Real estate brokers must seize the reins
Essay: Roadmap to Recovery
By Inman News, Thursday, December 4, 2008.
Editor's note: This guest essay is a part of the Roadmap to Recovery editorial project, which focuses on the future of the real estate industry. Essays should be 400 words or less and should detail your views on how to reinvent the industry and revive the housing market. Authors of essays published in full will get a free pass to the upcoming Real Estate Connect conference (for new registrants only), and the author of the top essay will receive $500. Send your essays to future@inman.com.
By JAY TERESI
You would think that after the tumultuous drop in real estate values and sales, the influx of national lead aggregators, and the negative view of agents by consumers, that something would change in the real estate model.
Unfortunately, several factors have led to the status quo.
First, there is the agent-broker mindset that listing information is private property. This (mindset also extends to) the local multiple listing service, since it is made up of regional broker groups. And this fundamental mistake opened the door to many of the industry's current troubles. The consumer became angry over the protectionism and began looking for other sources of information.
Entrepreneurs saw this gap and sought ways to provide the information for free and ultimately capture leads to sell as a revenue source. Do you see where this has led? Consumers saw less value in professional agents, which led to lower commissions, and broker gross revenues deteriorated due to referral fees to national lead aggregators.
Second, agent control of the brokerage business has led to higher splits (in favor of agents), lack of brand consistency, and falling profitability. Much like the current situation with U.S. carmakers, why would you continue to prop up a failing business model? Who works for whom, anyway? The reality is that this never-ending downward spiral of brokers' fear of losing agents vs. reduced income and profits does not allow for restructuring and investing in the future of the business.
The other tenet of this point is that agent education in the use and value of new technology and the understanding that this will increase their productivity is vital in getting them on board and working as a team under a local brand.
Third, and no doubt in sequence to the previous two points, brokers have failed to adapt to the consumer demand for access to free information -- specifically in the technology realm. We all know the National Association of Realtors estimates that upward of 86 percent of consumers begin their home-search online.
Yet only the lead aggregators as a whole have utilized the available technology for lead capture, contact management, and ultimately, some customer loyalty.
Many industry leaders point to the real estate office of the future as a more virtual model. Maybe so, but most definitely the incorporation of Web-based, consumer-friendly platforms with back-office lead management and monitoring will be the backbone of any future model.
Brokers who see the value of this retooling will reap the benefits of cost controls, budgeting efficiencies, and to the extent possible more predictable results. As I have read many times and believe, anything you can measure you can manage.
New focus on these efforts by brokers will build consistency in brand representation, agent activities and consumer interaction. Done properly this will be paramount to regaining profitability and adding value to the transaction, which the consumer may find welcoming.
Jay Teresi is broker-owner at FWT Realty LLC in New York and is former director of regional development for Weichert Real Estate Affiliates, a national real estate franchise company.
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Submitted by Catherine Read on December 4, 2008 - 5:05am.
["agent education in the use and value of new technology and the understanding that this will increase their productivity is vital in getting them on board and working as a team under a local brand."]
All the points made here are excellent and this one is very key. In addition to providing agents with a brand they can use to effectively market themselves (consumers are still brand conscious), education and training is a core value proposition brokers offer agents. Brokers have to provide something of real value to agents in order for the broker-agent model to continue working. And consumers want a higher level of service because they are increasingly more sophisticated themselves. Creating a "brand promise" when the company is managing independent contractors relies heavily on effective training.
Catherine S. Read
Creative Read, Inc.
Submitted by Rob Aubrey on December 4, 2008 - 5:07am.
As for listing information it is private information, however I agree that putting it out there makes business sense. But it is not a public utility.
Lower commissions were due to the longer than noremal seller's market. Commissions cycle all the time, lower in a seller's market and higher in a buyer's market. Because of the unprecedented seller's market it was led to believe that an agent's only value was to list the home. Well during the boom, that was correct. Now that the boom is over sellers are glad to pay a veteran professional more money to get the home sold.
As for broker brands. I agree that they are going out. Real Estate has always been a local business ran by local agents regardless of the brokerage. If polled not many consumers would have chosen their agnet because of the brokerage.
Submitted by Lenn Harley on December 4, 2008 - 6:04am.
Brokers and agents are giving so much away free now, many consumers have convinced themselves that they can manage real estate transactions without an agent.
Fact, IMO, finding the home that a consumer wishes to buy is the easiest part of the home buying process.
However, that information that the consumer wants for free is information compiled and managed at great expense by agents and brokers.
There is far more FREE information, innacurate information (property value), etc. on line now. If the real estate critics had their way, buying and selling real estate would be like buying and selling used cars, without a salesperson.
That's fine too. Home owners and buyers are free to do that as they wish. However, the real estate industry should not be expected to finance movements that seek our destruction.
Lenn Harley
Broker
Homefinders.com
http://www.homefinders.com
Submitted by Adrian Sherwood on December 4, 2008 - 6:50am.
A new class of media will drive the brokerage of the future.This media will:
1.drive down costs
2.help agents build their brand
3.save loads of time
4.eliminate need for agents to "own" information
5.have a built in differentiating factor
The reason the "private" mindset has prevailed is because there is no way for agents to separate themselves based on performance. Information availability is not the problem. Procedural predictability is the problem. Lead resellers used one question "Want to know what your home is worth?" to rake in millions from agents. To level the playing field just alter the question slightly " Want to know how to increase the value of your home in West Houston?" This question accomplishes several things. First, it cannot be copied by anyone with a wallet and a website. Second, it suggests you have specialized knowledge. Finally, it gives you permission to continue dialogue with someone that wants that dialogue.
There are basically three modes in RE:
1 Hire me (leads)
2.Pay me as a pro( performance)
3. Keep me around(recommend or rehire me)
Mode 1:
The CMA is completely predictable. A group of people that understood RE well got together with a group of people that had big bucks to create national ads running "Want to know what your house is worth?" and it worked. The same thing is happening to listing information.
Mode 2:
Syndication could relegate agents/brokerages to second class status forever. Why pay you thousands when I can upload a picture to www.whatever.com myself? Does sending a picture to 25 different websites amount to increased exposure for a particular listing? In my opinion, NO. What it amounts to is ( more listings = higher ad fees =higher revenue for website owner). Just because you're not paying out of pocket to syndicate your information doesn't mean it's not costing you. People pay for performance regardless of the industry.
Mode 3:
Still safe. But with the first two under siege wil it matter?
Submitted by Robert A. Hulme on December 4, 2008 - 8:23am.
Past Roadmap to Recovery editorials have focused on Brokers educating their agents, I continue to believe that this area will be where the team concept will prevail if done successfully. Our Local Board UCAR is also very good in supplementing what the Brokers teach to help make our agents more valuable to their clients.
After learning how to properly represent our buyers and sellers, I believe that technology is crucial in maintaining our edge. As Jay mentioned, an NAR survey says that 86 percent of Home Buyers begin their home search online, this helps to reinforce the importance of Realtors learning how to market online with effective personal websites that are able to communicate their mission statement to the consumer. But that isn't all, they need to have a website that allows the consumer to easily communicate back and provide an easy lead capture tool. Recently, our broker asked me to teach our agents at least the fundamental of Online marketing. I think we need to all chip in, to make sure every one of our fellow Realtors are successful, for the Broker Model to succeed.
Robert A. Hulme
Realtor, GRI, e-PRO
Prudential Utah Real Estate
www.UtahCountyRealEstate.us
www.LoansByRobert.net
801-885-2586
Submitted by Denny Bowler on December 4, 2008 - 8:52am.
Yes, the Internet has significantly changed the playing field that Agents find themselves on when playing the real estate game. In my recent experience with working with Buyer Clients, 90+% of them provide me with the mls #'s of listings they have seen on the Internet and say "we really want to see these listings". It is rare (less than 5%) that the home a Buyer decides to purchase is one that they found themselves on the Internet. It was not until they "hit the ground" with their Agent that they saw multiple houses that met most, if not all, of their "must have" search criteria.
Another key point to remember when looking at whether the value of an Agent is eroding because of the Internet is what happens between the time that a purchase contract is fully executed and the time the deal closes. As all Agents well know, this is where having a seasoned professional can make or break a deal. This is not something that can be quickly picked up by a Seller/Buyer who happens to read a couple of articles on the Internet. I do not see this "value-added" factor going away any time soon.
Yes, many things change, but many things stay the same. The Agents' challenge is to focus on those value-added factors that our Internet savy clients still perceive as our area of expertise. Excelling in these areas will provide the referrals and repeat business that keeps us profitable.
Submitted by christine baudin on December 4, 2008 - 1:31pm.
My opinion as a homeowner and buyer/past seller is that agents are in the most part no longer necessary for the savvy buyer. Real estate agents/brokers have a monopoly on the market and luckily it is starting to change with craigslist and flat fee mls listings. I really don't see what benefit the agent has besides showing a house to me (even though an owner could most likely do the same - especially if they knew they could keep 30k-60k in their pockets if they did). I hope that the internet will pave the way for homeowners to stop paying outrageous fees for very very little work. My experience with home buying and selling is that I cannot trust an agent. He/she is in it for the sale and the huge financial reward. I have had agents recommend unethical things from inspectors that work with them to ensure no problems during inspection (even though when we sold the house there were numerous problems that our inspector didn't see), to recommending overpriced homes. All just to get the commission. An agent may say that the money is not that huge if you take into account the time it takes for them to show all the homes and some people don't buy but we buyers and sellers would be more than happy to arrange showings without agents. We definitely would rather save 60k, wouldn't you? A monopoly, but hopefully not for long, thanks to the internet.