Are Realtors To Blame For The Business of Real Estate Being Broken?

By Michael Krisa, Executive Editor - Posted on
Don’t forget to leave us your comments at the bottom after you’re done reading this article…

We’re covering real estate TRENDS in this week’s article- check out the Swanepoel Trends Report for 2018 (CLICK HERE) for much more in-depth information and statistics. You’re going to want to know the top 10 things driving the real estate business this year! Today- it’s all about the management-empowered brokerage business model. Plus- you can get 10% off the Trends Report, ONLY here at Agent Inner Circle- use the discount code “discount10” when ordering! (CLICK HERE) to order.

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The real estate industry as we know it may be in for some interesting challenges ahead more so then ever before.

Well funded new brokerage models that leverage employees vs independent contractors, consumer-centric online platforms with a deep wells of data are just a few of the trends that were identified in the 2018 Swanepoel Trends Report.

 

Legacy Model

The current model, which is referred to as the legacy model has had one heck of a run dating back to just after the second world war.

A major change was the compensation agents received with the introduction of the 100% commission model introduced by RE/MAX and Realty Executives.

Consumer Power

The 2000s were about innovation and new technology, and finally enter 2010 where the consumer had the power, access to data and a variety of choices like never before.

Consumer demand for ease of use and a great customer experience has dramatically impacted business globally – just look at Amazon, Zappos, Ebay to name a few which delivery world class on-line services and a great customer experience.

Disruption, innovation, ease of use, consumer demands is not something the legacy model of real estate is accustomed to and frankly, as an industry we are extremely SLOW to change and adapt.

8 Major Drivers Fueling the Change

According to the Trends Report there are 8 major drivers that are helping to fuel the change:

1. Management Limitations – despite their best intentions to implement change, offer new technology, deliver a user experience, management, department heads, franchisors struggle and fail to make a difference. 

2. Agent-Centricity – when the brokerage considers its agents as its customers, it becomes difficult to then focus on consumers and their needs. Despite huge investments in technology and innovation, agents have generally resisted adopting company best practices and carry on as lone rangers or “solo-preneurs.” 

3. Consumer Expectations – today’s consumer expects transparency and simplicity when making purchases, yet real estate transactions are becoming increasingly more difficult. Implementing operational standards would help BUT the brokerage lacks the control to force agents to adapt and deliver a consistent user experience.

Some of the emerging new brokerage models are solving this by eliminating independent contractors for “employees” – a hybrid of salary plus commission based upon consumer satisfaction. Click here to access the corresponding article/video we did on the Buyer Direct Brokerage.

4. Consumer Loyalty – consumers, especially millennials have very little loyalty or use for conventional real estate brokerages. They are market savvy and very aware of new models which cater to them and as a result are gravitating towards these industry disruptors … think REDFIN, OPENDOOR, ZILLOW. 

5. Venture Capital – Over 1.9 billion dollars has been invested in emerging brokerage models over the last three years. These companies are tech savvy, leveraging the data, harnessing employees and focused on simplicity and the consumer experience. 

6. Emerging Technology – there are new platforms, apps and thought leaders focused on simplifying the real estate process and making a better user experience. The ones that are the most innovative with the technology and strategies will drive significant change. 

7. Failure To Respond – for the most part the legacy brokerages have failed to respond to the challenges and demands made by today’s consumer. Again until there is a universal buy-in by management and agent alike, innovation and change cannot occur. 

8. Direct Buyer Movement – this is an emerging brokerage model that is meeting the needs of today’s consumer who wants the Amazon like buyer experience of a certainty of price, timeline and process within the real estate transaction.

So what’s the solution – how do we fix the legacy model and maintain status quo?

This and all your other questions will be answered LIVE on Facebook … Join Us Monday May 21st @ 1PM ET for a LIVE interactive interview with Stefan Swanepoel. We will be going over the past 3 trends and you’ll be able to submit your question LIVE and get the answers from the man himself.

Here is the link to the event on our Facebook Page, so make sure you sign up to get notified when it starts … see you Monday @ 1PM ET!

Or on Facebook enter https://www.facebook.com/agentinnercircle/

 

What did you think of this article?

Click here to leave a comment!
Michael Krisa
Michael is a licensed real estate broker, a syndicated columnist and a freelance internet marketing consultant. As a sought after speaker and trainer, he is best known for helping to utilize video and video marketing in a way that actually works to make you money! As Executive Editor, Michael is very excited to bring his years of experience in real estate marketing to the team.
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14 thoughts on “Are Realtors To Blame For The Business of Real Estate Being Broken?”

    1. Hey Ronald I don’t know if I would call it the death of entrepreneurship but definitely an evolution in the way real estate is done. As in any struggle those that can adapt quickly will survive … sadly those that bury their heads and refuse to acknowledge consumer demands will perish.

      Thanks for your comment.

      All Good Wishes,
      Michael

  1. I found your video interesting, and I agree that with the Broker being the management of independent contractors the agents, all the Broker plays is a guide to the agents. This whole thing with a lot of agents now days is unbelievable, agents do not do the due diligence when they list the property, I have found property listed that had the wrong address, property that was list as 17 acres and wound up being .17 acres, home that were listed as 5 bedroom when in reality they only had 5 rooms in the house, I could go on and on. I was a real estate agent a few years back and the reason I became was is that I was looking for a home, and over half the 144 properties I looked at, the listing agent would not even go and show me the property. There is another big dis-service in the industry and that is the MLS providers by only allowing agents to see the data list in the service are not doing the Broker / Agent or especially the buyer any favors, they do not QA the data that goes in there posted by the Agents, second the information that could really help the buyer by parring down the list of properties can not be accessed by the buyer, the agent as a result winds up taking buyers to 10 to 15 properties before they can expect an offer. that usually means the buyer by then is flusterated with the whole process, and the agent has spent all the time and money on gas etc. which over half that that could likely have been cut out from the beginning if the buyer had been allowed to access good reliable and accurate MLS data in the first place. The second big boon doggel was when the state allow agents to become both buyer and seller agents. every time this happens the buyer is the one who will lose, first a listing agent selling a house is not doing the buyer a favor by not telling them everything they know about the property. Yes they may get the sale by not doing so but it will come back to bite them in the long run. The split commission between broker and agent all though I understand why it is necessary really does not do the agent any good, the agent gets the listing for the property, they put the data in to MLS, they sell the property to a buyer and half the commission goes to the broker for doing little of nothing. It is clear that the broker is not doing the due diligence on the listing they are not taking buyers to the property, they are not validating the info, and I have even seen brokers give listing by one of their agents to another of their agents to show buyers.

    1. Absolutely Allen sadly though many will just turn a blind eye and pretend all is same ole same ole 🙁

      Thanks for the comment.

      All Good Wishes,
      Michael

  2. Michael, the first thing that came to mine was “what are the solutions”?

    As in Larry’s comment above, to have to look at 144 homes before finding the right one is crazy. Either the Agent didn’t qualify what the Buyer was looking for or the Buyer didn’t know what they wanted.

    Broker’s like independent contractors, this way they can pass on all the expenses, even if the Broker gets a fine for something the salesperson did, they pass that cost on to the salesperson. As an employee this expense along with a lot others would be picked up by the Broker.

    1. Hey Al what’s the solution you ask?
      That’s the $3.9 billion question and outside sources are betting big that the answer is employees that are compensated by both a base salary + commission based upon customer satisfaction review.
      Thanks for the comment
      All Good Wishes,
      michael

  3. Actually I believe the problem rests squarely on Brokers and their greed.

    1. Brokers hire anyone with a pulse – because they make money from every Realtor in desk fees. Therefore you have Realtors out there who deliver poor service are incompetent and do not know how to explain their services.

    2. Most Brokers expect $300.00 or more for every deal I write on top of desk fees – why? Brokers do very little for me as an agent. I have been a Real Estate Agent for 14 years and my Broker (I’ve worked for 3 different ones) provides a paper submission service.

    Training? Hello – I do better on my own.

    Help me make more money? Please.

    It’s not the Realtor, it’s the Broker and our Associations who do not represent Realtors; yet they get paid by us.

    1. Interesting perspective Kevin.
      If i were to play devil’s advocate for the brokers they would argue … we pay for training that agents don’t attend, invest in technology and systems they will not use, have to pack the building with non productive agents to cover the rent – and cover their arrears, and on top of that mortgage everything we own to open this office in the first place.
      I have no answers Kevin – only more questions 🙁

      All Good Wishes,
      michael

  4. Change is good. Disruptions make us work smarter such as listen more closely to our clients. And align with their lifestyle needs.

    Real estate is not (yet) a commodity. Bring on the competition. It is good to see….and maybe someday they will understand how challenging it is to make this business profitable enough to sustain the investors and bankers interest long term. I was listening to an interview yesterday with Redfin CEO. Brilliant individual trying to make a real difference for the consumer. “Is your business profitable?” His answer, “Well, no. But that’s not the point…”. Not the point???

    Listen, Care and provide the services and connectivity that a consumer expects from a professional. More and more of our consumers are using the services of a REALTOR today. The trend is up, not down. And when the high tech, high cost models that can’t produce the returns their “consumers”, ie investors and bankers expect, then they will implode.

    Yet because of their efforts we as professionals and our consumers are blessed with some of the most amazing innovations that work together to make the processes seamless while giving us more time to focus on and nurture the buyers and sellers who hire us to represent them.

    1. Thank you for your comment Craig.
      Consumers have identified “service” as one of the biggest problems with the industry because there is no real bench mark or standard.
      Within an office of 100 Realtors you can potentially get 100 variations of what each one believes to be service.
      Even something as basic as publicly posted agent revues/ratings have been resisted on a major scale.
      I nave no answers Craig but I’m certain the business of real estate as we know it is on the verge of a major reform.
      All Good Wishes,
      michael

  5. Independent Contractors were created for tax savings. Employees can’t write off their luxury cars, smartphones, computers, their advertising or home offices and Employers must collect and pay income tax, CPP, HST and pay health tax from the commissions earned. Sick leave, health insurance, and liability insurance are also avoided by hiring independent contractors. It’s all about the money, and who pays it! Employees cost money. Independent real estate contractors pay money. At some budget brokerages, the operators make more on coffee and copies than on commissions.

  6. Love the article Michael. Especially the insight on millennials not having any consumer loyalty for conventional real estate brokerages. Simon Sinek really drives home this point in his Start With Why book. However, if they do grasp what your company’s why is and you are able to translate your mission statement in such a manner that they understand it, i. e. Apple, they will not only be loyal, they will be your biggest advocates

    1. Hey Jim – on paper that all sounds good but it has to translate into the customer experience of the product or service.

      Apple may have a great mission statement but if they fail to innovate and deliver a WOW experience their loyal followers will become a competitors new customers.

      Thanks for the comment my friend!

      All Good Wishes,
      michael

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