Editor’s note: Inman News is seeking input for our "Roadmap to Recovery" editorial project, which focuses on the future of the real estate industry. Find out how to participate at Inman.com/Roadmap. This article features responses by real estate agent Tim White to a set of 10 forward-thinking questions. You can view this list of questions at: Inman.com/Reinventing — if we publish your responses you win a free pass to the upcoming Real Estate Connect conference (for new registrants only).
The following is an Inman News Q&A with Tim White of Century 21 Carole White Associates in West Roxbury, Mass.:
Q: Imagine how the real estate industry will be different when we recover from the current downturn.
A: Lean and mean. Those surviving post-downturn brokerages will begin the new era as slim and fit operators, as opposed to the fat and lazy "we’ve-had-too-much-to-eat-and-can’t-see-our-toes" behemoths of days long past. The next-generation brokerage model will see overhead as a four-letter word and do everything possible to reduce its profit-eating impact. For example, in spite of the overwhelming evidence against the effectiveness of print marketing over the past few years as compared to measurable online marketing strategies, many brokers still earmark 70-80 percent of their marketing budget to print, and only about 10-15 percent to online marketing. There has been an inverse relationship between money spent on marketing platforms and return on investment with the effectiveness of Web marketing generating far more leads than traditional print marketing and at a fraction of the cost. We should see a dramatic reversal here once the market recovers. The market will recover, but I don’t think the same can be said for the print news industry.
Q: How will the business model or business practices of the title, brokerage or lending industries change in the future?
A: Brokerage business models are ripe for a seismic reformation. Starting at the top of the food chain, I think you may see many franchised brokerages move away from their current affiliation — no matter which one’s flag they are currently waving. In this business, we are all about our "value proposition," and the value proposition being offered by most major franchisors has not changed much in the past 10 years or longer. Just as we are on the cusp of the "consumer-centric" era wherein consumers are asking, "What’s in it for me?" and where they have infinitely more choices available to them ("choice" is the real "killer app" of the Web), brokerages must adjust their value propositions to meet the new consumer expectations. The same dynamic change must occur at the franchisor level as well or they will lose many franchisees, I believe.
Here’s a case in point: Many franchisors saved a boatload of cash in converting many of their printed materials to electronic ones, not to mention all of the administrative paperwork they no longer had to shuffle and pay for by directing franchisees to file everything electronically. This saved franchisors millions each year, but do you think they passed those savings onto their beloved franchisees? Those franchisors that do not pass along cost savings as a result of efficiencies brought about by advances in technology are not putting the needs of franchisee first, and those practices will soon come to an end. The franchisee, like consumers, will expect more and they will leave if they don’t get it.
At the brokerage level, expect to see more in the way of "virtual office" models as opposed to brick-and-mortar space. Agents might be rewarded with higher commission splits if they stay out of the office and in the field, where they belong anyway. Also, advances in mobile technology are making this scenario much more feasible and attractive.
Agents will have to understand that it’s no longer about them, but rather it’s about the consumer. Demonstrating and delivering real knowledge, perhaps through the use of multimedia platforms and (listings) distribution systems, will be a great way to show consumers how much of an expert the agent really is.
In summary, I think you’ll see a big shakeup through the franchisor-franchisee-agent-consumer food chain. My money, and focus, will be directed at satisfying the needs of the consumer.
Q: Will the industry be regulated differently in the future? If so, how?
A: As this relates to brokerage, no I don’t think so. Not much, anyway.
Q: What must the industry do now to prepare for this new direction?
A: Focus obsessively on the consumer. The broker-centric era has been over for a while; the agent-centric era is on the decline and will soon come to an end as well. The new era will focus almost entirely on satisfying the needs of the consumer, particularly as it relates to providing the consumer with more, better, easier choice. If a broker is not doing everything in his or her power to make consumers feel like they are the most important cog in the transaction wheel, the consumers will simply click away from that broker and click on a broker who will provide them with a demonstrably higher level of service and selection.
Additionally, demonstrating your knowledge of local markets, community, and negotiation and marketing skills will become essential. Consumers can and will do all kinds of research online before they contact an agent or broker. If brokers and agents can’t prove to the online consumer that they are experts in what they do, then it’s game over for that agent or broker. Multimedia presentations that underscore an agent’s expertise and service quality will become more and more important.
Q: What technology trends will change the industry in the future?
A: Brokers must begin to see themselves as media companies. Social publishing tools and new media platforms allow brokers to deliver their messages in a much more compelling format that goes far beyond the reach and impact of any print marketing campaigns. In fact, the term "marketing" is inadequate for this future trend. The ability to produce, publish and distribute your entire value proposition — to communicate directly with consumers your unique voice, knowledge and experience — is far more powerful than a mere marketing campaign in the local paper or in a general direct mailing. Brokers and agents will experiment more with multimedia of all types (video, text, photos, visualizations, etc.) in an attempt to deliver a richer and more authentic consumer experience. Many brokerages will create their own media channels in an effort to become an authoritative voice in the real estate space in their geographic area. They will win business by showing consumers who they are and exactly what they can do for them, in a very transparent way.
Brokers will begin looking at their agents as knowledge assets that can be leveraged in this new media landscape to great effect. They will see the value in training agents on how to be beat reporters, keeping an ear to the ground and an eye on the market, and then sharing their knowledge and experience with the world — perhaps even in real-time, eventually. Brokers will teach agents how to use video or how to blog about local real estate matters. Brokers and agents will collaborate, share and distribute the workload evenly for the common cause of being the hub of all local real estate conversations. They will network with the community like never before and build relationships of enduring value, and they will stay in continuous touch with their community using social platforms to bring people together.
Ultimately, the conversations will extend beyond real estate issues and expand into coverage of local lifestyle topics. We will move beyond just talking about ourselves and our inventory and begin demonstrating what we know about the community (parks, schools, transportation, zoning, developments, political issues that affect real estate in general).
Q: What skills will the real estate agent of the future require?
A: Agents will need an abundance of social media and publishing skills as well as an understanding of how distribution networks work and how to leverage these networks to obtain maximum exposure for the agent and the agent’s inventory. Agents and brokers will need to see themselves as "creators" of original real estate-related content specific to their local market.
This will be a hard switch to turn because the average age of Realtors is over 50 and, as such, they are used to being the passive recipients of information fed to them by the mainstream media rather than hunters, gatherers, producers and publishers of original content that showcases their knowledge and talents. Agents need to embrace the idea that they are the broadcasters of their own content. Think real estate studio …
Q: How will real estate advertising dollars be spent in the future? How will real estate marketing be different?
A: The easy answer would be to say that it’s moving online, but that wouldn’t be the full answer. The "marketing budget" will morph into covering expenses related to producing, publishing and disseminating high-quality information about the company, the agent, the inventory and the community. Marketing will become messaging: the coordinated, continual, collaborative sharing of the company and the agents’ entire value proposition over time. The marketing spend will cover the creation of building and maintaining media assets such as video production, network-building, partnerships and the creation of hyper-local niche real estate channels.
Some print will still be used effectively, but mostly for branding purposes.
By the numbers, I predict the ad spend will go from the present-day ratio of 80 percent print and 20 percent online to a future spend of 80 percent online and 20 percent for print. (Including production, distribution, etc.) Basically, there will be a complete reversal of print ad spend to online ad spent ratios. Analytic measuring of ad-spend effectiveness will become routine.
Q: Will sales activity in your local housing market contract or expand in 2009? Will national sales activity contract or expand?
A: In Boston, the housing market will contract but probably not as much as the national housing market will.
Q: What will drive the expansion or contraction?
A: The contraction will be driven by a shrinking economy, tight credit markets and tougher lending standards.
Q: Will local home prices decrease, increase or remain stable in 2009? 2010? Will national home prices fall, rise or remain flat in 2009? In 2010?
A: In Boston, prices will most likely continue to decline through 2009 and begin to stabilize in 2010. This should be true for the national housing market as well.
What’s your opinion? Leave your comments below or send a letter to the editor.