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Thursday, Feb 29, 2024

Homed-in Tech

Over his career, Jack Ryan has held many titles, including Goldman Sachs investment banker, Catholic high school teacher, Chicago newspaper publisher and would-be politician. Now, the 56-year-old is adding another line to his resume: tech entrepreneur. Earlier this year in Westlake Village, Ryan launched Rex, an online real estate platform that aims to do nothing less than change the way people buy and sell homes. The service, which has been in beta testing since April, went live earlier this month. So far, five homes have been sold on the platform and eight more are listed with the site, which enables homebuyers and sellers to carry out transactions online with the help of a concierge to smooth the process. Ryan makes no bones about the company’s sales pitch – “savings without the sacrifice” – or its determination to go around the traditional multiple-listing service and cut real estate agents and their commissions out of the process. Upending the $117 billion U.S. residential real estate industry is an audacious idea and many are convinced it’s not even possible. But Ryan, who has self-funded his 15-employee startup to the tune of “more than $2 million but less than $10 million,” is undaunted, figuring that he need not capture a majority of the market to be successful. He also points to the way technology has already disrupted industries such as travel and stocks. “For some reason, it’s like time stopped in real estate in about 1978,” he said. “It shouldn’t be that way.” He decided to start the company in Westlake Village after becoming familiar with the area through an investment in another startup, digital postal service Zumbox, which closed last year after raising more than $30 million in outside funding. When that venture failed, Ryan said, he knew that some of the engineers who had worked on it would be looking for new opportunities, including a few that had worked on Realtor.com, the official website of the National Association of Realtors. It doesn’t hurt that real estate is a major component of the California economy. “There are 400,000 housing transactions in this state every year, with 1,000 sales closing every day. The path forward here is pretty clear,” Ryan said. Rex’s business model relies on a 1 percent commission at close, as opposed to traditional agents’ typical 5 percent commission. Ryan figures he’ll need to sell homes in the $400,000-$40 million range in order for the company’s financials to pencil out. That’s why it made sense to locate in the Conejo Valley, where celebrities such as the Kardashians and Britney Spears own homes in Hidden Hills, one of the 10 most-expensive ZIP codes in the country, with median home prices exceeding $5 million. Armed with facts such as those, plus an entrepreneur’s piercing gaze and unbridled enthusiasm, Ryan plans to take his show on the road in the coming months, soliciting Series A funding from investors in Los Angeles, New York and Silicon Valley. Entry barriers Despite Ryan’s confidence, many are skeptical that online residential real estate transactions can become a viable alternative to the traditional way of buying and selling homes. One of them is Eric Sussman, senior lecturer at UCLA’s Ziman Center for Real Estate. “If I had a nickel for every student over the past 15 years who sees this market as ripe for disintermediation and disruption and thinks they can automate it, I could retire rich right now,” Sussman said with a laugh. “Loads of companies, including Costco, have tried it – and every one of them has failed. I mean, it’s common sense that folks like (residential real estate websites) Trulia or Zillow would have tried this by now if they could and they haven’t. That speaks volumes.” The fundamental difficulties in automating real estate transactions are the legal complexities and regulatory requirements that characterize them, he said. “There are so many required disclosures and things like inspections and due diligence that just can’t be automated.” While large transactions such as major stock purchases can be completed online, they don’t come with the stacks of paperwork that must be read and signed at every stage of a real estate transaction. Matt Epstein, a leading San Fernando Valley broker with Berkshire Hathaway HomeServices in Sherman Oaks, said he closes 40 to 50 sales a year and no two are identical. “Even if you know real estate, it’s a very complicated thing. The forms and laws and disclosures are changing all the time,” he said. Also, there’s a powerful human component bound up in trading something that, for most people, is their biggest asset, said Tami Pardee, founder of Pardee Properties, a West L.A. residential brokerage. “There’s an emotional connection to homes; half the time I feel like I’m a therapist, not a real estate agent. Even though corporations have been trying to cut agents out for years, technology can never replace that,” she said. “A computer’s never going to open the door for you or hold your hand.” Comeback kid Ryan said he has considered all the obstacles to success that experts raise and his company will be able to overcome them, plus add enough value on the marketing, convenience and cost side to entice users to try it out. For instance, disclosure forms and other standard sales papers are already typically handled online, with buyers and sellers using automated signatures. Because Rex is a licensed brokerage, all transactions conducted over its platform will be fully legal. “We are rigorously complying with every rule that California law requires,” he said. When it comes to the personal touch, Rex offers a concierge service. It is staffed by licensed agents who aren’t selling houses full time because they prefer a salary to living off commissions, Ryan said. The concierge function is automated, so it intervenes in transactions when it comes time to send someone out on a photo shoot, home inspection or open house. Without an agent pushing hard to close a sale and move on to the next transaction, homeowners will be more likely to hold out for their price, Ryan believes. And international buyers and investors will be able to find properties on the site and complete purchases or sales without having to be present. Ryan has a track record of reinventing himself that might serve well with Rex. In 2004, he was the Republican candidate in Illinois for the U.S. Senate facing a then little-known Democrat named Barack Obama. But Ryan withdrew from the race after a court unsealed his divorce records from his wife, “Star Trek” actress Jeri Ryan, that catapulted lurid allegations about the couple’s sex life into national headlines. The following year, Jack Ryan launched 22nd Century Media, a hyper-local print and digital media company that currently publishes 15 newspapers in the Chicago market. Ryan said that company is successful but he is transferring its ownership to three executives who have taken over operations there while he has devoted himself to launching Rex. In Ryan’s favor, not every expert is persuaded that an online real estate platform is a nonstarter. Daren Blomquist, vice president of real estate data firm RealtyTrac in Irvine, said another Irvine firm, Auction.com, has already begun automating some aspects of the transactions the company conducts for distressed and foreclosed properties. “It’s a different model than the traditional real estate transaction, but they’ve captured at least a small slice of the market where they are successfully operating,” Blomquist said. Other hybrid models, including some that change the way agents are contracted and paid, are also moving forward thanks to new technology, he said. For example, buyers and investors have long used online home listings to do much of the research that agents used to handle exclusively. “It’s a much bigger transaction than we’ve seen done online yet and it’s not a matter of putting in a credit card like you would at Amazon.com,” he said. “It’s always hard to predict these things, but I wouldn’t be surprised at some point if someone finds a way to crack the code.”

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