How Much Technology do Brokers Need?

July 1, 2001

Brokers everywhere are being inundated with technology business solutions by eager Internet vendors. The attraction for many brokers is coupling client, office, salesperson, and transaction management efficiencies with lead generation.

But some tools, such as multiple Web sites and transaction management platforms, may be solutions in search of a problem, say some. As a broker, how do you know where to put your money?

According to Steve Murray, co-founder of research group Real Trends, a lot of brokers are making huge technology investments to harness the power of the Internet, but they are only willing to make such investments if they can see an immediate benefit for their businesses.

"A software may be neat, but the brokers will ask themselves, "Will this help me improve my business?"" says Murray. "If they can't answer yes, they will pass. The other thing they are looking for is what will help their salespeople give better service. It has to have a point of difference like PDAs and cell phones. They want an advantage, like my salespeople have this or that and yours don't. That's what makes brokers adopt a technology."

Murray points out that the climate for e-marketing has changed radically this year, with many service providers failing to prove their business models. Companies like Realestate.com, Homes.com, and iProperty.com, with more than $30 million apiece in venture capital at the beginning of 2000 were on the ropes by Spring 2001. "We had an overabundance of these companies jumping into the market," explains Murray. "They thought if they can just get 10 percent of 750,000 agents, they'd get rich quick, but there were just too many of those."

Brokers are doing it for themselves

That's why some brokers were either reluctant to jump in or they may have bought some technologies only to feel that they got burned. As service providers like Homestore, HomeSeekers, and others competed against one another, their competitive strategies collectively made it too risky and expensive for salespeople and brokers to buy each of their lead generation packages.

Some brokers are taking control of Internet technologies and forming co-ops to lower costs for brokers and salespeople. Existing broker co-op Realty Alliance has thrown its weight behind Homeseekers as a service provider, and has installed two of its members to Homeseekers' board of directors. A new technology consortium led by technology trainer Roald Marth and backed by a few leading brokers is called Wheretolive.com and is actively recruiting top brokers to participate. Broker support of Home-Link, an organization which aggregates third-parties involved in the real estate transaction has put the shoe on the other foot in terms of using transaction management. Vendors who want to be on the platform pay a fee, which has caused some controversy by trade groups such as home inspectors who are used to getting free referrals.

Brokers such as Gary Keller, co-founder of Keller Williams brokerage and franchise, are creating and marketing home auction platforms for brokers, while Ike Broaddus of New Millennium REALTORS® is launching a new brokerage-salaried salesperson management software called Guru Networks.

In short, brokers are not passive or uninformed customers.

But how many and who will succeed in the coming months? There's only so much business to go around for the vendors, even broker-led vendors, and then there is the salesperson to consider. Despite the fact that NAR studies show a median gross personal income that is $16,200 higher for salespeople who use technology tools like e-mail, half of salespeople do not use the Internet to close leads. Yet, three out of four use e-mail, clearly favoring the Internet as a communication medium. But marketing is another story. Some salespeople are waiting for their brokers to step up to the plate with technology solutions. Others believe the Internet is still too young to make much difference. Still others believe that having their listings on the Internet is enough marketing.

The salespeople who do operate on the Internet are demanding results for their dollars presenting even more challenges for technology companies.

Offers Murray, "Top salespeople and brokers are smart people. You may be able to fool them once, but you aren't going to fool them twice. They have figured out that they don't need four and five Web pages to be found on the Internet."

Other technologies

On the horizon are large platforms such as Realty Desktop by HomeAdvisor and eRealtor by Homestore that promise to integrate contact, client, office, salesperson, transaction, closing, and post-closing management services on the same software system which should streamline and simplify all online salesperson activities from e-mail marketing to post-closing affinity service sales.

But early editions of Web-based transaction management platforms have yet to prove their mettle, suggests Murray. "We have done some research that shows that transaction management may not actually increase productivity," says Murray. "In a test we did several years ago with top producers, we found that these salespeople increased their productivity by 30 percent to 40 percent with the first assistant. With the second assistant, productivity increases only escalated 20 percent, and with the addition of a third assistant, there was no increase in productivity whatsoever."

Until brokers and salespeople can use integrated systems that are complex and flexible enough to support all the various tools they enjoy using, transaction management tools may suffer the same fate as listing marketing tools. If salespeople and brokers find them too expensive or unable to bundle their favorite software into the platform suites, they will be hard to convince to give up their old products. Technology companies are therefore challenged to enable competitors' technologies if they want to sell more platforms.

Yet, technology investment is on the increase, says Murray. "One hundred out of the top 500 brokers have reported that their investment in technology has gone up," he says. "From 1990, the average broker invested 46 percent of gross revenues in technology. In 1999, it was 1.33 percent of gross revenues.They have almost tripled their spending on technology in the last 10 years, and two- thirds of that increase came in the last three years."

The top ten brokers, according to Murray, averaged $165 million in gross revenues. That's $2.2 million per year that brokers are investing in technology. "This doesn't count what salespeople are spending," notes Murray. "Two years ago, it was $850,000."

What are they buying? Web services, T1 lines, servers and storage devices, software, and more. "This is just the hard costs, not including staffing, so put an end to the myth that brokers aren't investing in technology. What they are doing, however, is filtering through those things which will improve their business in the short run and deferring those things which are tomorrow."

Brokers are paying to integrate MLS listings into their databases, and installing wide and local area networks to link their companies so their salespeople have access to quicker information. Anything that gives the salesperson an edge will also give the broker an edge.

"You get an immediate payoff in recruiting," says Murray.

(c) Copyright 2001 Realty Times. Reprinted with permission.

Blanche Evans is a writer/editor and CEO of evansEmedia. Formerly, she was a senior editor with Realty Times, where she was named by REALTOR® Magazine as one of the most influential people in the real estate industry.

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