Four Factors to watch in the Future

by Stefan Swanepoel

CHANGE AND TRENDS

In “Real Estate confronts Reality” (1997) I wrote: “ The next few years could mark the end of an era of real estate brokerage as we know it today. The time has come for real estate professionals to accept that they can no longer ignore what’s happening around them.”

Since that time, the real estate industry has experienced one of the most changing periods in its history, and although various trends as still relatively new, we have chartered a new course for the industry – one that we cannot change, and one that will as the trends mature through their cycle, will fundamentally change the way in that real estate brokerage will be conducted in the decades ahead. The following trends have and will continue to play a significant role over the next year or two: 

1. Continuing Consolidation
   Real estate brokerage companies are getting larger and larger as acquisition mania rampages through the industry. Fueled by declining residential revenues per transaction, economies of scale and cross selling, larger companies have been forced to pursue mergers, acquisitions and joint ventures as a survival strategy. We have moved into a new era of mega-brokers, one the industry has never experienced before and one where it appears that size does really matter.
   
2. New Business  Models Although there is frequently negative talk and doubt about the viability of a new business model, one cannot but be in awe at the abundance of new concepts being floated in the industry. Many still have to pay their school fees, and most are not yet profitable – that said, any serious real estate player would find it valuable and wise to be current with new models such as:
   
   • Buyer Brokerage
   • Annuity Agencies
   • VOW’s
   • Employee Estate Agents
   • One-Stop Shops
   • Discount Depot’s
   • Fee-Based Services
   • Superstores
   
   
3. Involvement by Corporate America
   Rarely has pending legislation suggested changes to the financial services arena as controversial as the recent Gramm-Leach-Bliley Act. If approved, the proposed new legislation would remove the separation of commercial  and investment banking entirely. NAR has put up a commendable and fierce battle and at this stage it would seem that the involvement of banks has been delayed. Banks are however but one group of players and the possible involvement by Title Insurance companies, retailers like Home Depot and service providers like H&R Block and American Express could also change the fundamental structure of the industry.

4. In Search of Profitability
   Compensation is the largest cost component for any real estate firm, often accounting for 80% of expenses. The past quarter century has seen the gradual erosion of the broker’s profits, with the average profit per transaction today ranging between $44 and $132. Unless the company does a large volume of business, this is insufficient to produce the revenues needed to stay in business. In this new environment the pure practice of brokerage is insufficient to sustain a business unless the broker can marshal a large volume of transactions. Many industry leaders have acknowledged that the next three to five years will witness the demise of the “stand-alone” residential real estate company as we know it today. Large real estate firms have taken notice of the shrinking return to brokerage and have commenced an attempt to control other parts of the transaction by purchasing, creating or partnering with existing companies to offer mortgage, title, home inspection and escrow services to the home buying public.

AREAS FOR REALTORS® TO IMPROVE

Focus

In the past the value proposition for Realtors® has been the control of information.  Realtors® possessed it and the consumer needed it. But this is no longer the case. As technology allows the consumer to control information the traditional role of the real estate professional has begun to change. A new consumer-centric value proposition based on reducing time and stress and increasing convenience and service will be necessary for success.

Knowledgebase

The ability to a body of advice and knowledge at your beck and call is an invaluable resource for any Realtor® serious about their career. One company, iSucceed, Inc. has executed exclusive agreements with more than 170 top producing real estate agents offering their proven money-making systems and strategies such as: insider secrets, presentations, pre-list packages, ads, scripts and dialogues. This 'just- in-time' knowledge service is now available, cost and time effectively, via the convenience of the Internet.

New technologies/opportunities

 Someone has discovered a great way to stop losing a potential customer surfing your website because of poor communication and service. This is achieved by placing a “magic button” on your website at each place you think that a potential customer might have a question. When a potential customer clicks on the “Click4info” button, a pop-up box invites the viewer to advise at which number they would like to be called at. This gives full discretion to the customer to select any number that may be most convenient to call. The button then simultaneously dials the customer while also dialing the Realtor® at a pre-determined number selected by the Realtor®. Within about 5 seconds the two calls are completed and connected and the customer is speaking directly to the Realtor® to help resolve their question.

ABOUT THE AUTHOR

Stefan Swanepoel is a sought after keynote speaker and is widely recognized as the leading industry visionary on trends and change. He has penned eight books and whitepapers including the best selling “Real Estate confronts” series. Stefan is Chairman & CEO of RealtyU, the largest network of real estate schools in the nation (www.RealtyU.com), and also serves as strategic advisor to numerous companies, both locally and abroad. More information visit www.RealSure.com