The Real Estate Dish: 20 Minutes with Eric Stegemann, CEO and Director of Strategy at TRIBUS
Join QuantumDigital’s EVP and CMO Eric Cosway as he gets the latest dish on real estate technology with Eric Stegemann, CEO and director of strategy at TRIBUS. Eric became a REALTOR before reaching the age of 20. While selling real estate, he saw a larger opportunity to build a technology-oriented brokerage. In 2004, he created River City Real Estate, which quickly became the largest independent brokerage in the St. Louis area. There he oversaw the development of numerous real estate technology breakthroughs that were well ahead of their time. The intellectual property developed at the company eventually became the framework for a new technology firm: TRIBUS. Formed in 2009, TRIBUS brings forward-thinking technology solutions for medium and large-sized real estate brokerages across the U.S. and Canada.
Eric: Eric, welcome to the podcast.
Eric S: Thanks so much.
Eric: Can you give us a brief overview of your background, and your current role at TRIBUS?
Eric S: Well, it starts out as a college kid, which everybody thinks is kind of funny. I actually started selling real estate to pay for college. I went to a school that cost about $40,000 per year, back 20 years ago. Mom and dad didn’t have the money to pay for the $40,000 per year to go to the college. It was in Chicago. I grew up in St. Louis, and I got my real estate license when I was between 18 and 19. I would drive down from Chicago to St. Louis every weekend. I’d leave about 3:00 PM after my last class, sell real estate all weekend, then hop in the car and drive back to Chicago on Sunday night for school. I never imagined I’d be here 20 years later; it was originally supposed to be just a way to pay for school. I figured, “Hey, if I sell 4, 5, 6 homes per year, I pay for college.” And I fell in love with it.
Eric: So, you were a REALTOR by the age of 20. I wonder about that first home you listed and sold—were you able to have a beer?
Eric S: That’s a good question! The answer is no! I got my first sale when I was 19. Funny story about that. It was some people I met on a phone call. I was doing phone duty at my office one Saturday afternoon… picked up, talked to them. And they said, “We really want to see this home.” I jumped on it, went out there, and showed them the property. And the very first words out of their mouth when I showed up at the house were, “How old are you?” My answer to them—which is still the same answer I always give today, because it’s just fun to continue that—is, “How old do you think I am?” They said, “26.” And I said, “Hmm… somewhere around there.” And I smiled, and I said, “Look, I know my stuff. I’ve got a great broker in my office that’s behind me. If you don’t feel comfortable, he would be happy to come out and help us.” To this day, I’m always thankful for Chuck, who was my first office manager/broker. He really supported me well in that first contract I did.
Eric: It sounds like you were really motivated to get into real estate. Tell us more about your experience and your ownership of River City Real Estate—which, I think, was the foundation for TRIBUS. Is that correct?
Eric S: Yes, that’s right. And I still say that one of my best achievements in life was when I started River City Real Estate at 21—which most people think is just crazy. There were some changes in the real estate market in St. Louis. There was a transaction fee that got started, and I knew a lot of agents at my company, and a lot of agents at other companies, that all didn’t want to charge, or didn’t feel comfortable charging their clients the transaction fee at the time. So I said, “Well, hey! I’ll start a brokerage.” You know, what 21 year-olds do. And I started a brokerage at 21. I ran it for 7 years before I sold it. And still, one of my best achievements I say is that I ran the brokerage for 7 years and we never got sued once—which I think is just hilarious. At 21, starting a brokerage, making some good money running a brokerage, and all the things that 21 year-olds do. And somehow we got by, and did pretty well with it. Pretty proud. We made a great team. At one point, we were the largest independent brokerage in the St. Louis area, and we had little satellite offices around there. We did some deals in Kansas City, in mid-Missouri too. And it grew into a nice business over the 5, 6, 7 years that we did it.
Eric: Yeah, it sounds like it. So, what you did at River City Real Estate—I think the framework was really balanced around real estate technology. Was that your love, your passion that you brought out of that business, and then continued as an entrepreneur with TRIBUS?
Eric S: You know, it’s funny. Technology and real estate have found a way to weave back and forth in my life. At one point, it’s technology. At one point, it’s real estate. And now, it’s kind of everything together. I was going to school, and what I went to school for was actually computer engineering. That’s what I wanted to do with my life. After selling real estate for a year, driving back to St. Louis—and I made a very good income, almost double, maybe triple of what I would have made being a computer engineer, that year selling real estate at 19—I decided, “Hey, this is better. I need to do this.” I got more into the real estate thing.
Eric: Very smart shift!
Eric S: So after that, we started building our own tools. Back in ‘05, ‘04, we had our own in-house developers at our real estate company. That was, from what I understand now, pretty out there back then. And the reason we did that is because, of all the other tools that were available, nothing worked together. And I kept getting frustrated, and I kept saying, “Hey, these things should talk together.” And the fact that they didn’t made everything we did harder. So, we started building all of our own tools to run the brokerage, and that’s really what spun out and became TRIBUS—the original tools that we built to run that brokerage.
Eric: At TRIBUS, you’re still doing custom tools and custom web experiences for brokerages today. How has the business changed? Are you still in that market today?
Eric S: Yeah. Over the past 8, 9 years that TRIBUS has existed, I like to say we’ve gone through some shifts. First, we focused just on independent brokerages. And that was really the focus. A very proud moment in my life, and something that I remember very fondly is, after I sold the brokerage… I spoke at an event, and I happened to meet a gentleman in Los Angeles that was starting up a new brokerage. And, in the course of starting up that new brokerage, he said, “We’re looking for some technology folks to help us get this thing up and running. Would you be interested at all in coming out to California, and being here for a while when we try to get everything up and running?” There were 12 folks that were in a room, and their intelligence and passion for the business was something that I very much enjoyed being around, and that company turned out to be Partners Trust. I got to be there very early on with them. And then it kind of spiraled from there. So we focused on brokerages, and independent brokerages early on. Then, we started finding a niche in the Prudential world—back when it was still Prudential. Not very many vendors were paying attention to them, and I had a gut feeling that something great was going to happen with that network. It was too valuable for it to just go away one day. So, we started working with a number of Prudential brokerages—at one point, ten percent of all Prudential agents were a client of ours in one way, shape or form. And then, I like to say we lost our way a little bit. We started selling things to agents. Growth started happening. We started to say, “Hey, there’s an opportunity to sell websites to agents—a premium website to an agent, independently.” We went down that direction, and while I think we did a great job at what we did, it wasn’t our core competency.
Eric: It’s tough to scale.
Eric S: Yeah. Very hard to scale. Agents have a different mindset of what they’re looking for. Many of them, when they purchase software, they’re looking for leads, they’re looking for a funnel to be set up. That wasn’t something we were providing. So, about two and a half years ago, we said, “What is the thing we do best?” In talking to all of our customers, what we realized was the medium to large-size brokerage is really where our core competency was. We understood that business. My team that I assembled by that point were all previous brokerage folks. So, our VP of Product today—that was our first employee, actually—she is a second generation REALTOR, did new home sales, did resales. So, she knew it. Our VP of Business Development comes from 20 years in the real estate industry. Our head of development actually got his license and sold real estate for a couple of years to really understand the business. So, by knowing that, and really ingesting and understanding that side of the business, there was something unique that we could bring to that medium and large-size broker, and that is a fully custom environment that was easily done brokerage by brokerage, but completely siloed, so that one brokerage could operate one way, while another one of our clients can operate in an entirely different way.
Eric: So, it sounds like you got acutely focused, narrowed your perspective on the medium and large-size real estate brokers, and you maybe veered off into the agents before then. What are agents looking for in a brokerage today? What are they expecting when they join a brokerage?
Eric S: That’s a good question. We actually did a bunch of research recently. We’re very fortunate to have a team that is very curious, and they’re always looking at “What makes people tick? Why are they picking this brokerage? Why are they clicking on this button?” And in the process of doing that, what we discovered was there were two main reasons why people were picking a brokerage, outside of another one. I’ll start with that outside one for just a second, which is commissions. So, everybody knows that you can recruit agents on commissions. But I always had a saying, and it actually holds pretty true, which is “Recruit on commission, lose on commission.” Somebody will always come out and make one offer of five percent more, three percent more to an agent, and it’s going to get them to come over. But, what we found is those agents tended to be transactional in nature, meaning as soon as a better offer came along, they tended to jump ship again. Through that process, we kind of lumped those people out to the side. If you want generational agents, people who are going to stick around for 10, 20, 30 years with your brokerage, we found there’s two things, consistently, of why they’re choosing their brokerage: Number one, support. The people that a brokerage has in their offices, the people that the agents interface with daily, it’s the person you turn your transactions into. That broker that I was talking about, my first broker, Chuck—I will never forget him for the rest of my life. Just like many agents feel that way about their office managers, or their CEOs, or their COOs. They became very loyal, we found, to those folks. And then the second reason is technology and marketing that were easy, done for them, and part of their process. Obviously it’s a little self-serving, but when we did the analysis, we asked “What are the technology pieces that you’re looking for inside of that brokerage?” What we found is that it wasn’t a check-box item, or what I call a check-box item. Meaning, you couldn’t just provide a website or a CRM and dump it in the agent’s lap, and say “Good luck.” Which is, unfortunately, what most brokerages do. The agents that selected their brokerage because they had great tools and technology and marketing were selecting because they had something unique and different. That’s part of the rise of the RedFins, the Compasses of the world today, is there’s something unique and special about their brokerages that everything just functions perfectly in that technology sphere. We have a free downloadable white paper on the topic of using technology as a recruiting tool.
So those things were there—it was custom-design for the brokerage, custom tools for the brokerage, and then the marketing piece that goes along with that. Which is, in many cases, when the brokerage was doing the marketing on behalf of the agent, when they’re sending out email marketing pieces that have the brokerage name on it, but are all branded towards that agent, the agent felt like they were getting a lot of value from that brokerage. Because, they knew they needed to do it, they knew they needed to send out postcards, they knew they needed to do email marketing. But they just never actually spent the time to sit down and do those things, and when the brokerage could do it for them—many ways in an automatic way—they felt like they were getting a lot of value for that, and it made them stick around.
Eric: In terms of that market, what are they struggling with today? If you look at these larger size real estate brokerages, what are the top 2 or 3 challenges they’re facing to continue to grow their business? Because growth is hard, and you’ve got lots of experience in this market. So, what would you say these folks are facing today?
Eric S: Well, number one is having a particularly good value proposition. In some brokerages, having a great value proposition might be commission. There’s the Realty ONEs of the world, there’s other companies that offer very high splits. And that could be a value proposition, and that works for them. There’s nothing wrong with that. You can’t get mad at that.
Eric: Is that sustainable, though? That’s easily copied by other brokerages out there.
Eric S: Well see, I think it’s a numbers game. So, if you’re Realty ONE, you’ve got a great advance on most everybody else that’s out there. And I think the flywheel has started on them, where they’re able to recruit people just from existing now. But, I think a small brokerage starting up, if you’re trying to get things rolling, having that as your value proposition probably isn’t the best way to start. And that’s where it kind of focuses on what we discovered, which is one of my things I’m really working hard to change in this industry right now, is what I call “management by guesswork.” What I mean by that is, when you get folks from major consulting companies like Accenture, or these other companies that work with S&P 500 companies that come in and look at real estate organizations, they laugh. Because, what they discover is that almost all decisions inside of brokerages today are made based upon gut reactions. So that’s what I call “management by guesswork.” Brokers make decisions and say, “Hey, we’re going to put an office here.” And they don’t know why they’re putting an office there, they just feel it’s the right decision to be made. But, if they can collect the data and truly understand where there’s traffic counts, where agents live, or where they’re trying to get more agents… is putting an office in that area going to help them expand? Or are they just going to take agents from their other offices and move them over there? Those are all questions that you can find the answer to if you’re willing to collect the data. It’s the same thing with marketing. People don’t understand—a lot of times they do marketing and they say “Hey, we’ll buy this tool” or “We’ll do a postcard campaign” or “We’ll do a newspaper ad”—and then they put their regular phone number on there, or they put in a regular website address, or something like that, where there’s no way to track how that person got to them. And then they’ll say, “Well, we’ll ask them.” Well, it turns out people are really bad at remembering how they found you. So, if you could have things on your postcards that are PURLs—personalized URLs—where you know who it is, and you know how they got to your website, or if you could have a separate phone number that you set up through a VOIP system that tracks inbound calls, or if you have a different website address that you send people to from each campaign, now you can start tracking that and really come up with an ROI, and know, “Oh! This actually makes us money,” or “,This is not something that is making money” but maybe you still do it because the branding is worth it. But, at least you get the data to make those decisions. And unfortunately, too many things inside of brokerages right now… there’s no data to know “Yes, this works” or “No, it doesn’t.” For brokerages looking to better grow their business using data, TRIBUS offers a free downloadable workbook called, “Management by Guesswork.”
Eric: Let’s say I’m a large broker, medium-size broker and I have a relationship with TRIBUS. Is that part of the coaching I get? Is that where the value-add that you guys really differentiate yourself… you’re going to help these business people make more fact-based decisions based on technology and data elements you guys understand and drive?
Eric S: That’s absolutely accurate. I mentioned Accenture before, and I sometimes say that we like to be the Accenture for real estate. Accenture goes into big, huge companies and really understands and ingrains themself with that company—learns everything there is to know, maybe reviews P&L statements, balance sheets, all of that—then watches the process of how things work inside of the brokerage, and then they’ll make software that’s custom designed for that because they’ll figure out “Hey, this removes seven steps of the process” or “This makes more people want to join your company.” We like to do the exact same thing. We’ll go in and really understand that brokerage. In many cases, one of our team members will go in and write up an 80 or 90 page report, literally, on how the brokerage functions, any recommendations that we might have, and then we produce that report and say, “Here are the things that we think we can help you achieve, get better with, recruiting, etc.” Then, most of the time of course the broker does pull the trigger and says, “Yeah, that sounds great! Let’s get there.” And then we track those numbers over a year, two years, three years that they’re with our company, or hopefully 10, 20, 30 years they’re with our company.
Eric: Your combination of really deep consulting, and being a software integrator—also having the software like display and other products you guys have—you provide the software as well. Would that be an accurate assessment of your business model?
Eric S: I think so, yeah. We charge in a traditional methodology because that’s something that brokers really understand, which is I pay a per-agent type of a fee. And, so that’s the process that we do. And we like to say, if you sign up for that, the consulting that you’re going to get is free. The reason why we do that, and we don’t really charge extra for it, is because I know if I can help you, as a brokerage, grow from 1,000 agents to 1,500 agents over the next three years, I just added 500 licenses to what we’re charging you for. You’re making more money, we’re making more money. It’s a win-win. And it’s not a sales process again, right? If I can help a brokerage grow 500 agents in the next three years, I don’t have to sell another brokerage. I just helped them grow and make more money which, like I said, makes us more money too.
Eric: So, you have a diagnostic service, and you have a deployment service, and where you make your money is on the deployment service, through a licensing arrangement. Very good. My last question, or maybe one or two more is, looking at the industry, what do you see are the two or three shifts in front of us from your perspective spending a lot of time with these larger brokers?
Eric S: Number one is that any vendor that’s not focused intently right now on integrations is going to be left behind. And we’re already starting to see that, right now. There’s been acquisitions of vendors over the past 6 months—that are not in that world and don’t plan to change that world—and these acquisitions have happened because, I think, these other companies are saying, “Well, we’ll take the customers, fold them into our other product, and make it work.” Integrations and saying, with this idea, “We’re not going to be the best at everything, but we’re going to work with the best of everything.” I think it’s a mentality you have to take over the next couple of years. And as a brokerage, it’s the mentality you have to demand of your vendors... to say, “You’ve got to find the companies that are willing to play nice with everybody.” Copy that walled garden. APIs, data warehousing… those are the things that I think are going to be very big. And better services for sellers, is the other thing I’d probably say. Not just “We’re going to stick a sign in the yard and put it in the MLS.” I think we’re going to have to offer a whole lot more value to sellers to get them to avoid “i-buyers,” like Opendoor and Knock.
Eric: Has the emergence of teams in the last couple of years—we’ve been impacted by this—has that impacted the go-to-market models and the way the brokers are now representing themselves?
Eric S: It is. And I think it’s something that brokers should be, A. Aware of, and B… “worried about” is not the right term, “cognizant of” I think is what I’m looking for. What I mean by that is, let’s say you end up with a brokerage and you have a single team that has 100 agents, that is 10 percent of your overall business. Which is happening today. There’s a lot of very large Keller Williams teams that are out there that are material portions of their market center that they’re in, and material portions of the overall business. And who knows what happens with those teams over the next 5 years? So, I think it’s a matter of understanding that model, and understanding you’re going to lose teams, and so you need to be recruiting teams at the same time. So, I think it’s something you have to know the data on. It goes back to “management by guesswork.” Know your teams. Know who’s inside of your company. Know the risks that you have with those folks leaving. Be able to change your models, or permission plans, around that so that you don’t have to necessarily lose those folks. And be looking for the people you can pick up elsewhere, and create these teams that may live on past the team leader being there. I think that’s something that Steve Murray from REAL Trends has been big on the past two years, is actually helping teams identify their own values, and to say, “This team is valuable because it has a repeatable process.” As opposed to this team where there’s a rainmaker that’s the one person in charge who’s doing all of the business.
Eric: This has been great talking to you today. I’m awestruck… we both have the same names, but at 19 I had no idea what I wanted to do, and you were a realtor, so that’s extremely impressive. You’ve outgunned me, my friend! That’s a great career path.
Eric S: I fell into it! Like I said. And I just fell in love with it. I can’t imagine doing anything outside of the real estate industry. I just love this industry so much, because there’s no other industry in the world where you have an entire group of people… we’re getting ready to have 1.4 million realtors, they’re going to announce it here pretty soon that we’ve crossed 1.4 million realtors, the most ever in history. And what other industry do you have in the world where every one of those folks, or the vast majority of them, wake up every day and say, “I’m willing to put my paycheck on the line that I’m going to do a good job today.” That, for me, is so exciting because it’s a group of people that are more passionate about what they do than anything else. At one of my presentations I give, at the very beginning of the presentation, I said, “If you don’t love what you do, there’s a door in the back of the room. Leave. Go find another job.” Because, you’ve got to love what you do to be in this industry. And that, for me, is super exciting.
Eric: Eric, thanks for joining us today. It was a great pleasure getting to know you better. Good luck with TRIBUS.
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