When residential transactions dry up, brokerages must find unconventional ways to generate money.
Douglas Elliman has rolled out a payday loan service platform for its brokers, providing another source of income as the industry braces for a bear market.
Tongo, a third-party platform backed by New Valley Ventures, the investment arm of Elliman, allows brokers to borrow up to 75% of a pending commission for a fee of 3-5% charged every 30 days. Tongo announced last week that it had completed a $7 million seed round.
The move is a way to give brokers liquidity, said a spokesperson for Elliman, who insisted it had nothing to do with the lackluster state of the residential market.
“The timing comes entirely because we recently discovered Tongo and are excited about their solution,” the spokesperson said.
Still, a cooling market with less deal flow means brokers may have to wait longer, for fewer checks. Tongo described its service as a “cash on demand” debit card product that could help agents stabilize cash flow.
And Elliman isn’t the only brokerage to announce new products. Keller Williams said this month that it would provide wealth management training to its brokers, with a view to possibly licensing such training to other firms. and business enterprise Walker & Dunlop enters the private lending business with Walker Private Lending, focused on multi-family property owners.
Everything is happening in a context of extreme economic uncertainty. Cushman & Wakefield predicted a mild recession in late August driven by high oil prices and the ongoing Russian invasion of Ukraine. Ian Shepherdson, chief economist at Pantheon Macroeconomics, told the New York Post that house prices could drop 20% until the middle of next year.
That could spell trouble for Elliman, which failed to grow revenue in line with some of its competitors in the second quarter. Elliman’s revenues grew by just under 20% between the first and second quarters of this year, while Compass, eXp and Anywhere all posted increases of at least 30%.
Elliman shares are down 62% this year.