Broker co-ops could cut costs
Roadmap to Recovery Q&A
By Inman News, Friday, January 23, 2009.
Editor's note: Inman News posed questions to our audience as a part of the future-focused Roadmap to Recovery editorial project. Click here for more details.
The following is an Inman News Q&A with John Rainville, a Pennsylvania real estate broker:
Q: How will the real estate industry will be different when we recover from the current downturn?
A: The new landscape of real estate brokerage is starting to emerge in several markets. Gone are the days of a firm having multiple offices to serve one county. I see the industry moving to one regional office that services all the adjoining counties. The agents are able to do more via the Internet, keeping the needed "office" to as small as two rooms -- a conference room and a work room. Contracts can be done electronically, reviewed by a manger, transmitted vie e-mail and signed with digital signatures and delivered back to all parties with the click of a button. It is imperative that the "new" brokerages utilize technology and group buying power to help agents reduce their business expenses. Overhead is the "devil" that all firms will need to keep in check. Cooperatives of brokers may emerge for cost savings on staff, advertising and even office space.
Q: How will the business model or business practices of the title, brokerage or lending industries change in the future?
A: On the brokerage side I see less personnel and more outsourcing of services to contain costs. For example, (companies may set up a) "call center" to answer the phones for all offices and then transfer the caller out to the agent in the field, with follow-up e-mail messages. This allows phones to be answered live, 24/7. The commission structure for now has been set with the advent of all of the 70-30 broker-agent splits offered in the business. The "free" ride (limiting an agent's sharing of commissions with a broker) after an agent hits a certain plateau will move or disappear altogether.
Q: What technology trends will change the industry in the future?
A: The adoption of broadband will continue to allow us all to do more from our computer. Webcams and videos of properties will continue to drive the experience the younger generations are expecting.
Q: What skills will the real estate agent of the future require?
A: Strong computer and sales skills.
Q: How will real estate advertising dollars be spent in the future? How will real estate marketing be different?
A: The Internet for now will be the leader in advertising revenue budget allocations. The vast improvement in targetable direct mail will also see a large rise as it adopted by the real estate industry. Why send a "just-listed" card to a geographically-targeted area when you can target a better-refined demographic who may actually purchase the property?
Q: What will drive the expansion or contraction?
A: First-time buyers will drive the recovery in 2009.
John Rainville is broker for BrokersRealty.com in Camp Hill, Pa.
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Submitted by REALonomics .net on January 23, 2009 - 7:10am.
John, you are correct on all points and for more than a decade we have also predicted the demise of the vertical real estate market (see www.ePartnerUSA.com) in favor of open markets where brokerage firms disperse the centralization of their market in favor of penetrating multiple markets to create new revenue streams.
The real estate industry continues to evolve from one economic model to another and as it evolves the profitability has eroded or, in some cases, disappeared altogether. See our post and presentation at:
http://realonomics.net/2008/05/realonopoly-does-anyone-still-wanna-play-...
We are not completely certain that first time buyers will or can drive the recovery, however, given the new, increasingly stringent barriers to qualification being erected by banks who have now discovered its safer to take the government handout than it is to loan money!
It's more likely that the recovery will be driven by inventory declines fueled by private investors coming back into the market with cash and potential returns in excess of 30%.
Please download a FREE copy of the Ten Commandments of the New Real Estate Economy at:
http://epartnerusa.com/presentation.htm
Whatever the recover means, it won't mean "business as usual" that's for sure.
Donald Teel - Founder
e-Partner
www.ePartnerUSA.com
REALonomics
www.REALonomics.net
877-380-1000
Submitted by Gary L. White on January 23, 2009 - 8:08am.
Gary White, Broker
CRS, GRI, ABR, ePro, AHS
FlexIt Realty
www.FlexItRealty.com
Business models of big buildings, warehousing agents and high overheads are going to be a memory...technology, service and the pressure being exerted on lower commissions is going to force a business model change. I have created transaction centers with a low overhead model designed to meet the needs of clients and agents. The traditional brokerage is having extreme difficulties feeding the elephant they built and it isn't going to take peanuts to make him go away. The economy, foreclosures and short sales will drive many out of business with agents seeking other forms of employment. The local MLS groups will have to make changes too. The Internet has changed many business models...the email and Electronic Information Act has further impacted the ability to communicate and close without having large offices or meeting centers.
It will be interesting, those who adapt will flourish and those we seek to maintain their old ways will probably see themselves with less market share or become irrelevant.