It's not everyday that one of the largest real estate brokerages in the country gets sold, so it was big news when Sutton Group announced on December 7, 2023 that it had been acquired.
Who acquired Sutton Group made it even bigger news, as the brokerage had been bought by Ross McCredie, the Founder of Sotheby's International Realty Canada, real estate investment company Dundee 360, and wealth management platform RealWealth.
In between founding and growing those companies, McCredie also spent some time in the US, where he served as Chief Global Strategist for Pacific Union, leading the sale of the company to Compass to create the largest independent brokerage in the US.
After bringing the Sotheby's brand to Canada in 2004, McCredie served as President & CEO as the company expanded across 30 markets and grew to have a roster of over 900 realtors.
Just about two decades later, he's now buying into a brokerage that's already well-established, with over 200 offices across Canada and a roster of more than 6,000 agents.
In an interview with STOREYS in late-April, McCredie discusses how he grew Sotheby's, the rebranding of Sutton Group that was launched this week, and how he wants to change the real estate industry.
I wanted to start off by going back about 20 years, when you founded Sotheby’s International Realty Canada. What was the driving force there? Why was it something you wanted to do?
At the time, I was running Intrawest in Whistler — developing, sales, and marketing — and we were just seeing more and more international buyers, especially in the higher end of the market. I was always looking for different ways, as a developer and developer's rep, to figure out the best way to reach these foreign buyers and international markets.
Sotheby's Auction House had done a licensing agreement with Realogy, which had Century 21 and Coldwell Banker, so I reached out to them in 2004 and said "Hey, I'd love to figure out what you guys are gonna do in Canada because I'm really interested in the Sotheby's brand," and that's how that started.
I wasn't a real estate agent — I've actually never been a real estate agent — so we bought the rights to Canada and I asked my wife to go out and get a real estate license. I just saw a huge opportunity to get an iconic brand like Sotheby's, which has been around since 1744, and owning the rights to Canada seemed like a smart move at the time.
You acquire the Canadian rights and then you set out to grow the company. What was your approach? Looking back at it now, what do you think were some of the key moves? Anything you’d perhaps do differently in hindsight?
We started the first office and we had one agent, which was my wife, and we had no staff. Over the course of 12 years, we opened 40 offices across the country, we recruited all of the people ourselves, we owned and operated each of the offices, and we didn't franchise even though I could've franchised.
I was a bit of a control freak and I really felt like the power of the Sotheby's brand — we really needed to control that. To be honest, it was really hard. I didn't know much about the business. I reached out to a lot of people in the industry and not a lot of people really wanted to help me, so that was a bit interesting.
As we grew, every time we opened a new office I felt like we were making less mistakes. By the time we got to our fifteenth office, we kind of had it dialled. Then the brand really had traction because we won the bid to do the Hotel Georgia here in Vancouver, we launched Revelstoke Mountain Resort, we did the Four Seasons in Toronto, so we really developed, pretty quickly, a strong brand recognition across the country.
And we were really focused on top-level people, but more importantly people that were truly professional and wanted to be in the business and actually wanted to act like fiduciaries. I really felt that the industry had a mix of good, bad, and ugly, and there wasn't a brand out there that stood for what we call "the Navy SEALs of the business." We wanted the best and the brightest, hardest working, and most ethical people, and Sotheby's was a great brand to do that with.
You mentioned that people didn't really want to help you early on. Why do you think that was?
We used to get emails people all the time, forwarded from someone else, saying that "Ross is gonna be broke in six months" or "He doesn't know what he's doing."
We were doing things differently. Our model wasn't to get as many agents as possible. It was literally focused on [sales] volume and people. There's so many real estate agents in North America right now and about half of them last year didn't even do a transaction. It's an industry that sells itself with delusions of grandeur — come in, sell real estate, get rich — and the reality is it's just not true. The vast majority of people that go into the business don't survive three years. In fact, most of them don't survive one year.
So, when we opened our shop, we were just telling people the truth. Usually what I would say is "Go work at RE/MAX for a couple of years and if you make it, come back and talk to us." We stood our ground, whereas every other brokerage was literally just, every week, recruiting more agents.
Fast-forwarding a bit to just before buying Sutton Group, what did you see when you were looking at Sutton Group from the outside looking in?
I had just spent 10 years in California, mainly. I helped Compass reconstruct their business finance and then I saw an opportunity in California to get involved with Pacific Union, which was — at the time — the twelfth largest brokerage in America. I went in as a Partner and Chief Global Strategist and we bought seven more companies and built that business up in California, going from the twelfth to the fifth. At the same time, Compass was growing quite a bit, and was funded by Softbank, so I reached out to [Compass] and I basically got them to merge.
I saw the NAR lawsuit, which has been brewing for seven or eight years now, as a huge opportunity for a company to really move the needle around the conversation. The vast majority of the public doesn't understand why a real estate transaction takes so long and costs so much. In California, I started to become really focused on data. The US consumer has so much more data and when I came back to Canada, I couldn't believe how bad the information Canadians have [is]. Probably the worst of any G7 country in the world. We just don't have access to data and information that we should, so I was looking and had been pretty focused on real estate technology and how we need to reduce time and money, which adds value to the asset itself.
That's been in the background of everything I've done, probably, for the last 15 years. I've continued to seek out ways to do that and really focus on more of a wealth management model than a transactional model. And right now I believe everyone in the real estate industry is focused on the transaction. They're not focused on the homeowner or the asset itself.
What data is available to consumers in the US but not here?
For instance, if you pull up a property address for somewhere in Seattle, you can get almost all of the registry information, you can see who's owned the asset, you can see previous sales, how much it traded for, property tax information. Crazy enough, you can see information like the number of times that police officers have been called to that address. There's a lot of datapoints.
It's one thing to have a lot of data and information, but a lot of the time it's not verified, so it's really about getting verified data and information. In Canada, if you wanted to pull up a property address in Vancouver, it's pretty hard to get information on that asset. You either got to pay or you have to go to somebody in the industry who has access to BC OnLine.
So, my point there is that I think everybody keeps talking about affordability and housing, and the first thing we can probably do to help people is give them really good and accurate information at the time that they're looking to buy or potentially sell an asset. Also [important is] information related to the cost of the asset, because a lot of people get involved in real estate thinking that real estate is always a good investment, and it's not always true, right? So the true cost of ownership of an asset is incredibly important for people to make a decision.
This seems like an ambitious and grand goal. How do you plan on making it happen?
Well, I think it's by asking people for help, but a lot of people in the industry aren't necessarily interested in helping us achieve our goal, cause they're pretty short-sighted. That middle-aged stock broker that existed in 1993 who probably didn't add a lot of value to the transaction? They're gone. They're completely gone. E-Trade came in and people started to realize it doesn't need to take 10 to 15 days to trade an asset and I can get a lot of this information myself online, I can buy the asset myself, so the role of that stock broker had to change to much more of an advisory and fiduciary role.
With real estate, about 40% to 50% of transactions occur through death or divorce. A lot of people don't talk about this, but that's a highly emotional time, usually, and people don't make great decisions, and a lot of bad actors come into play and a lot of financial elder abuse happens. I've experienced it in my own family and I kept asking people, "Why hasn't anybody created a transparent platform that allows digital information to be provided to potential homeowners and fiduciaries so you can prevent financial elder abuse from happening?"
The other thing that happens a lot of times in this world is a lot of Canadians don't have a will, and if you don't have a will, it's a huge problem in the event of a death. I just saw this movie happen when I was at Sotheby's over and over again and I kept thinking, "There's gotta be a better solution here." So we built this first platform inside Sotheby's and it was called 1744 and the goal there was to create portfolios of data and information around an asset, cause we knew that if you did that, the asset itself actually became more valuable.
An example of that is collector cars. If you're buying a collector car and you've got a lot of detailed information on the asset, you'll get a premium of anywhere from 5% to 10% and if you don't have it, the asset gets discounted heavily. When you think about a real estate asset, the majority of information you're getting is from MLS or Realtor.ca, and a lot of the time that data may not be accurate. I just think that it's crazy that people are making one of the most important financial decisions you'll ever make based on data that can fit on a single sheet of paper. That, to me, is just nuts.
With Sotheby's, you founded the company. Now with Sutton Group, you're taking over a company that's already established. Was that part of the appeal for you, that it's a different kind of challenge?
Sutton revolutionized the business 41 years ago. They came in and they completely disrupted the entire industry with desk fees rather than [commission] splits. At the time, back in the early 80s when Block Brothers [Realty] was a big player, the splits between the agents [and brokerage] was 50/50. When Sutton came in, they were the first people to just charge you a desk fee and then the transaction fee, so you went from paying half of your commission to keeping 97% or 98% of your commission, so they grew very, very fast.
But in the past 10 to 15 years, the brand started getting a little tired, the ownership wasn't really investing in the business, and I saw an opportunity to acquire it. We're about to launch, in about two weeks, a new brand and brand identity, we're transitioning the business much more from a transactional business model to a wealth management model. With 200 offices and 6,000 agents, about $40B in transactions, it's a pretty good distribution for launching a digital platform that I think is going to change the way people manage and transact real estate.
The other thing that has been really beneficial to me is — as much as I didn't want to do franchises when I owned Sotheby's, now I see them truly as my partners. I don't have to manage those brokerages; they do. I don't need to know those markets, because they live in and breathe in those markets. They seem to be very excited about the ownership [change] and what we're bringing to bear.
The previous Sutton Group logo (left) and the new logo (right).(Sutton Group)
Is there anything else on your agenda for Sutton Group? Where do you wanna take the company?
Right now, it's to establish ourselves as a brand and truly transition it from transactional to wealth management. I'm not looking at any of the other brands or business models for real estate brokerages in Canada. I'm looking at financial service companies, wealth management companies, private banks.
Our goal this year is to reinvigorate the brand. We're in deep discussions with municipal, provincial, and federal people related to data and information and housing affordability, because everybody talks about affordability when they talk about housing and they never really talk about the role the government plays in terms of the costs. It's a huge part of an asset. People don't really understand, when you buy a house, how much of that dollar is paid out in taxes and permits. I think Canadians need to know that.
If you look at the cost of housing in the US and the cost of housing in Canada, it's dramatically different. Everybody knows that to be true, but nobody really understands why. And what I can tell you is that by providing a digital platform and giving people information, they're gonna start asking their municipal leaders, provincial leaders, and federal leaders why they're paying so much money either to manage or transact real estate.
We're also growing the brand. I've hired a new President and Chief Operating Officer. He's phenomenal. I've hired a new Chief Marketing Officer who's incredible. We're building a new website, we're launching a new app, and Cornerstone — it will be Sutton Group powered by Cornerstone — is the technology partner [for the digital platform.] I'm equally as excited as I was in 2004 when I bought Sotheby's.
Having spent time in the US and now being back in Canada, what do make of the NAR commissions settlement and how it may or may not impact Canada?
I feel like the industry is finally having to change. [As a result of] COVID, a lot of people had to figure out how to do things digitally. We had appraisals being done for properties that nobody actually went into. We had transactions of real estate where buyers and sellers never met. That revolution forced the industry to start behaving differently and in order to do that, a higher degree of trust needed to be provided when it came to data and information.
The lawsuit in the US, and [the one] ongoing in Canada, I think is a really good thing. Consumers need to be asking the industry "Isn't there a better way to manage and transact real estate?" And the answer is "Yes."
We're not in that space. Our agents, it's up to them to negotiate the fee they charge with their homeowners and we had the same mindset when I owned Sotheby's. I really never understood why the industry would set a standard where if you're a real estate agent and you've been in the business for two weeks, you're gonna charge me the same as someone who's been in the business for 20 years? The industry was protecting the business model and commission structure that made no sense.
Things like title insurance. People are starting to ask the question, "Do I even need title insurance?" And the answer is probably "No." That's a cost to the transaction. Appraisals in Canada cost $600 and take 10 days, and they shouldn't. It should be $100 and take 24 hours. All these little things — inspections, appraisals, title insurance, the taxes, commissions — go into the cost of an asset and also the timing of why it takes so long.
The Land Title Office is the one that holds all the information that allows that transaction to occur. With a stock or a bond, you've got six different intermediaries and they figured that out so you and I could've been buying and selling stocks on this phone call right now. And that's a much more complicated transaction than a real estate transaction. I'm 100% focused on figuring out how to do this better. That's what's got me excited.
