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5 harsh realities indies will face in 2022 (and how to combat them)

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It’s never been a more interesting or exacting time to be an indie broker. In November, Inman celebrates the indie by narrowing in on what growth tactics are working best and what tech is emerging that offers the best competitive advantage.

A self-professed tech geek, Erica Ramus is more than a decade into running a small but mighty indie brokerage. She has a master’s degree in real estate and is the author 10th Edition of Dearborn’s Real Estate Brokerage: A Management Guide.

Coming on the heels of the 2020 global pandemic, where we all had to learn to pivot and change how we did business to survive, many of us had a fantastic 2021, financially. Despite tight inventory and more challenges with learning to live with the COVID-19 virus, our office saw a record number of closings and the highest dollar volume in our 15-year history. 

As we look to finish out 2021, indie brokers need to look at industry trends to get ready to hit the ground running in 2022 and prepare for new challenges.

1. Raging hot markets eventually cool off 

The real estate market is cyclical. Newer agents who have never lived through a downturn may be unprepared for just how hard this business can be when the market moves from a seller’s market to a buyer’s market. Remember when a brand new listing didn’t generate dozens of showings and multiple offers in its first weekend on the market? 

We already see signs in my area of a market slowdown. Houses are sitting a little bit longer on the market, and we are seeing price reductions on houses that may have sold quickly last summer. When the market shifts, life will get easier for buyer’s agents but significantly more challenging for those who concentrate on listings. 

How to combat

Prepare your agents now for how to handle a shifting market. Explain the cyclical nature of real estate, and put a plan in place for how to transition from a seller’s market to a buyer’s market. Will your marketing efforts change? Will you put more or less effort into acquiring listings, or will you spend more money to bring in buyer leads? 

2. The real estate market is tied closely to the health of the economy 

Many of us brokers — and our agents — had a banner year in 2021. Those of us with investments in the stock market did pretty well, too. But just as the real estate market rises and falls, so does our economy. 

The government did a good job of propping up the economy in 2020-2021 during the pandemic. But boosted unemployment payouts, stimulus checks and mortgage forbearance programs are over now. The Fed has begun tapering its monetary policy pumping money into the system, negatively affecting the stock market rally. 

When there is uncertainty in the markets, this can filter down to home purchases. When people feel nervous — about their jobs, their nest egg or finances in general — they are less likely to move up to that next home. 

How to combat

I’ve read conflicting reports on whether or not we’ll see a rash of foreclosures, but I’m preparing my office to handle an increase in short sales and foreclosures. Several of my agents have earned their SFR designation from NAR in the past few months, and we are actively prospecting for distressed owners to get ahead of the curve.

3. Increased regulation and government oversight is coming 

This isn’t a maybe; this is a fact. The DOJ versus NAR showdown has been years in the making. The changes NAR voted on at the November board meeting are just a first step in showing the government we have an open and transparent system, to try to stop accusations of antitrust violations and anticompetitive business practices. 

Anyone who’s answered the phone call where the buyer on the other end has no clue how we operate or how we get paid knows this is a problem.

Buyer’s agents don’t work for free. Their compensation is baked into the home price (as in, the sellers price the home, factoring in how much they will pay the listing broker, who then will compensate a portion of that to the buyer’s broker). The buyers don’t get free representation, but they do get to pay for it over the life of the loan (unless they pay cash). 

Buyer’s agents should be educating their buyers upfront, explaining how they get compensated. They should always show them all properties that meet the buyer’s criteria and not steer them away from those properties with a “less than desirable” offering of compensation. 

If this was happening the way it should, the government wouldn’t be looking for skeletons in the industry’s closet. 

How to combat

Educate your agents now (if you haven’t already) on the proper way to handle the buyer representation agreement and not screen houses in or out of showing tours based on the offer of compensation. Make sure you add these instructions to your office policy and procedures manual if they are not addressed there already. 

The purpose of regulation is always to protect the public. It is not to protect brokers or agents or to prop up our commissions.

We’re going to see more rules and regulations, not fewer, in the near future. Make sure your agents understand and follow the law. It sounds simple, but we regularly see bad behavior among our ranks in practice, and the buck stops with the broker. 

4. Attracting and retaining talent will only get harder 

The number of Realtor members hit all-time highs in 2021, yet we saw record low inventory this year. That means more and more salespeople are running around chasing after fewer and fewer listings.

The winners in that scenario are strong listing agents and experienced salespeople who have a pool of past clients to fish in. Losers are the newer agents and weaker agents in general. 

Recruiting and retaining agents is the lifeblood of any brokerage. Maybe you don’t have ambitions to grow to mega-brokerage size. That’s fine, but you will still have turnover. Agents leave the business, they retire, and sometimes they switch firms. Unless you’re an office of one, you’ll need to recruit.

Over the past few years, we’ve seen the biggest franchises get even bigger, acquiring strong regional indies and buying competitors. With deep pockets, some will throw money at agents to leave you with sign-on bonuses and promises of splits you cannot compete with. Other new models offer stock options or residuals to recruit others into their ranks. 

How to combat

If you’re a strong, successful indie broker who produces well-trained, successful agents, other brokers will constantly recruit those agents.

How will you combat this and protect your agents from being recruited away from you? Promises of more money are always at the root of the pitch. What do you have to provide when you cannot compete by throwing more cash at the problem?

Know your value proposition, what you provide to your agents that they cannot get elsewhere. Maybe it’s company-generated leads or proprietary marketing.

What about training and systems and tools? Big franchises offer all of that, but that does not necessarily mean their training, systems and tools are better. I work with successful indie brokerages who have put together their own tech stacks that compete head-to-head with franchise systems. 

As a final note on tech as a big draw: Know that a recruiting broker might brag in the interview that their tech is top-notch and state-of-the-art. It sounds enticing to the agent, but in the end, tech is only as good if the agents use it. I’ve also seen brokers spend big money on tech tools for their agents that they never use. Shiny new tools are only as useful as the adoption rate

5. We are a threat to ourselves 

In NAR’s DANGER Report, the study found that we are our own worst enemy: Incompetent agents are a huge threat to our industry. We, as indie brokers, may be a threat to ourselves as well. The enemy is within. We are a huge segment of NAR’s membership, and yet we focus more on big-box franchises and what a threat they are to our survival than we do on what we have to offer agents and clients.

How to combat

First, know what the competition says about you. What are the other brokers using to entice your agents away? How are they getting new recruits? What are they saying to prospective clients to win the listing? How are they marketing their brand in your market to attract clients? What is in their listing or buyer packet? What is on their website to attract customers?

Second, spin it back at them. If someone claims to have a relocation or referral company that will bring buyers in from an international network, explain how we all have that power. All brokerages — indie and franchise — use the MLS system and IDX websites to push your listing out worldwide. Zillow evens the playing field, right? All listings end up there and are marketed on a level platform no matter who the broker is.

From an agent perspective, make sure your agents know and understand your tech stack. Hold classes on your CRM, and explain lead gen and how that works in your office. Some agents might not even know how much you offer. 

Make sure they understand everything you offer them, and you may need to audit the system for agent usage. Target those who are not logging into your CRM or who are not using your transaction portal. Why not? I know, it sounds silly. (I’m the broker and paying for it, so why aren’t they using it?) 

Besides recruiting, you need to spend time re-recruiting your current agents. Educating them about everything you offer and helping them learn the systems and tools is one step to keeping your agents close. Checking in with each one regularly and auditing their use of the company-paid platforms is one way to identify if someone may be looking elsewhere.

These are just five threats that I see on the horizon for indie brokers in 2022. Yes, they are threats, but that doesn’t mean you cannot be proactive and figure out how to turn them from threats to opportunities. The best thing you can do is believe in your strengths as an indie broker and get rid of the perception that you cannot compete with franchise brokers. 

Erica Ramus, MRE, is the broker/owner of RAMUS Real Estate. You can follow her on Twitter or LinkedIn.