Brokerage-As-A-Service for Residential Real Estate Agents with Stephen Capezza, President at Side

Nate Smoyer (01:07.152)

Hey Steve, welcome to the show.

Steve Capezza (01:10.062)

Hey Nate, thank you, glad to be here.

Nate Smoyer (04:17.488)

All right, for everyone listening in, I've got Steve Capezza. He's president of Side, the real estate brokerage as a service platform with more than 600 companies and more than 4 ,000 agents on the platform. And congratulations to you guys debuting in the top 10 for the first time on the RealTrends 500 list this year. How does that feel?

Steve Capezza (04:41.134)

It was, I mean, so we've.

We've been at that level actually for some time, but it was really cool to see our name in lights there. And it's a reflection of the companies that use our platform and their collective production. And so we're very proud of the community we built.

Nate Smoyer (05:09.072)

Yeah. And now your role as president at the side, you know, this isn't your first time really leading significant and large technology initiatives within real estate. You've been at this for more than a decade. So you've seen that list, you know, many times year after year and who's made that, but also the changes of the landscape, the needs that brokerages have and needs of agents.

What are some of those changes that you've seen over the course of your career, both that you've had a personal experience with, but also things that you've been witnessing that others have been.

Steve Capezza (05:46.542)

Yeah, I mean, you know, when I came into, I came into the category in 2002. And when, when I entered the space, you, there were real estate professionals that we, the companies that I was with the early days that we would talk to that would literally say, I don't believe in the internet. That's what I joined. When I joined PropTech, I was talking to people who,

work like literally offline. Yeah. The direct mailer, the magazine, the billboard, the radio advertisement, like that was the marketing of the day. And so when you think about that today, like just the, those things still exist. But the real estate book is not a popular periodical at 7 -Eleven.

Nate Smoyer (06:15.952)

That is incredible.

Steve Capezza (06:44.046)

Right. And so just sort of the evolution of how real estate professionals are getting their name, face and phone number in front of potential buyers and sellers that in and of itself has seen a sea of change over the course of the last 20 years. I think another huge highlight clearly is how folks search. And so in 2002, Main Street USA.

Nate Smoyer (07:06.48)

Mm -hmm.

Steve Capezza (07:10.894)

walking by a real estate office was how you search for homes. That's where you began your home search and you'd walk in and a real estate agent was working the floor at the time would take out a big book in that book where all the homes available in that local market. Today it's Zillow. And so that, you know, the turning on the lights to the data coupled with the advent of the iPhone and where mobile devices became effectively the remote control of our lives.

Nate Smoyer (07:25.296)

Mm -hmm.

Steve Capezza (07:40.302)

that forever changed how folks began to search, began their search for their home. And so I think that's, you know, my personal experience there is certainly something that I was involved in and excited about, but it's a huge impact in the industry. I think the other thing that, and this is where, you know, Side is a participant here, transactions are, still have an analog component to them.

And we're trying to fix it, but they're more digitized than ever before. And if you go to the fintech side of it, mortgages, like when I bought my home, everything with the exception of closing the deal happened online with my mortgage. So that's an example of what used to happen at the bank and on paper is now digitized online. So those are three.

Nate Smoyer (08:09.072)

Mm -hmm.

Nate Smoyer (08:26.544)

Yeah.

Nate Smoyer (08:36.432)

I still have, I still get requests when we buy property. Like we haven't bought anything for the last two years, almost two years now, but the last property we bought, we still had to do wet signature. So I still had to do like, you know, and of course I'm never in the area where I'm buying. So I'm like, I'm always like meeting a mobile notary at the street corner. Like, you know, literally I've done this. Like it was during COVID, I had to like,

Steve Capezza (08:52.398)

Yeah.

Nate Smoyer (09:05.744)

We folded down the tailgate of a mobile notary in the cold in Chicago winter, signing a hundred documents.

Steve Capezza (09:12.686)

Wow, that's a cold signature. Yeah. What I think is interesting about prop, I mean, what's interesting about real estate is it's among, if not the most archaic category. It is still in the middle of its, we'll call it technical, technology revolution, right? And so, yeah, whereas Amazon has digitized retail,

Nate Smoyer (09:16.752)

It was.

Nate Smoyer (09:36.336)

Yeah.

Steve Capezza (09:41.07)

in a meaningful way, that has taken shape in parts, but there's a lot of work to do in this category as it relates to that.

Nate Smoyer (09:53.168)

Yeah, so you kind of alluded to something earlier. You talked about like the old way of doing things, right? The books, the billboards, right? Even the shopping carts. I'll pick on that one for a minute.

Steve Capezza (10:03.982)

Shopping Cart ads, beautiful.

Nate Smoyer (10:05.584)

Clear distinction of who a top agent was in that time. Today, those mediums aren't necessary and the ability to have access to better tools and tech capabilities to provide better service is really available to everyone. As a new agent, you weren't buying billboards or you were just gonna go broke. Maybe you bought that expensive car and you went broke anyway.

Right. But today you don't have to buy all those very big, expensive mediums and you can still become a top agent. What are some of the things that differentiate that really set those top agents apart from the agents who really aren't being able to rise above or break through the noise in the market?

Steve Capezza (10:51.95)

Sure. Well, I mean, the first is the mindset of a top producer is quite different than that of your generalist or even hobbyist in the space. And that is, you know, if entrepreneurs listening to this podcast, that's what separates great entrepreneurs from the rest of the pack is their willingness, their grit, their gravitas regarding their business, their executive presence.

A top producer shows up with that, with their customer, with their team, with the industry, and you can sort of automatically feel it. So that, you know, sort of from a humanist perspective, that's one thing. I'd say that the second thing that I observe about the top producing real estate professional versus everyone else is they are...

that rigorous vigilant around the concept of staying in front of their customer, whether it's a past client, whether it's an extended future, extended person in their sphere of influence, whether it's a new customer, like they are on it. The best example, so we talk about billboards, we talk about shopping cart, that's Instagram. Like,

Nate Smoyer (12:10.32)

Mmm.

Steve Capezza (12:15.854)

that like, like you spending all, all that they spend all this time on Instagram. And the reason they do that is they're getting in front of their core customer and, or a channel that can help them get more customers, which are other agents in their, in their market or other markets. And so, that's also a big, big differentiator. The third, this is really for the top agents rise to become team leaders. and these teams in effect operate like.

businesses, they are operating companies, they're doing one, two, three, four, five million dollars in revenue. And they gear themselves with the appropriate tooling and they use that tooling to continue to grow their business. That's where side actually comes in is when they do become operators of businesses and they've outpaced the value of the brokerage brand they're advertising. But that is definitely a differentiator as they run their real estate business like a company.

Nate Smoyer (13:15.728)

Yeah, so I'm gonna take that and run with it here. So there's kind of two things I'd like to unpack here. So I would love to unpack the idea of being a real estate brokerage as a service platform. So breaking down what that means, but also I'd like to dig into a little bit here because most companies they set out, they have an ideal customer, right? But they don't say we're only gonna be working with certain customers.

They'll still take other customers, but you guys are pretty selective about who you choose to work with and who's able to work in your platform. So the second part of this question is I'd like to dig into what are some of the criteria of agents and brokers that you look for to be on the side platform?

Steve Capezza (14:01.006)

Yeah. Great. Yeah. So we can, we'll, we'll, we'll talk the first part around brokerages as a service. So there's, it actually hits at the two problems side is solving. So at a certain point in an agent's career, a top agent's career, I stated this already. I stated again, their value to their customer and to their community has outpaced the value of the brokerage brands that they're advertising.

And the construct of brokerage is such that although they're operating a business inside of this brokerage, they don't own it. The brokerage does. And so our view is that should not be the case. If you've outpaced the value of the brokerage brand you're advertising, you should be advertising the brand that you represent. And generally that is your brand.

and brokerage should act simply as a service to enable you to not operate the business that you are running, but to actually own it. And so that's what brokerage as a service does. We invented the category and effectively what we do for our core customer, which are top real estate professionals, generally team leaders, is we enable them to move from operators of a real estate business inside of a brokerage band whose value they've outpaced,

and we move them to become owners of that business. In effect, they are now independent boutiques. And the idea of brokerage, like any other part of your business, is it should be a service that powers that business. In real estate, to sell a house, you have to sell it through a licensed broker. And so we provide that service. And so when you partner with Side, the marquee is not your...

Nate Smoyer (15:34.768)

Hmm.

Steve Capezza (15:55.598)

traditional broker brand, the marquee is your brand. And we simply move to the back of the house to make sure that brands can operate within the Department of Real Estate's requirements around brokerage.

Nate Smoyer (16:08.528)

Yeah, very cool. And then, and then we can dig into a little bit of like, what are some of the hallmarks that you're looking for from an agent? Cause obviously like there's some, you want your agents to be successful and some of it's going to be, you know, obviously what the brokerage as a service, if you will, right? The platform is going to enable, but you're also looking for agents who have outpaced the value that the brokerage brand that they were previously working under is delivering. So what are some, you know,

Is it just the number of deals? Is it a deal with volume? Or is there more to it that really speaks to, hey, this is an ideal partner?

Steve Capezza (16:43.374)

Sure, yeah, there's an economist side and there's the humanist side. And so I'll hit the economist as effectively the metrics. We look for partners who operate high volume businesses in the major US real estate metro markets. So LA, San Francisco, New York City as examples.

And our view of the industry is such that the current construct of brokerage and industry is built to actually serve the mediocre to long tail professional, not necessarily the top producer. And you can look at the economics of these companies that

Nate Smoyer (17:35.312)

Mm -hmm.

Steve Capezza (17:39.822)

sort of operate in this space and you very clearly understand why that's where they get their margin from. And so no one has actually built a service around what do top producers need. And so the side platform is they actually need to go start their own independent company, own the business that they operate, but they do need a broker to operate that business. And that's what we provide for them. And so, you know, given that our view is the more,

these operators, the more of them that become owners, the landscape of the industry is actually going to consolidate around these owners. They'll pick up more market share and therefore you'll have an industry that's full more of top producers consuming market share and doing more transactions than ever before because they will have the enablement, they'll have the empowerment, they'll have the tooling to pick up the capacity.

and the brand differentiation to pick up more customers than they did previously. That's what we're there to provide. So we believe we're solving a problem for the industry by consolidating around top professional. The requirements of that are high volume in major metro markets. Ideally, you have a few members in your team. We do favor those who have a higher balance of listings versus buy side. We believe that's a more sustainable.

partner and the companies we partner with have to be sustainable in order to be successful or ultimately grow. And so that's that piece. On the other side of it is like, look, we want you to be a great contributor to our community. Community is the through line of side. It is a very compelling value to prospective partners and current partners to quote one of our partners, it alone is worth the price of admission. And so because of that, like,

Nate Smoyer (19:23.792)

Hmm.

Steve Capezza (19:38.638)

Being a productive member of the community is important to us. Being a rising star on your market, someone who's engaged, coachable, willing to mentor, those sorts of things also play a part in our selection.

Nate Smoyer (19:51.248)

It seems like a really important piece. I mean, as a solo agent or striking out on your own, I mean, you're really left out there in the deep end. You know, and I hadn't considered that prior to this interview. Was that something that was intentionally engineered into how Side had planned to grow? Or is that something that kind of came about organically because of the types of agents you were able to attract and saw what was able to build from that?

Steve Capezza (20:21.838)

Yeah, so there's, I mean, there's two pieces to it. The, you know, the real estate industry is an industry of churn. And if you're building an offering around, you know, sort of your average to below average agent, you're signing up for a high churn business. And so that ended up itself, just think of it as building a business that was not attractive to us. Secondly, like, look,

you know, we're trying to build a great business and build a great company. and because of that, like the idea is it's got to make impact. It's got to make impact on ultimately the end user, which is people buying and selling homes and communities. These folks serve. And there was just a clear differentiation between, the experience a top producer or top professional provides versus the average and guy and our other co -founders, Ed and Hillary.

just felt like those top producers were underserved by the construct of brokerage and industry at the time. And if they were served well, they could thrive. And there's enough of them where you can build a really compelling and amazing business. And so that's how they sort of drew the line in the sand. Our company will make an impact on its customer and those customers of that customer by delivering a great.

service and product and that's how we landed on our ICP.

Nate Smoyer (21:49.968)

That's very cool. Now it's pretty well talked about or maybe known like you have the, is it the Pareto principle? Is that how you say it? I always say it wrong. Like the 80 -20 rule. I think the Pareto principle is different.

Steve Capezza (22:06.03)

Yeah, so 20 % of professionals will do 80 % of the business. Is that what you're talking about? Yeah.

Nate Smoyer (22:14.384)

Yeah, yeah, yeah. You kind of like, you know, you have like a smaller percentage that's doing disproportionate amount of the lifting, right? So like 80 -20 or 90 -10 in real estate, you know, your 10 % is doing 90 % of the transactions, so to speak. I'm curious, from your perspective, obviously, you know, you've seen a larger part of the market over the years, but also like now working on the side business and seeing what your agents are doing. In the tough times that we've been in,

especially being able to get listings. Has that evened out or is it the same or is it getting more extreme that proportion of who's doing the volume in driving deals today with as difficult as it is?

Steve Capezza (23:00.238)

Yeah, so there's a couple of things that are true in real estate. One is a lot of transactions, in fact, the majority of transactions actually flow through average to below average agents. They do like one or two transactions a year. And in effect, the long tail of the industry is a top producer's biggest competition.

And so, yeah, what we have seen, so like, it's interesting, like a top performer and a top performer, they actually wants to do more deals together. They know deals will get done. They know quality. Their biggest, you know, the biggest thorn in their side is a bunch of hobbyists flying around, brothers and sisters of customers who do one or two a year, and that consumes a lot of transactions and brokerages.

Nate Smoyer (23:29.74)

interesting.

Nate Smoyer (23:41.264)

Mmm.

Steve Capezza (23:58.062)

And the industry are happy with that because brokerages have high margin splits with bottom performers. It's how they keep the lights on. And the industry is fees. So the more people paying fees, whether or not they do transactions, the more money we make. We have seen over the course of the last year, I believe like this is soft math, but we went from an environment where.

I think it was in 2021, there were 6 million transactions, 2022, something like 5 .5, trades happened last year, 4 .1, this year, 4 million. And yeah, and it is an accelerant to the middle and below average leaving the industry. And so our cohort of customer side, side partners, they have picked up market share.

Nate Smoyer (24:37.616)

Yeah, way low.

Steve Capezza (24:54.382)

One of the reasons we were number nine in the real trends list and only in 10 states is because our partners in general relative to market outperformed the market significantly. And one of the reasons behind that is because a bunch of bad agents left the industry. I do see that accelerating that with the National Association of Realtors settlement.

Nate Smoyer (25:07.12)

Interesting.

Nate Smoyer (25:13.424)

Yeah.

Steve Capezza (25:22.254)

You know, you got required by side agreements. If you're not good at real estate, it's hard to get a signature from someone who's also going to tell you how much money they're going to pay you for a service. So that should be an accelerant to folks leaving the space as well, which will empower our partners and other top producers to pick up more market share.

Nate Smoyer (25:41.648)

You know, Steve, what's very interesting is that you and I are having this conversation because somewhere between like probably four and six agents in 2015 did not have me sign a buyer agent agreement. And I was so frustrated with my experience in buying property my very first time that I ended up going FISBO anyway, that I got the bug.

Steve Capezza (26:05.294)

Wow, yeah.

Nate Smoyer (26:09.968)

And just decide I have to get in a real estate. Of course, it is much better for the world that I am not an agent. Cause I had a knack for finding the worst deals possible. But I mean, it led me in this path and it's ultimately actually how I got into PropTech and why I'm so interested in this industry is that I see there's so much room to improve the experience for, you know, the end user, the end consumer.

And that buyer agency agreement, I think that's a, it's a really important piece. And if it has to get mandated to happen, so be it. but also like being crystal clear about that relationship is, is, you know, super important. And it's, I think it's extremely important to the customer experience, you know, going through that process.

Steve Capezza (26:59.63)

100%. I mean, look, great service providers do two things well. They set really clear expectations and they meet or exceed them. And this will be a forcing function for agents to show up and being required to deliver on those two things. And because of that, it's gonna be certainly somewhat of a nuisance, if you will.

Nate Smoyer (27:15.888)

Hmm.

Steve Capezza (27:29.23)

to a top professionals like a friction point, but it's a healthy one. It's existential for bad agents. It's existential for hobbyists. They're not great at setting expectations and they're not great at fulfilling them. And you've had a few experiences that are examples of that myself as well.

Nate Smoyer (27:49.36)

Yeah, yeah. I'll tell you one last story and then we'll move on here to the final segment of the show. But I remember I had clients come in or lead come in and I called them up and we sent an appointment, they came in and they're like, yeah, we're on the verge of winning a lawsuit. Like, congratulations. We're going to get millions of bucks and we're going to shop some homes. And I'm an idiot. So I take them around showing up a bunch of homes. And then I have a call them. I'm like, hey,

I gotta have you guys come in before we can proceed. Gotta have you get this agreement in place. I'm trying to do things as my managing broker was telling me to go do. And they were like, we're not signing anything. And I remember thinking like, this is so dumb. If I hadn't pushed that dock, like they would have been around. I could have got that deal. I am a hundred percent certain without ever anyone telling me they never bought anything and that there was no lawsuit. They just wanted to look at expensive homes. It would have saved me so much time.

Steve Capezza (28:42.862)

Yeah.

Nate Smoyer (28:48.272)

I could have actually focused on the real work and you get down to a little more serious with who you're working with. It is important. I couldn't agree anymore. Steve, we're gonna jump to the final segment of the show I like to call for the future is when I get to ask each guest who comes on the show to give their best predictions based on the following four questions. Are you ready to play?

Steve Capezza (28:48.526)

Yeah.

Steve Capezza (28:55.118)

What? What?

Steve Capezza (29:12.27)

Let's play.

Nate Smoyer (29:13.168)

All right, number one, it's nice and easy. What does side look like one year from now?

Steve Capezza (29:22.894)

Side will have...

close to 800 partners. We will, we didn't talk much about this, but the, our first party technology, the stuff we're building, it's called the side applications, all about automating brokerage, turning brokerage from a cost center, a heavy weight on a business to a profit center. We will have advanced our core application in such a way that,

hyper connects our community and just saves our partners a bunch of time when just running transactions. All of our partners will get paid instantly at close. And then we will be higher than number nine on the real trends list a year from now. Those are my predictions.

Nate Smoyer (30:25.232)

I'll often mark my calendar, March of 25, I'm gonna come back and check that prediction. I love it, love it. Number two here on for the future, I think you kind of answered this earlier, but we're still gonna go with it and if anything else you wanna add to it, but where does agent count nationally go from here, let's say over the next two years?

Steve Capezza (30:30.03)

Yeah, we'll see. We'll see.

Steve Capezza (30:50.83)

I mean, the one and a half million licensees today we'll call it. I mean, conveniently those numbers aren't necessarily public anymore. It's going to be below a million.

Nate Smoyer (31:02.928)

It's been a few years since it's been below a million, eh? Like...

Steve Capezza (31:04.878)

Yeah, the last time the lowest was in, I think, 08, 09 was like 800 ,000 or something. We will get to, we will be, it will no longer be a million plus, it'll be below a million.

Nate Smoyer (31:19.92)

All right. Number three here on For the Future, what's one industry trend you think will continue, but you wish would go away?

Steve Capezza (31:31.31)

Industry trend that will continue that I wish would go away Continue for how long?

Nate Smoyer (31:42.608)

You follow your heart on how you want to interpret it.

Steve Capezza (31:44.098)

I believe that the MLM component of the industry will continue. And I wish that would go away because it is not designed to serve the core customer of real estate, which are buyers and sellers, nor drive real estate professionals to do what they should be doing.

which is helping those customers find homes.

Nate Smoyer (32:17.52)

Alright.

Last one here, what's one thing you believe will dramatically change or fade away in real estate as a result of tech advances?

Steve Capezza (32:29.102)

we're gonna do this. We are going to make a real estate transaction for the agent as close to, consider it's a house versus checking something out at a grocery store. But as close to parity with as buying a bag of chips at your local convenience store. We are gonna make the transaction very, very, very, very easy.

for agents, transaction coordinators, and our partners.

Nate Smoyer (33:03.312)

That is no short order. I love the vision and the swiftness of response that usually people have to think on that one, but you guys know exactly where you're headed and what you're trying to do here. Steve, this has been awesome. Thank you for coming on the show and sharing a lot of both your experience in this industry where top agents are succeeding, how they're succeeding, but also what side's been doing to help them to grow. Congrats on the success and the growth in a time where.

Majority of people are not saying that about their businesses or their partners, and you guys are clearly doing something different here. For those who want to get in touch with you and learn more about SIDE, where do they go? How do they do that?

Steve Capezza (33:45.646)

Find me on LinkedIn. That's my primary social channel and feel free to DM me, make a comment on one of my posts, follow, all the things. So.

Nate Smoyer (33:58.928)

Yeah, of course, and you can find the links to Side as well as Steve's LinkedIn on techness .io. It'll be in the bio of this episode. Don't forget, you can always subscribe to the newsletter. You'll get marketing articles, tips and tricks on growth, as well as latest PropTech news and interviews with that on a weekly basis. Steve, thanks so much for coming on the show. I can't wait to see what you guys come up with next. We'll see you later.

Steve Capezza (34:23.214)

Yeah, awesome. Thank you, Nate. It was a pleasure.

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