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Welcome to In The Cloud - The eXp Realty Explained Podcast

With Hosts Kevin Cottrell & Gene Frederick
Call or Text 512-522-8470

Kevin Cottrell - eXp Realty Gene Frederick - eXp Realty

Nov 5, 2018

Today we talk with mega agent Tom Daves from Sacramento Califonia. Tom was previously working with Keller Williams being a top world wide agent. As a team leader he runs a large successful real estate team. Tom talks to us about his decision to move to EXP, why he did, he touches on the real estate market change, equity, growth and revenue share and explains how much of a game changer his transition has been to his life and business. 

Learn More about eXp Realty - Click here to watch a quick 7 Minute Intro Video.


Remember our disclaimer: The materials and content discussed within this podcast are the opinions of Kevin Cottrell and/or the guests interviewed.  This information is intended as general information only for listeners of the podcast. Listeners should conduct their own due diligence and research before making any business decisions. This podcast is produced completely independently of eXp Realty and is not endorsed, funded or otherwise supported by eXp Realty directly or indirectly.  

 

In this episode

  • Being Sceptical about EXP
  • EXP in Nasdaq
  • Market Change
  • Why Join EXP
  • EXP as an Exit Strategy
  • The EXP value proposition
  • Equity and revenue share opportunities
  • Marketplace disruption
  • Due Diligence 

Want to Learn More about eXp Realty?

If you are interested in learning more about eXp, reach out to the person who introduced you to eXp or contact Tom to inquire or ask questions.

Contact Tom:

Call at 855 Tom Daves.

Or email at Tom@TomDavesteam.com.

Links: www.EXPCloud.com

Takeway

The pain the other great mega agents that are coming on board and as well as the alignment with amazing team members that we have. So yeah it all came together at once.



Transcription

KEVIN: Welcome back to another episode of EXP explained podcast I am host Kevin Cottrell joining me today from just outside of Sacramento California is Tom Davis. He is the team lead from the Tom Dave's real estate team. If you're in that Keller Williams system you undoubtedly recognize Tom's name in his team's name. They were the number one team for several years running in the Keller Williams system nationwide and Tom runs a business on the team that does multiple hundreds of millions of dollars per year. A very very large business very successful businessman in the real estate business he's been in the business for quite some time. So when I heard that Tom had made the move from Keller Williams as a large multi hundred million dollar producing team I wanted to find out his insight on why he made the decision to join the EXP. What he shared with me, I know he's going to be insightful whether you're a team lead on a smaller team or your team lead on a large team like Tom's including expansion teams. Please stay tuned for my interview with Tom Daves.

KEVIN: Welcome to the show Tom.

TOM: Hey Kevin. Thank you.

KEVIN: Oh I'm looking forward to our conversation. Excited to share your story and talk a little bit about the big change you made over EXP. But before we do that why don't you give us a little of your background. Obviously a lot of our listeners probably know who you are but once you get a little bit of your real estate background talk a little about your business before we dive into the big change here.

TOM: No I appreciate it. Absolutely. I've actually been in the business for 40 years. Kevin I started when I was 12 at a very young age and started right away and worked with traditional real estate sales and got into management and had a couple of different Remax brokerages and also worked with Oreo's with Flip's, Blackstone private equity team so pretty much seen every single economic cycle and it's been an amazing tour so far. I'm really excited that I'm now at EXP and I always say real estate you know is very very exciting and you can go from the hype of exploitation to the depths of defeat within the same 60 seconds. So it's fun it's exciting and it's all mindset right.

KEVIN: Absolutely absolutely. So I think the question and certainly for me and everyone else when you announced you were leaving Keller Williams. You were the top agent worldwide for five years so this is the question I have someone who has that big business right. It's Mission critical it's important you're the top guy at Keller Williams worldwide for five years. This is an important decision. It's a strategic decision. What led up to walk us through a little bit of the process and why EXP.

TOM: Okay great. So as I briefly mentioned I think my favorite saying is Wayne Gretzky you have to skate where the puck is going to be. And I've been blessed enough to position myself in most cases ahead of the curve and I head of that economic cycle whether it was traditional Oreo Flipp's you know hooked up with Blackstone private equity sold them like 600 homes in a year and a half. And the team and don't get it wrong. You know the team was amazing and Keller Williams was amazing. I was there for 18 years. I have nothing bad to say about them. But being a top agent is not always what it's cracked up to be. Candidly the margins weren't always that good. I had some great years and I noticed over the last few years that the margins were definitely shrinking and the market is starting to crown the market is starting to change as well. And there's no doubt that the market is shifting and it's technology based cloud based you know with all of the different companies that are coming online. Zillow, Redfin, Purple bricks, Amazon and they are all engaging in real estate. There's no doubt that technology is the future of our industry. And plus the consumers that consumers want and instantaneous communication at their fingertips. So that was you know one of the main reasons was the economic model and the cloud base. I literally when I made the move and changed over to the EXP realty I cut my expenses in half which was pretty amazing. And my very first month I had a 42 percent profit margin.My first month here which was pretty awesome. Pretty excited about that. Not to mention you know the stock EXP were publicly traded company as well as the revenue share and really having an exit strategy as a leader. I always feel that we need to seek out opportunities for our talent for our organization. And one of the problems that I've always had is to keep that ceiling of opportunity far greater than what anyone could achieve if you don't you're not going to be able to keep any talent. And it was becoming a little bit of a struggle for me whereas with EXP with the three types of income the commission income the stock for building are well as well as the revenue share it really truly provides an exit strategy for myself, anyone on the team and anyone that seeks to find it with literally no capital risk which is pretty cool. And the final is to have the opportunity to partner and align myself with you know Don Yokum, Randy Bird, Brent Gove, go and Gene Frederick. I mean it's just amazing that to align yourself you are the sum total of the four or five people that you hang out with. So that's pretty cool. And there is a saying that I really like is not always the assignment it's the alignment and that's quite frankly why I made that change. It wasn't easy. It was tough. But that's why I made change and that's why some of the biggest minds in the business are going after this thing.

KEVIN: The question I have for you. I'm glad you brought up the margins. And one of the things I want to talk about is and I don't know if you're involved in the early MREA early 2000s when they had everybody in Austin for those mastermind's. I used to be with Andy Allen and Aaron Lancaster and they had that one of those mammoth early teams that was doing 600 transactions a year more. And what we found was exactly what is talked about which is there's a lot of sexiness to high volume and high transaction volume but the margins can be rail thin. You're subject to market conditions changes keeping talent attracting and recruiting and all that becomes a big machine. And I found most interesting your comment about instant profitability and margin increase because really if you look at it from the standpoint of the originals called the core value proposition in the MREA book about what you should be making your numbers went from where they were which undoubtedly was a lot less to you called it 40 - 42% which is sort of the lauded number that the best of the best in that model should hope for. Now one of the realities is you know I'm from Austin you know I joined Keller Williams very you know probably pretty close to when you were involved with them as well. And you know Gene was my mentor and trained me and then I was a team leader so I was around a lot of this and that was my first observation. I'm glad you brought it up because I think the marketplace is trying to figure this out right. You know there's a couple of challenges with big teams. You touched on one which is you know like you said it's not always awesome to be the biggest guy on the block with the most volume of people and expenses because the margins can get thin. But for listeners. Here's an example of an enormous operation that suddenly had 40 percent whereas before and you don't have to tell us necessarily what it was. But I would imagine you were probably down in some pretty low numbers where you had to watch things carefully and things could go south I'm assuming.

TOM: Oh absolutely. And like I mentioned the margins were definitely shrinking. Yeah I was top agent with KW And you walk across stage and get your plaque but it's all about the bottom line of the profit and it did take me a few years to learn that realized that I think the first half of my career was all about success and walking across the stage and kind of all about me. But the second half is about significance. About pouring into others adding value and the bottom line right. They get significant.

KEVIN: Tom the question I have is in the traditional teams that the retention of talent sometimes is hard right. They want to go do their own thing because they can only grow to a certain capacity and income level and they don't have the buckets of revenue share. They don't have stock. And so the comments that I'm getting from guests again and again are that my environment and my team from a standpoint of wealth creation for team members is different now because I can help them and mentor them. So it's not just one bucket production in their income that comes from that they can build revenue share they can have stock. Are you looking at that in your operation as being something that you're going to basically utilize for team members as well.

KEVIN: Absolutely. And I think one common mistake that real estate agents do is they don't treat their business like a business and they don't think long term. So many agents and brokers are on the real estate cycle. Good month bad month. But if we begin with the end in mind and we think long term then we'll be able to build a plan and a strategy with a vision to achieve the goals that we really want to achieve to live that big life. And that's what it's all about you know whatever that is.

KEVIN: And that's true. And I've heard from guest after guest and you know Jean and I and you and and Don Yoakam and others are talking to a lot of people and the ability for people to create the different income brackets that you talked about is a game changer it just doesn't exist right there's nothing wrong with the franchise systems. They just have not created an environment where that exists in other words. I've got a key team member and they want to go off and do the next big thing, normally and quite often it is go do their own thing have their own team. Well in the EXP world what we're seeing again and again and again is they start looking at the bucket of revenue share. They start looking at let me accumulate stock the way that we can accumulate stock and so it's creating a different dynamic especially for the teams that are coming into the EXP envelope where the rainmakers and the leaders who are in these teams are saying everybody's trading everything different. They're not inclined to run off and go do their own thing or even talking about it like they were they're talking about you know hey Tom tell me how to go do this. I want your help. I want to go get revenue share and I'm assuming that was part of your equation too you know to reward talent and attract people because not only are you known throughout the system that you just came from but you're well-known enough in the industry that lots of teams are going to pay attention to what they're going to hear on this interview and what they hear from you and Don Yoakum and others which is this is a game changer isn't it.

TOM: Oh it really is. And EXP just totally provides the structure and the ownership opportunity that most brokerages don't. And this structure vital to maintaining a profitable real estate business and creating additional income just being in a constant state of growth.

KEVIN: Which is absolutely true. So imagine rolling back to when you were observing and you were in sort of the big franchise system and you were starting to see significant movement because it has been going on for a little over a year where we had really big movement among teams including large teams. A lot of listeners are in that same position today. And I want to kind of talk a little about due diligence and key things that if you were sitting down and having coffee with them you would want them to be thinking about in other words you were where they are before now you know what you know. And as Jay Kinder says once it's seen it can't be unseen. So let's talk about some of those things from the standpoint of putting you back in your you know "I'm the number one guy worldwide at Keller Williams. I'm seeing this happen". What are the things you know now that you'd want somebody listening to this to say if I'm a team leader for a real estate team a big production team what should they be paying attention to how should they approach this from a due diligence standpoint.

TOM: That's a great question. So I would take a look at the books. Take a look at the numbers. Take a look at the economic model. Talk to others that have gone before you. And you know things that to be honest I was a little bit skeptical that I mean I just thought EXP with all of these ways of creating wealth and opportunity. It just sounded too good to be true. And I just did not believe that it was sustainable. But when the Federal Trade Commission approved EXP to go on the Nasdaq and will become publicly traded. It was a game changer for me. I'm like OK well that's it. It's a done deal. So definitely a way to go.

KEVIN: The other thing that's a factor obviously the up listing on NASDAQ is huge. Right. It's a credibility thing you don't get uplifted in the Nasdaq if there are holes in your business model and things are not sustainable and you can't go essentially out in the marketplace if they look at it and go oh this is never going to work long term. Right this is not the way it works in Nasdaq. So the second thing that I think you mentioned it's important to circle back to is the fact that too many it looks too good to be true. And you know my advice always is you know there's guys like you rent go Jean-Frederic, Pat Hays Scott and Tracy Lewis, me. There's a number of people that are available to you as resources Don Yokum will be another one. And you know that's why we always before we wrap up in these interviews get the best way for contact information. Most guests will say here's how you reach me and text me and I'll be happy to talk to you because they'll be other people that are in similar situation to you regardless of how they learned about the EXP they're going to be like well "I'm skeptical too. I need to talk to somebody" and that is in my mind a key due diligence step. In other words don't sit there in an envelope either hearing the words you're in a vacuum or an envelope you don't see any outside information and looking in the envelope going this doesn't make any sense to me. It looks too good to be true and you're trying to make your decision in a vacuum. You need to talk to people that have come before you like Tom said you need to have those reference calls and that's part of the process. And so part of the reason we do the I guess interviews so you can hear in the parties like Tom's words why they did what they did. But I would imagine that in this process Tom that you didn't just do this and figured out on your own you did talk to people did you.

TOM: Oh I did. Absolutely. I did a deep dive. I spoke with two different business coaches both my coaches spoke with several different people many of the agents that have already come onboard with the EXP and asked them what they would do differently. You know if there were any snags or any concerns and every single one of them told me the main mistake that they made was they should have joined sooner.

KEVIN: You know I mean frankly that is the number one thing that we tell people which is even if you decide it's not for you. I mean if you're a rainmaker and a team you know whether you're similar level and scope to what Tom is or maybe you have a team that's a much smaller team. The biggest mistake you could make is being skeptical of not doing something because definitively if you waited three four or five years it's going to be a different opportunity. It's kind of like the people that were at Keller Williams When you talk to Jean-Frederic and others that got in in the early 90s and got significant profit share built up and they are at the top of the tree. It's the business opportunity with a rapidly growing business. EXP is growing faster than the franchise system ever did because of the way it structured its a cloud based brokerage. So that would be my advice too which is even if you ultimately decide to not do it take Tom's advice and dig in and talk to those people do those reference calls. Figure out if it's a good fit for you. And then dip the decision but do it sooner rather than later. Because what ends up happening is more and more of your peers and your competitors in the marketplace are going to be over and they you know look up and if you waited you know God forbid three four or five years you're going to see a lot of people coming over and I'm sure that was part of what you saw. You started see what started slowly last fall. You know and then you had like Jay Kinder or Michael Reese and some others come over and then mega team after team came over in the last 12 months. I mean it's a crazy number of teams after Jay came over in November and I'm sure it will be hard to miss that in the marketplace.

TOM: Like I said many of the best minds are going to after this and also I think one of the things that was happening was my pain was increasing you know as I mentioned the margins were shrinking. Just different things were happening with the growth of the team and the numbers and you know the only way for me to keep the numbers was just to you know we closed 350 transactions last year. Okay keep these margins we need to do 450. You know let's just do more volume let's just do more deals hire more staff to crank up. And so the pain I believe was getting so great that this opportunity was a no brainer for me. You know it all kind of came to a head all at once. The pain the other great mega agents that are coming on board and as well as the alignment with amazing team members that we have. So yeah it all came together at once.

KEVIN: Tom here's what I would say too is because your business is so gigantic is the top guy worldwide Keller Williams. You look and act a lot like we're also seeing. And you know this because you and Yokum are talking about it is lots and lots of independent brokers whether they're small at 30 40 50 agents 25 agents or hundreds of agents are all waking up with a similar problem what you had which is margins are thin. The industry is shifting. God forbid there is a big market shift and they're caught on the wrong side of it with EXP growing around them. And I know you're seeing it and I'm just saying this for listeners benefits what Tom saw and Tom accomplished is not unlike why the independent brokers are what Gene and I see as one of the huge trends that's going to happen in the next three years is the conversion.

TOM: Oh absolutely.

KEVIN: So one of the things I always like to ask is Tom before I get your contact info for listeners in case they want to reach out to you is there anything that you hoped I asked you on the podcast today that you really wanted to get out about EXP and watch what's going on over here that I didn't ask.

TOM: No that's great. I think we hit the high points.

KEVIN: Okay fantastic. So again I always give this preface. It doesn't matter who got you interested in the EXP Tom and Jean and I or Brent Gove or anybody you hear on these interviews is there as a reference to help you make the right decision. Tom's the same way I'm going to get his contact information as far as the best way to reach him. We're going to turn right around and send you back to whoever introduced you to the EXP that's the cultural agent's point in the same direction. So don't feel sheepish if you're a team leader on a big team and this is mission critical for you as well and you feel like Tom's e-mail shoot straight with you and he's enough of a peer that you think he's the right guy to talk to, Tom how do they reach you.

TOM: Great the best way to reach me is to either call me at 855 Tom Daves. Or you can e-mail me at Tom@TomDavesteam.com.

KEVIN: Okay perfect. I appreciate you coming on. And thank you so much Tom.

Thanks Kevin. Have a great day.