At the National Association of Realtors’ midyear legislative conference, the strategic-thinking committee unveiled The Danger Report, the product of 70-plus interviews with industry CEOs and nearly 8,000 Realtor surveys. The focus was to identify the greatest potential threats to the status quo of the real estate industry, listing the top 10 dangers to agents, brokers, NAR, state/local Realtor associations and multiple listing services.
The 10 dangers to agents can be roughly divided into three categories: changes in the role of the agent, changes to compensation and changes to the structure of the real estate industry.
Change to agent’s role
Four of the threats to agents involve potential changes to their role in the transaction. Three of them (decline in the relevancy of agents, the agent-centric era ends, and the agent is removed from the transaction) would result from changed consumer perception of the need to hire an agent on either side of the transaction. However, the reality is that operations are becoming increasingly complicated, while the cost of mistakes is becoming greater.
An increase in “agent-free” transactions would certainly lead to a rise in transaction-related lawsuits. A few local news stories about buyers suing sellers over inaccurate property disclosures will do more for the public’s perception regarding the need for a Realtor than NAR’s entire branding campaign to date.
I believe changes to the agent’s role is more likely to come as the result of regulatory reform in favor of the customer. When the government gets done with the reform of lending and closing services, don’t be surprised if real estate agents are next on the list.
The other threat related to the change of the agent’s role was also ranked the “greatest” threat to the agents: masses of marginal agents destroy reputation.
This is nothing new — association membership soared during the real estate boom of the mid-2000s and dropped almost as quickly as housing prices during the decline. Good agents have always had to fight to differentiate themselves from the inept masses, and I believe they will continue to do so. At some point the market will slow down, and the natural and needed “thinning of the herd” will occur.
The good news for agents is that while more and more agents enter the field, new tools are also emerging to help separate the true professionals from the rest. Agent ratings and reviews are being used by more and more consumers. Combining this with the individual sales statistics, so that a consumer can see exactly how many deals an agent has closed, and in what neighborhoods, will help agents who embrace this change not only weather the storm, but emerge stronger and more profitable.
Stay tuned for Danger Report Parts 2 and 3.
John Blom is a managing broker for The Hasson Company. You can follow him on Twitter (@johndblom) or LinkedIn.