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As billions of dollars of venture capital pour into startups seeking to revolutionize the residential real estate business, independent brokerages can stay competitive by seeking out solutions that keep agents focused on their clients — even if it means becoming software developers themselves.
That’s the perspective of Miami-based indie broker Enrique Teran, and LeadingRE executive Staci Cowell, who shared their insights Thursday on an Inman Connect New York panel, “Industry Trends, Challenges, and Technology to Watch.”
According to the Center for Real Estate Technology and Innovation (CRETI), venture capital funds invested $32 billion in real estate tech companies in 2021, with 49 percent of that funding going to companies that are focused on residential real estate.
What that means is independent brokerages are becoming “more and more nimble, and we don’t have to rely on a franchisor anymore,” said panel moderator Sarah Richardson, founder and CEO of Phoenix-based Tru Realty. “We’ve got $32 billion coming into the marketplace. We’re gonna have some options, right?”
Indie brokerages are investing not only in agents, but also in proprietary tech platforms developed by startups to digitize the transaction process, said Cowell, vice president of business solutions for Leading Real Estate Companies of the World, an affiliation of 550 independent companies in 70 countries.
“I don’t think it takes away exactly the agent’s role,” Cowell said. “It just pivots a little.”
With millennial clients in particular, “It’s no longer the job of a Realtor to spend time driving around checking 20 or 30 houses out,” Cowell said. “They know what house they want, they know the benefits and the features … but they really don’t know about the transaction process.”
When shopping for technology solutions, Cowell said indie brokers basically have two choices.
“I think it’s the all-in-one suite versus the best in breed. I don’t think one is better than the other,” Cowell said. “I think it’s ‘Do you go to the Cheesecake Factory and get some average food — but you can get anything — or do you go to a fine Italian restaurant and get high quality services there?’ I think we have to look at the consumer and identify which is best for them. And how to be efficient with that.”
Teran, who in addition to being a co-founder and principal of Avanti Way Group is the president of the Miami Association of Realtors, agreed with Cowell that technology solutions should be built with both the agent and client in mind and simplify the process. But to avoid being disrupted, Teran thinks Realtors will have to build their own tech.
“Ultimately I feel that the industry is almost fighting for its survival,” Teran said. “A lot of times we’re letting innovation come from the outside in.”
If that’s the model, he said, “somebody’s going to obviously take the narrative of our storyline, right?”
Last year, Miami Realtors’ MLS formed a joint venture with three other multiple listing services to acquire to acquire real estate software company Remine, the provider of an MLS platform whose components include a front-end public records and search tool.
“That was a huge purchase, and no MLS board had ever gone out and purchased software, to start innovating from within to control data and what not,” Teran said.
He sees a similar big shift coming in the brokerage world.
“We’re starting to invest in technology platforms [because] the off-the-shelf platforms that you see out there are not made for you, exactly,” Teran said. “You’re adapting your business to it.”
If becoming a software developer sounds intimidating, Teran, who has a background in IT, insists that it’s the best way to give agents the tools that they need.
“I think it’s very interesting for all the indies that are here, to build technologies has become so cheap now,” Teran said. “That’s something we don’t realize.”
Building your own proprietary technology can also help indie brokerages stand out from the competition, he said, by creating a value proposition that helps recruiting. Avanti Way has 1,300 agents, and the proprietary software the brokerage has developed to improve the real estate deal process is helping the company add about 60 agents a month, he said.
“They don’t care about the commission splits, they don’t care about the cash. They really care about the value that you bring, and if there is no value, then we go and fight on the money,” Teran said. “That’s the wrong fight to be in — we’ve got to be in the value proposition guys.”
If real estate brokerages fail to invest in technology and instead continue to compete for agents by offering more generous commission splits, they’ll be “giving away the farm” to tech providers, he said.
“If you look at any industry, what propels it forward and [fuels] innovation is sustainability,” Teran said. “If nobody’s betting on sustainability, how do we keep an industry going forward? And if you look at the commission structure from 1980 till now, most of the money goes to the agent. So who is investing in the industry right? Do we have enough money as a brokerage to be able to invest?”
Cowell said finding the right technology solutions can also help with agent retention.
“I see a lot of challenges with agent burnout,” she said. “You know, we’re in an Amazon Prime now mentality, where things needed to happen yesterday, and that’s trickling down,” with agents and their managers facing increasing demands from clients.
At LeadingRE, Cowell said, “What we’re trying to do is help navigate that with our management teams and say, ‘How do we simplify the process? How do we help agents build their business plan differently and make it more condensed? So instead of having a business plan for a year, let’s do a 12-week year and have a goal each each week, you know, for those agents to avoid burnout — and management burnout.”
Teran said technology is an important component of managing agents at Avanti Way. The brokerage has built a customer relationship management tool that not only keeps track of clients, but also properties within the agent’s farming area.
“You can sit down with the agent and you have their numbers. How many households have you contacted? How many listed with another agent?” Teran said. “We’re spending a lot of the time with the agents to make them more productive, and hopefully not cause them to burn out but produce more.”
Teran thinks using MLS data to generate predictive analytics on agents is the wave of the future.
“There’s a lot of gold nuggets, if you will, within that data,” that can be mined to learn why agents move from one brokerage to another, for example. “We have that data and you know that’s a goldmine for the brokerage side.”