Survivor: The Real Estate Game

by Stefan Swanepoel

Cutthroat; Competitive; Changing; Dynamic; Fragmented; Egotistical.
No, this isn’t Survivor: Australia, Africa or Thailand.
This is Survivor: The Real Estate Game.

You are a contestant in this game, for better or for worse. Survivor:The Real Estate Game isn’t really all that bad, as a matter of fact most participants actually love it. However, everyone will acknowledge that the last few years have been bewildering and predictions are that it is going to become even more perplexing before it gets better.

We are not talking economy or mortgage rates. That part of the game has been rosy, and for the last couple of years has been the saving grace of the country. Instead, we are talking about an industry itself that is in the throws of a reorganization, a reengineering and a remargining exercise. Don’t let someone deceive you and tell you that the real estate industry isn’t changing. Believing that is ignorant. Although the daily appearance may seem inconsequential and immaterial, the actual change is more formidable and is happening faster than ever before.

For example, new unconventional commission alternatives like EXIT are rising faster than balloons did back in the 70’s. Help-U-Sell has returned from the dead to once again help consumers save dollars. The groundswell in favor of banks entering real estate has the NAR octopus in knots. And NRT has taken no prisoners in an amazing race to build impressive nationwide supremacy.

Are you getting the picture? There is a great deal of fundamental industry-sweeping change happening right now. And fortunately, Survivor: The Real Estate Game won’t have just one winner, but many thousands of winners. Are you going to be one of them? If so, let see me share with you a body of information that should be incorporated into your next strategic planning session.

Over the last five decades, our Industry has constantly been evolving and looking back. One can today clearly distinguish between business models and trends that have noticeably changed the way we conduct business.

The 60’s automated and picturized the multiple listing system (MLS), while franchising ad various new brand such as Century 21 and ERA became the legacy of the 1970’s. The 100% concept and REMAX liberated the 80’s as the industry changed from a broker to a more agent centric model. During the early 90’s technology gained universal real estate acceptance while the later part of the 90’s was overcome with Internet fever.

And so here we are, at the beginning years of the 21st century. Although the dominant trend for the current decade has not yet been established, various trends are already flexing their muscle and we are most likely look back at the early 2000’s and refer to this period as the decade of the consumer and of corporate America’s involvement.

The last few years have also introduced a deluge of new business models. Although we are clearly at the early stages of this event and the success of most new models are still undetermined, there are numerous models that are very appealing to the consumer and starting to show creditable potential.

It is hard to construct exact boxes and try and place these new participants in specific categories. However, when sifting through the smorgasbord of service and products, similarities in strategy and offerings do start to emerge. And in my opinion, the following categories of new business models warrant closer attention.

Probably the most established of the new models, buyer brokerage has, since becoming part of NAR exploded from 6,000 to over 40,000 members. This has allowed the Real Estate Buyer’s Agent Council (REBAC) to surpass all other Associations within NAR to become the single largest of Council or Association. Ongoing consumer pressure to separate simultaneous representation of both the buyer and the seller will have a long term impact to the industry and subsequently further sensitize the value and commission potential of each previously perceived equal contributors (listing and selling side) to the overall transaction.
One-Stop Shops

Already partially introduced by large brokerages a few decades back this logical business addition became a “cool” concept when it was popularized in the 1990’s by the Internet generation. Frequently referred to as the “Integrated Model,” it has, after the Dotcom crash, been accepted by the existing real estate brokerages as a vital strategy to strengthen existing companies against the onslaught from outsiders and dwindling commissions. It is of course this very cross-selling feature that has the banks gleaming at the real estate transaction, again.

New Paradigm Companies

Largely associated with the Dotcom era, this model has also been called “Online Offices”, “Internet Brokerages” or “Virtual Real Estate Companies.” Many Realtors® have written them off as a passing fad yet this is not sound thinking. It is true that many similar companies are now members of the graveyard, but there are some such as eRealty, YHD and ZipRealty that are proving that it is possible to create a more streamlined real estate transaction with many of the traditional services being conducted over the Internet.

Annuity Agencies

Slicing up, repackaging and offering real estate commissions in a different way is exactly what helped REMAX grow from hot air to one of the worlds largest and most respected companies. This time a rapidly aging Realtor® industry is enthusiastic about discovering income after retirement. So don’t ignore these residual income stream franchises such Keller Williams and EXIT Realty – they will most likely be around for a lifetime.

Fee-Based Services

These are also known as the “Menu”, “Smorgasbord” or “Consumer Assisted Models.” Although a variety of companies have recently sprung up variations of this model, few are as interesting as the rebirth of Help-U-Sell. This once household industry name died in the early 1990’s when parent Mutual Benefit Life went into receivership. However, in 1997 Help-U-Sell was bought out and has returned to offer consumers the choice to select what services they want and what they would like to pay.

Employee Estate Agents

“Agents will never work for a salary,” a million-dollar agent once told me. I said, “You’re right, you do fit the profile, but there are thousands of other people that will welcome a more steady job, with a steady paycheck and benefits.” Various companies have tested a change from the independent contractor status business to a salaried compensation structure and this option is not that far fetched anymore. From a bank or Corporate America point of view, this salaried compensation idea would appear to be a very interesting option to consider.

Superstores

No-one does it better than mega player NRT. They have propelled what was already a premier brand and arguably the third largest company, Coldwell Banker, to real estate stardom and number one spot in the nation. Since the 1980’s introduced us to the concepts of superstores we have during the last two decades become enamored with giants such as Staples, HomeDepot and CompUSA. It was just a matter of time before it was real estate’s turn. The question is, Will there be room for another one or two superstores?

NEW BUSINESS TOOLS

We have been bedazzled with e-commerce, palm pilots, blackberries, bluetooth, m-life, t-mobile, and more. But however overwhelming, professionals must remember that e-business is nothing more than traditional business being done online. M-business in turn is little more than wireless e-business, and v-business is basically voice enabled m-business. So in the end, the new alphabet soup is nothing more traditional business restructured. Therefore you must also re-inventing yourself to adapt to using theses new repackaged tools.

The first technology wave brought us PC’s (Personal Computers) and LAN’s (Local Area Networks) and introduced applications such as Word Processing, Contact Managers and Network Communication. The first wave of communications did away with much of the paper, and made it easier to save, file, retrieve and share information. The second wave was the Internet, which extended the LAN to the public networks. Indeed, this development is still a work in progress – with the Internet increasing in size, speed and efficiency almost daily. The third wave is the current deployment of cheaper and faster bandwidth (DSL, cable and T1), which enables the convergence of pre-existing technologies into an integrated desktop and software applications.

The fourth wave, just now beginning, is introducing the deployment of wireless high-speed bandwidth that allows us to make the desktop mobile. The primary drivers making this possible: low cost bandwidth to the home and office in the form of Cable, T1 and DSL; near DSL performance on wireless laptop and palmtop devices.

So how should you evaluate software solutions that capitalize on the latest generation of innovation; be it thin client, ASP, wireless telecommunications or unified messaging? The process is complex, but some interesting companies to watch include GURU, Leadmaxx, Genutec, Katabat, Adigida and Zingback. What is exciting is the fact that some of the products are really getting close to actually solving real real estate problems.

Fidelity National Information Solutions (FNIS) has assembled an impressive array of software solutions and data companies such as Micro General, VISTA, Moore Data, RealEC, iProperty, RISCO, Reez and more. Although FNIS is clearly still a few years away from standardizing and integrating everything into one seamless solution, they have already aggregated an impressive offering that encompasses flood, tax and real property information for some 1,250 counties across the nation, arguably the most dynamic MLS system in the nation, a Realtor® desktop, a Broker back office product as well as a transaction coordination system.

In Summary

Thanks to the Internet, the confines of time and space have disappeared. Thanks to the NRT bigger means bigger profits. Thanks to the new business models we are have a REMAX-type struggle again. Thanks to the Dot-Commers we now understand that real estate professionals in the future will have to offer more for less. But that’s OK. Realtors are not going away. They will not be dis-intermediated. Home buying transactions will always require the “high-touch” component of an effective, well-educated and well-equipped facilitator and negotiator.

Remember that none of the new business models are perfect and neither will any one of these business models dominate the industry. They will however contribute significantly to the evolution of the traditional real estate model and ignoring them will leave tire marks over you. Also by adding new business tools that are already available, brokers and agents can prepare themselves and strengthen their business for the changing market. With that preparation, you ultimately will be one of the major competitors in Survivor: The Real Estate Game.

So once the votes are counted and the results are final. Will the ultimate survivor be you?