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Is Your Firm Engaging the New Status Quo?

May 20 2015

reconis engage status quo 1Like many business, cultural, sporting, academic and social activities, there is a season for real estate industry update and status conferences. During the disclosure season, each of these events adds just a bit more clarity to the ultimate question: What is new regarding real estate brokerage and marketing operations?

With the adjournment of last week's National Association of REALTORS® Legislative Meetings & Trade Expo (AKA Midyear Meetings) in Washington, D.C., the industry's 2015 update season came to a close. During the past 90 days, a plethora of meetings including, but not limited to, Inman Connect, T3, Gathering of Eagles and last week's NAR meetings provided the industry with a glimpse into the current status of a brokerage business and operations environment that has found itself mightily impacted by a wide range of trends, directions, and forces.

There can be no doubt that each of the hundreds of observers who participated, attended and/or evaluated these events came away with a slightly different impression. The industry media over the next ninety days will be awash with impressions and opinions. Be that as it may, there are a number of conclusions that are high enough up the intellectual pole to be universal. The objective of this piece is to attempt to present these new foundational realities.

The following five statements are nominated to head the "most impactive" list:

  1. Various presentations by senior industry (as opposed to organized real estate) leaders contributed to an overall understanding that, moving forward, brokerage operations in many ways will end up further afield from the traditional model than previously imagined. This, in turn, leaves a sense that current efforts are in the nature of "getting ready" for the ultimate, rather than being the ultimate.
  2. There is an increased understanding at the highest levels that the industry is not maximizing its profit potentials.
  3. The current record level of public ownership of industry infrastructure and its demands and expectations regarding profitability is impacting virtually every aspect of the industry.
  4. Increased levels of direct and intense consumer interaction are forcing the industry to meet new levels of interactive and experiential demands and expectations.
  5. The value propositions of the franchise, brokerage and agent sectors are losing traction in the eyes of their respective customers.

reconis engage status quo 2How then are these four factors influencing the current industry environment? First of all, it is important to note that while, in some cases, they are operating severally or individually, in the majority of cases they are converging with each other to impact jointly or in combination with one another or lessor factors.

The traditional brokerage business model has evolved to focus on profitability. This transformation is driven by a growing sense that if it doesn't get its profitability act together, two probable results will occur. The first is that Wall Street will withdraw its support of the current business model, and the second is that forces currently outside the industry will introduce a new business model that will combine new factors and functionalities that will render the current business model irrelevant and even more ineffectual.

The industry appears to have gained a more complete understanding relative to the effective use of agents. The industry is shifting its focus away from the traditional idea of sending thousands of misdirected and underprepared agents out to fish by themselves every morning, and hoping for the best. In its place are a number of new strategies that call for maximizing agent effectiveness through agent teams, standards, best practices, accountability and metrics driven management.

The industry is developing a whole new approach to the concept of the "lead." Gone are the days when firms view leads as agent generated business opportunities that may or may not be pursued based upon an agent's mood or attitude on any particular day. In this new brokerage world, every lead is presumed to have profit potential if it is being engaged by appropriate and timely attention. One major firm provides agents with five minutes in which to respond to a lead before other options and company resources come into play with a maximum of seven minutes to direct contact.

The role of agent teams is shifting from gang-like entities to very sophisticated and highly managed groups of agents operating in close coordination with other brokerage assets and resources under the terms of carefully designed and negotiated written agreements. Agent teams are transitioning from profit wasters to profit generators.

The two developments cited above have come together to require much more sophisticated agent recruiting procedures. Profiling and other psychology based procedures are providing a much higher probability of success not just from a productivity or financial perspective but, even more importantly, relative to the would-be agent's ability to engage brokerage standards and best practices, respond to brokerage supervision and collaborate with other members of the brokerage team. These developments clearly signal the end of the agent centric era.

As the brokerage environment has moved forward to incorporate these new factors, a parallel understanding has emerged regarding the need for classic leadership skillsets and competencies on the brokerage's management team. Here again, the traditional "keep agents happy" at any cost philosophy is transitioning into a sense that brokerage management systems, not agent attitudes, must set the brokerage's pace, tone and impact.

reconis engage status quo 3One of the most interesting developments of this new brokerage business model has been the discovery that the brokerage's corporate culture may be one of its most valuable assets. More and more firms are now incorporating the ideas originated by Patrick Lencioni that creating a "smart" company (one that uses strategies, marketing, finance and technologies to drive success) is good, but nowhere near as effective as also creating a "healthy" company designation (adding minimal politics, minimal confusion, high morale, high productivity and low turnover to the "Smart" mix).

All of these factors come together to merge with what appears to be the most challenging issue facing today's real estate industry. This, of course, is meeting the needs, expectations and demands of the contemporary real estate consumer. Perhaps more than any other operational statistic, the fact that 44% of consumers are currently finding the property they ultimately purchase without agent assistance, sets the tone here. Today's consumer is nearing a point of believing they can do the deal without agent assistance.

Whether this is true or not isn't really an issue for the brokerage. The point of conflict occurs during the discussion of service pricing. Even those consumers who recognize the need to use an agent (still the vast majority) are not clear relative to the value proposition. From the brokerage perspective, if the consumer doesn't believe there is value in the agent, they are highly unlikely to find value in the brokerage. There is a growing understanding that the agent sector is basically unwilling or unable to carry their part of the value proposition argument. Thus it becomes increasingly clear that the brokerage may have to carry both.

These observations leave us at the edge of where the conversations of the past few months have dared to extend.

There is a new brokerage business status quo out there. But wait, there is more! Even before industry travelers had a chance to pack their tents and head home, Move.com had already announced a new REALTOR.com promotional campaign that appears to have the potential of stimulating a whole new round of change and transition within the portal sector.

Track industry developments closely. This new future has your name written all over it.

To view the original article, visit the RECON Intelligence Services blogRECON Intelligence Services blog.