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By Meg Flippin, Benzinga
The 6% commission standard on real estate deals is expected to be no more, potentially lowering the cost of owning a home. The change is part of a $418 million class-action lawsuit settlement against the National Association of Realtors (NAR), which was accused of inflating the fees paid to real estate agents. Thanks to the settlement, the commission is up for negotiation, which some estimate could result in a 25% to 50% decrease in commission fees that just last year cost Americans $100 billion.
This change to the real estate market could also help pave the way for companies providing buyers with tools to streamline the homebuying process, such as reAlpha Tech Corp. (NASDAQ: AIRE). The Dublin, Ohio real estate technology company says it is experiencing strong growth thanks to the launch of its artificial intelligence (AI)-powered, commission-free home buying platform.
Buying A Home Can Be Much Easier
reAlpha’s AI platform guides users through every stage of the homebuying process and is currently available in 20 Florida counties, with plans for expansion. The platform leverages AI to help customers find homes, make an offer, get a mortgage and close the deal. With reAlpha, users pay zero buy-side commissions, and the company plans to make money by collecting closing costs of 1.2% to 2.47% via mortgage brokering, title and search and home insurance services.
reAlpha’s launch comes as the AI market is taking off, forecast to grow to $1.8 trillion by 2030. Advances in machine learning and automation are enabling tech-focused companies to develop AI models that are disrupting many industries.
Real estate could also use some innovation, and reAlpha is attempting to capitalize on that, hoping to disrupt the way Robinhood Markets Inc. (NASDAQ: HOOD) did with online investing or Expedia Group Inc. (NASDAQ: EXPE) did for travel.
Growing Revenue
For Q2 this year, reAlpha reported quarter-over-quarter revenue that rose 205%. The company also closed its buy of Naamche, Inc., a Nepal-based AI technology firm. This acquisition bolstered reAlpha's AI capabilities by adding 42 engineers, developers, analysts and UI/UX designers to its team, increasing the company’s full-time employee count from 15 to 57. reAlpha said the acquisition marks the beginning of the company’s acquisition-led growth strategy, which it said aims to revolutionize the real estate industry through cutting-edge technology.
More To Come
"We believe that the completion of the Naamche acquisition marked the second quarter of 2024 as the beginning of the ramp-up of our acquisition-led growth strategy," said Giri Devanur, CEO of reAlpha. "We are continuously looking for strategic acquisition opportunities that will advance our mission of bringing innovative technologies to the real estate industry. Naamche's acquisition is one of the early steps in this process."
Other acquisitions include AiChat, a Singapore-based company that develops AI-powered conversational customer experience solutions and Hyperfast Title LLC., a title company that’s licensed to operate in Florida, Virginia and Tennessee. With it, reAlpha can offer title services through its platform.
Now, reAlpha has added another key piece to its portfolio with the acquisition of Be My Neighbor, a mortgage broker licensed in 26 U.S. states. The company says this acquisition strengthens reAlpha’s AI-powered homebuying platform by incorporating mortgage lending and refinancing services, allowing for a more integrated and seamless customer experience. Be My Neighbor, founded by veterans, will continue to operate under its own brand while leveraging reAlpha's generative AI capabilities. This move is part of reAlpha's broader strategy to vertically integrate the homebuying process, which it says should enhance its commission-free platform and unlock new revenue streams.
Looking toward the third quarter, reAlpha is forecasting quarter-over-quarter revenue growth of 140% to 170% in Q3, driven by the integration of its newly acquired companies, AiChat and Hyperfast Title. reAlpha said these acquisitions are expected to enhance its service offerings and contribute significantly to its overall revenue.
Taking A Page From Constellation Software
reAlpha is only just getting started. The company says it is on the hunt for even more acquisitions as it grows, taking a page from Constellation Software (TSX: CSU), a Canadian software and services company that has a reputation for acquiring hundreds of software businesses. reAlpha says it hopes to position itself as a trailblazer in the real estate technology sector by strategically acquiring accretive real estate service and technology companies centered around its core platform.
“We intend to capitalize on a significant industry shakeup created by the NAR lawsuit. We developed and launched the reAlpha platform after the settlement was announced on March 15, 2024. We are focused on continually improving the product and acquiring additional real estate service companies to unlock more potential sources of revenue,” said Devanur.
“We look forward to sharing our growth and developments in the coming quarters, especially after the effects of the NAR settlement take effect on August 17, 2024,” he said.
New CFO
reAlpha recently announced the appointment of Brent Miller as their new Chief Financial Officer (CFO). Miller, who officially took on the role on Aug. 19, 2024, will be responsible for all financial and accounting operations at reAlpha, reporting directly to the company's president and Chief Operating Officer, Mike Logozzo.
Notably, Miller brings valuable experience from his previous role as CFO and treasurer at KKR Real Estate Finance Trust Inc., a commercial mortgage real estate investment trust. During his time there, Miller played a key role in shaping the REIT’s financial strategy, including capital raising and financial reporting. His background with KKR underscores his expertise and makes his appointment at reAlpha a significant development for the company.
Featured photo courtesy of reAlpha
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