokerage website like the rest of the world outside of the U.S. and Canada.

What happens if the CCP goes away?

There will be inventory hoarding where basically you create an environment where you're no longer competing for product, service and value, and you're actually competing for inventory. And I think by definition, that creates situations we don't want to be involved in — like pay-to-play schemes where you have to work with us if you want access to this inventory. And by definition, if any group of people isolate a group of properties, how do we not create fair housing liability?

Opponents of the CCP have asked individual agents to speak up and get involved. Whose voice matters most in this fight?

That's a great question that I'm not sure I have the answer to. I go back to what an MLS is. I've heard the other side just describe it as a database, but it's far more than that. It's actually the local business rules that set the ability for competitors to cooperate. If you and I participate in that local marketplace where we're both member subscribers, we're agreeing to the rules of engagement. 

And so as I understand it, the folks who want to see the CCP completely repealed want the option to advertise direct-to-public on private websites while still drawing from the cooperative feed, and that's where I have a big problem. If you don't want to participate, you don't have to participate. But you can't draw on that data and not contribute in the exact same fashion.

Is there room for improvement on CCP? Absolutely. But to me, member participation — where we're all playing by the same rules as competitors — is the key point.

Anywhere CEO Ryan Schneider said if the CCP were repealed, he wouldn't 'stand idly by' while competitors built private networks. What's your take?

I've actually said the exact same thing. And I would say eXp is the single largest net beneficiary, because it is one complete company, whereas Ryan Schneider has separate brands that don't share information. 

I will always do what's best for our collective fiduciary responsibilities based on the rules of engagement — and I've been loud and I've gone on record a bunch of times and on several panels where I've said that I am the biggest net beneficiary and I'm asking you guys not to do this.

We hear Glenn Sanford and other eXp execs talk about rev share and recruiting, but you don't seem like as much of a 'downline guy.' How relevant is the downline today?

So, I did not start the company. I joined the company two and a half years ago. I think I brought my very fresh perspective, and I'm a self-admitted data nerd. Before I form any opinion, I consume a lot of information and say, "What is this?" 

To me, what Glenn created with rev share is more of an aligned partnership mode. I came from a very large franchise and owned a piece of the franchise system. I think, from my experience, franchises actually create friction between the franchise and the franchisee. They're not aligned. The franchisor's product is the franchisee. What Glenn did, in a very intelligent way, was he took a system that is super basic: Take $1 of revenue, then 50 cents goes to gross margin to operate the business, and 50 cents gets invested back into the people who took it upon themselves to grow the business.

Based on the data, all the growth in the last couple of years has been by the companies that look more like us. And I'm predicting that most of the new companies — there's been a couple announcements in the last six months — are going to continue to look like us. 

Everything's an evolution, right? Franchising was the best way to grow 20 years ago, before we had high speed internet. And there was this massive acceleration during Covid of forcing the whole world to become virtual. So I look at rev share as no different than a growth module inside of our platform.

With all the recent industry changes, do you think trust is going to be an increasingly important selling point for brokerages?

I would say so. I've asked close to 50% of agents being onboarded in the last 90 days why they went with us, and they said it was because we know what we're doing. [Among agents who left and came back], these agents were like, "It was a shiny thing and they couldn't pay me for weeks," or like, "They couldn't answer my broker question." It all came out of operations. The big difference is we have 3,000 full-time employees that make sure that you get paid on time and answer your broker questions on time.

Whether it's perceived or real, the marketplace is looking for safe harbor, leadership, education or whatever creates that feeling of certainty.