Editor’s note: This special four-part series will explore who controls the average real estate transaction, who or what is challenging and changing that central role and how it impacts the industry and consumers.

Editor’s note: This special four-part series will explore who controls the average real estate transaction, who or what is challenging and changing that central role and how it impacts the industry and consumers. (See Part 1: Realtors have the powerPart 3: Web pushes realty agents out of spotlight and Part 4: Lenders woo and sidestep real estate agents for customers.)

A lot of hands go up when home buyers and sellers start asking questions. And those hands are grabbing for their business. Traditional brokers say agents are not always the first point of contact for consumers these days, but they want to ensure that the agent will ultimately remain at the core of the real estate transaction.

Judith Clausen, broker-owner of Buyers Advantage Real Estate of Metro Denver, said agents must stay on top of technology in order to stay relevant to consumers. Without technological savvy, “real estate agents will not be the first point of contact for consumers. Web sites will be,” she said.

“There is more competition now than ever before for the consumer’s first point of contact on the Internet. Mortgage companies, third-party aggregators, auction sites, other agents, newspaper Web sites, new homebuilders’ Web sites, and the list could go on and on,” she said. “My greatest competition is mortgage sites and other technologically savvy agents. But so far there has been enough business to go around.”

Who controls the average real estate transaction? Take a survey.

Gene Collins, broker for Collins & Associates Real Estate in Florida, said he also sees growing competition for the first point of contact in a real estate transaction. “More and more industry players are competing for that position,” he said, naming LendingTree.com as one example. “They’d like to get a piece of that real estate agents’ pie.”

He added, “That is the single biggest challenge for real estate agents today – to be that first point of contact. Another trend we see today is the huge Web sites…that go trolling for buyers and sellers, then capture the name and sell that to us.”

Real estate agents must remain relevant in consumers’ minds by staying in regular contact with their customers and developing long-term business relationships, he said. “Realtors have to look at clients and customers as more than a one-shot deal. Realtors have to get better at keeping in touch with people.”

Some brokers are asserting their relevance in real estate transactions, and agents in some cases view this as a challenge to their central role in transactions. But agents haven’t been following up on all of the leads they receive and new business has been falling through the cracks, in some cases, necessitating the move by brokers, said Jon Cheplak, a member of The Real Estate Recruiters consulting firm and a former executive for Prudential, GMAC and Better Homes and Gardens.

“What the broker is trying to do is capture that business that they may not be capturing. This has created a situation where brokers have had to step in, to be a part of that managing funnel – managing the leads, incubating the leads,” Cheplak said. “Unfortunately, agents feel that there’s a battle going on at times with the broker.”

It would be a dangerous precedent for a company to attempt to generate all leads for agents, Cheplak said. “If we move into a space where the firm is the first point of contact we’re going to create order-takers,” he said. “I think there needs to be a contribution by both – the agent needs to generate leads and the company needs to generate leads. There needs to be a team effort.”

Agents are still firmly lodged at the center of real estate transactions, but brokers need to have elbow room, too, said Duane Sauke, broker-manager of RE/MAX of Rochester in Minnesota. “There is no doubt that (some) brokerages are making every attempt to move into the space of ongoing customer contact or prospecting,” Sauke said. “Brokerages are making a more overt effort. This just has to do with brokerage profitability vs. agent profitability.”

Profit margins for brokers have generally been on the decline, Sauke said, and he expects that this trend will inevitability reverse in order to sustain brokerages. “Essentially it has to move to the other direction,” he said. “Brokerages are trying to create a placement in the procurement (process), and thereby be able to get some of the money.”

Some brokers are using third-party lead-generation systems, and others have in-house systems for their agents to use. Real estate giant Prudential acquired eRealty this year, for example, growing its ability to generate in-house leads and referral fees while providing a wide range of listings for consumers.

Clausen a former Keller Williams Realty agent who formed her own independent brokerage, said corporate brokerages can restrict agent freedoms, and restrictive policies by brokers could lead agents to go elsewhere. “My own view is that real estate professionals are an independent bunch, and the kind of corporate control currently being exerted by some of the large brokerages will drive the most successful agents away.”

Steven Kropper, founder of Domania.com, noted in a 2003 analysis of real and imagined threats to residential real estate brokerage that “various lead generation ventures are inserting themselves at the start of the home-buying process” but agents “remain in control of the middle and end of the transaction.”

The threat to agents’ position at the center of transactions, Kropper stated, is driven by consumers’ demand for “direct unfiltered access to listing details…Brokers who provide the information that consumers demand will own that customer. Growth-oriented brokers will give consumers access to rich information.”

Stefan J. Scholl, an exclusive buyer agent who owns Buyer’s Broker of Northern Michigan, said that his company generates its own leads through Internet marketing. “In my opinion, while paying for leads may result in a short-term boost to an agent’s bottom line, long-term success and security can only be insured by investing in one’s own lead-generating pipeline. I prefer maintaining my own company’s position as the primary point of contact with consumers.”

Realtors, individually and as a national association, have battled against other perceived threats to their central role in real estate transactions, such as the potential entry of banks into real estate brokerage. The emergence of new Internet technologies in the industry has not, as doomsayers said, emerged as a substitute for real estate agents or usurped their role in transactions.

Sauke said that many residential real estate brokerage models have come and gone, and the most successful models appear to be those that are centered on face-to-face interaction with customers. “I am still seeing that the successful models are using a human contact for the critical and high-level thinking parts of that service,” he said.

There are definitely more business models available to consumers these days, he said, and this “has caused lazy service models to become better service models, has caused old-fashioned systems to adopt new methodologies and new efficiencies. All of those things have benefited the consumer.”

Referral from friends and family is still a powerful force in agent selection, Sauke said, and he doesn’t expect that to change much. “We are a society that likes to share and test what we are going to do vs. what someone else has done.”

According to the latest National Association of Realtors survey of home buyers and sellers, about 44 percent of respondents who bought homes and 40 percent of home sellers said they chose their agent on the basis of a referral by a friend, neighbor or relative. Another association survey, released in 2002, found that more than half of home buyers and sellers used the same agent previously or was referred to the agent by a friend, neighbor or relative. And a similar survey, released in 2000, found that about 34 percent of buyers found their agent through the referral of a friend, neighbor or relative.

The 2003 survey reports that real estate agents are still the first source through which buyers learn about the home they purchased, and 41 percent of buyers report that they first learned about their home from an agent. Yard signs are in second at 16 percent, and 11 percent of buyers said they first learned about their home on the Internet.

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Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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