Innovators Series: Brokers

REALTOR® Magazine convened a roundtable of some of the nation’s most innovative and successful residential brokers to get their views on where the real estate business is headed.

March 1, 2007
 

 
   
 

Where do you see exclusive buyer agency going in the years to come?

Do you see traditional brokerages bringing reduced commissions into the game?

What's your opinion of a real estate firm advertising production numbers of salespeople accompanied by interoffice photos of these people receiving a plaque?

Who will have the advantage in the new 24/7 "flat world" – larger brokerages trying to scale back overhead-heavy operations, or smaller firms that can adapt to market changes quickly?

How will technology change the real estate business in the next couple of years?

What about 5 or 10 years from now — how will technology change the real estate business?

Where do you see your growth coming from in the next few years?

What are your companies doing to capture leads over the Internet, cultivate them, and then convert them into clients? Are you providing such lead management services, and if so, are they free?

 
     
 

Where do you see exclusive buyer agency going in the years to come?
   

Dave Jenks: For me, this is really a two-part question. First, buyer agency is here to stay. The best agents (and their affiliated team members) will be doing an ever increasing percentage of their business with clear agency representation agreements. The trend in the real estate profession to clarify representation and to have a fiduciary relationship with each of the people we serve has been a very positive and important step. The second issue deals with real estate companies, or agents, who work only with buyers. I don’t believe this model will gain much traction in the long term. Even though exclusive buyer agencies have existed for some time now, it doesn't seem they've captured significant market share when compared with those who deal with both buyers and sellers. One reason is that seller listings create market presence and serve as a magnet for buyers. Those agents and companies that have seller listings will continue to get the lion’s share of buyer leads. Once service relationships are established and reputations are built, it is difficult for agents to not respond to referrals and repeat business on both sides of the transaction. Economically, it doesn't make sense.
   

Lyle Martin: Personally we don't see exclusive buyer agency growing. An agency just for buyers isn't needed. I do foresee an increase in the number of practitioners representing buyers exclusively. Assist-2-Sell offices have been embracing this approach for many years, with agents specializing in working with either buyers or sellers. I also believe the fees paid to the practitioners representing buyers will go down. It has already started with the offering of rebates.
   

Jaren Davis: I am not completely aware of what exclusive buyer agency is trying to accomplish. I am aware that the consumer is interested in the convenience of one-stop shopping. If exclusive buyer agencies are a model moving toward a single-purpose business, they are moving in the wrong direction.
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I am an agent at a traditional, full-service brokerage. I'm concerned that discount, nontraditional brokerages are going to eat the lunch of the traditional brokerages during the next 10 years. As real estate gets more and more expensive, I foresee sellers being less and less interested in paying a full commission to agents who do nothing to increase the value of the home and whose jobs do not differ today when the property is worth $1 million than 15 years ago when the house sold for $250,000. Do you see traditional brokerages understanding this and bringing reduced commissions into the game, or are agents going to have to abandon that ship in order to survive over the long haul?
   

Bill Evans: All brokerages, whether they are full service, menu of services, or discount models, will be faced with the same challenges: How do they avoid becoming a commodity? And what is the true value they are providing to the consumer? Can they factually articulate their value proposition, and is it quantifiable? It’s easy to claim anything, but do the statistics back it up?

Just as in all sectors of business – banking, investing, auto – there is a range of full-service to no-service models. Ultimately, consumers choose the agent and the brokerage that they believe will help them achieve their goals. All brokerages must separate themselves from the crowd if they do not wish to become a commodity because commodities are typically chosen on the lowest price.

Agent-centric, consumer-focused, full-service and menu-driven brokerages will thrive in the new information age economy. Intellectual distribution is one of the key drivers of this new economy. Companies that understand that will surely grow and profit. Ultimately, the company with the best sales associates and best consumer portals and tools will succeed.

   

Lyle Martin: The popularity of our “discount” model is a response to consumers’ frustration with paying fees that are not tied into the value received. In the past, the unparalleled marketing effectiveness of the MLS provided the value sellers were looking for. The price of participation for the seller was to pay the high commissions demanded by the brokers. These commissions were necessitated by an inefficient business model: too many sales associates to sell too few homes. Despite the growing availability of listing information outside the MLS and consumer pressure for lower fees, traditional brokers are looking for ways to raise their fees or add additional services as revenue sources (one-stop shopping).

We see brokerages in the future becoming smaller (fewer agents) and more competitive on the fees they charge. They will learn to operate in a more efficient manner and to add value beyond merely putting the home in the MLS and hoping someone sells it. The fee on the listing side is currently the most vulnerable but the selling side fee is also going to feel increased pressure. The Assist-2-Sell model is attractive to salespeople who recognize the trend toward lower fees and want to bring full service with savings to their market.

During our roundtable discussion, one panelist commented that price isn’t the only issue when it comes to selecting a real estate company. I totally agree. That’s why Assist-2-Sell is built around a full-service discount model. Another panelist said salespeople must demonstrate an “expertise in marketing, negotiating, and understanding the transaction.” Again I agree. Just like traditional brokers, we hold our franchisees to high standards. Our owners and salespeople who came from traditional brokerages didn't leave their skills, knowledge, and expertise behind.
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Patricia Johnson: What is your opinion of a real estate firm advertising, with a full-page newspaper spread, general production numbers of salespeople accompanied by interoffice photos of these people receiving a plaque? I was one of the recipients and I had no knowledge that the information or photos were going to be made public.
   

Sharianne Daily: Our company doesn’t have any awards, ranking, or contests. If we recognized a Top Ten, those salespeople might be seen as the only ones to list or sell with, and that wouldn’t be the case at all. It isn’t a win-win for the sales partners or for the company.We also have a policy of talking about being “Leaders in Real Estate” versus saying that we’re “No. 1.” No. 1 is in the eyes of the beholder. To a customer, it could mean the largest, or it could mean No. 1 in transactions or No. 1 in production. Because everyone is saying in advertising that they are No. 1, consumers don't care and it's overlooked. This type of advertising is usually done by the employing broker to satisfy associates’ egos, much like newspaper advertising that’s done solely to appease sellers. We believe consumers want to know what we can do to help them with their change – buying, selling, relocating, and so on.
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John Rainville, BrokersRealty.com, York, Pa.: Who do you see as having the advantage in the new 24/7 "flat world" – larger brokerages trying to scale back overhead heavy operations, or smaller firms that can adapt to market changes more quickly?
   

Matt Carroll: Small firms belonging to a larger regional brand experience the best of both worlds and have the advantage in today’s real estate industry. Smaller offices have the ability to adapt to new market conditions. By being part of a large, respected brand, they benefit from consistent marketing and centralized technology and tools that small, standalone offices can’t match. Large, institutional companies may lack important local connections as they span many states. However, locally owned offices that are part of an overarching regional brand serve as the local face for the brand and have the opportunity to show their deep commitment in their community and bring a recognized brand to a grassroots level.
   

Bill Evans: Both are in jeopardy. It’s the companies that have been building and implementing the new business model for the information age over the past 10 years that will succeed. These companies understand the need to be agent-centric and consumer-focused. They’ve put the dollars into new technology and training, and they’re on their way to the top.
   

Sharianne Daily: The advantage goes to the company that can be the most transparent to all involved – the salesperson, the broker, the seller, and the buyer. As an Independently owned company, we believe it is easier to be transparent and adaptable as a smaller firm (235 salespeople).
   

Jaren Davis: John, thank you for your question. Please understand I give you my answer as a large broker. Your assumption that the large broker is less nimble is 180 degrees from reality. The large broker is not overburdened with heavy operational expenses. We meet the demands of the marketplace as the industry grows and contracts through office expansion or integration. A distinct advantage we have as large brokerages is that we have the recourse to anticipate what is coming and to act. An example: At Coldwell Banker, we saw the consumer moving to the Internet (you describe it as a flat world) well before many of our competitors. Our Internet presence is second to none, and we have the integrated systems that capture those clients on their terms. Our agents are contacted on their mobile phone within 15 seconds of an Internet user asking to be contacted. Another example is our effort to employ one-stop shopping. Today’s real estate consumer is interested in convenience; our company in partnership with our agents can meet that need with our ancillary services. Those coming into our profession today are excited to know there are large brokerages such as ours. In addition to partnering with them to meet the needs of clients, we provide access to health insurance, liability protection, and incredible legal resources. I hope you can see how important large brokerages are to our ability as a profession to meet the needs of the consumer and provide agents a secure future.

   

Dave Jenks: Your question carries with it the answer: Those companies and agents who “adapt more quickly” will be the ones who win. This is probably more about mindset and willingness than it is about size. Companies – large or small – that are scaling back their commitment to technology and to serving the online consumer will be left behind. Underneath this, however, is a long-established truth: Consumers choose sales associates, not companies. Those who build long-term relationships, have up-to-date client databases, and communicate systematically will achieve the greatest market share. Having an attractive, content-rich, responsive Web site will enhance their opportunities. Responding quickly to e-mail and Internet inquiries will increase the conversion of those leads. In fact, for new practitioners who make the right use of technology and the Internet, the competitive world of real estate has gotten “flat.”

   

Lyle Martin: It doesn’t matter whether you are large or small; you have to be structured in a way that makes you adaptable and open to change. Brokerages that embrace change and execute quickly will have the advantage.
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Eileen Landau, ABR®, CRS®, e-Pro, Realty Executives, REALTORS®, Naperville, Ill.: How will technology change the real estate business in the next couple of years?
   

Dave Jenks: Great question, and one we’re all trying to answer in our business plans. The truth is that so far, technology has had very little impact on how consumers actually select sales associates. That’s still based on associates’ local market knowledge, reputation, referrals, and repeat business.


We know that consumers who use the Internet the most are more likely to ultimately work with a professional. However, we also know that they seldom actually find their practitioner online. Instead, people are using the Internet to confirm that an associate is technologically savvy and has a content-rich, user-oriented site. To win clients, sales associates have to be online, and they must be there in a classy, service-oriented manner.


In addition, more consumers now expect their real estate professionals to communicate with them and keep them updated via the Internet. E-mail can be responsive and immediate, and online transaction management can keep everyone up-to-date. But, in my opinion, real estate will remain a local service business. Consumers want greater access to online listings, neighborhood information, and other housing data, but they also want a trustworthy fiduciary to explain it all, take care of the details, and protect their interests.
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Eileen Landau, ABR®, CRS®, e-Pro, Realty Executives, REALTORS®, Naperville, Ill.: What about 10 years from now — how will technology change the real estate business?
   

Dave Jenks: Over the next five years, the greatest technology-driven challenge will be dealing with the "non-value-added lead generators" that use marketing and technology to capture consumers and then sell them back to the real estate professional for a referral fee. Sometimes this is actually being done by real estate companies to their own associate. Associates will have to get better at building their own databases and networks, allowing them to do direct associate-to-associate referrals and build their own local brand.


Finally, there’s a new generation of professionals coming into the real estate business who’re business-oriented, learning-based, and technologically savvy. They know how to do relationship-based, "offer-response" marketing. They know how to systematize their service, and they’re astute about creating a business within a business. They’re the ones who Gary Keller talked about in his book The Millionaire Real Estate Agent. They’ll build powerful, local real estate service teams. While there will always be a place for the great individual sales associate, I predict that over the next decade these high-performance real estate sales teams will take a greater and greater share of the business.
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REALTOR® Magazine: Where do you see your growth coming from in the next few years?
   

Lyle Martin: We see it coming from the next generation of buyers. We've got Generations X and Y, and now Generation Z is coming on the scene. So we're focusing a good amount of our resources into tapping that market. And the way that they want to communicate with real estate professionals [using the full range of what’s available technologically] is totally different than the way we've been doing it for the last few years.
   

Jaren Davis: Our real estate salespeople are going to look a little different in the future. We’re finding that new salespeople coming into our brokerage houses are very consumer- and technology-literate practitioners who are capable of communicating in this electronic world. They're younger and highly educated.
   

Dave Jenks: We also see salespeople coming into real estate who are very business-savvy and want to build businesses within the brokerage. So, we see more of the formation of salespeople-led, branded, local businesses within the real estate industry, and these salespeople doing an ever-increasing share of the business.
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REALTOR® Magazine:What are your companies doing to capture leads over the Internet, cultivate them, and then convert them into clients? Are you providing such lead management services, and, if you are, are they free or are you charging your associates a fee?
   

Sharianne Daily: We do it for free.
   

Matt Carroll: It's not free at our company; it's referral-based. We have an outside company that does it. It has a call center and a lead incubation program that will take the long-term customer and, under our brand name, stay in contact with that person. The cost to the salespeople is included in what they pay in their fair-share [administration fee] on an annual basis.
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