Industry Visionary

There are several, but I’ll give you three:  Traditional brokerages are scrambling to keep their profit margins up against a rising chorus of “by owner” and “limited service brokerage” operations.  We’re about to see a major shakeout as the top performing boomer agents who are dominating today’s industry begin to cash in and retire. 

Next, today’s average real estate consumer is 40 years old, a Generation X-er whose expectations of quick, customer-centered service are being created and reinforced by the Internet and marketing concepts driven by “mass customization”.  They tell researchers they want to feel more in control of their destiny and have more say in the transaction.  Other industries are seeing it and responding.

But, if you look carefully, the traditional brokerage model is still centered largely around the needs of its top producers because that means they keep their sales volume.  These high volume boomers were taught that to be successful, they should be in control of the transaction.  That’s a big disconnect that will eventually have to dealt with by our brokerages.  Some are doing it, but most are simply continuing to ride the current hot market without beginning to implement the necessary changes in their business model.

Lastly, and related to my second point, is a slow but inexorable shift by the more progressive brokerages to revamp their management philosophies as the agent ranks begin to fill with those same Generation X-er’s.  Their needs, expectations, value systems and source of “strokes” are not those of their boomer counterparts and will require a different sort of management approach to get the most from them.  

It’s obvious that today’s large national and regional firms are getting the message about the changing consumer expectations and the changing face of the industry.  They are experimenting with different business models in some of their markets, like Coldwell Banker’s Blue Edge initiative.

Unfortunately, some of the biggest corporate players are not in the brokerage business.  For example, Lending Tree is committed to changing the face of the real estate industry, but doesn’t sell the first house.  Their consumer-centric approach to brokering all the services needed in a transaction will be a force to be dealt with by those in the brokerage side of the business.

Personally, I have been impressed by the innovativeness and “tell it like it is” thinking of brokers like Ron Peltier, Chip Roach and Lennox Scott – brokers who “get it” in that they understand that they can’t stand still and are truly trying to strategically position their firms for the next wave.     

Sure, all their innovations and changes may not work as planned, but they know they need to keep trying and that’s what I admire and respect.  But, you can bet also those innovations that work are quickly being copied.

On the association and MLS side we’re fortunate to have CEOs like Joel Singer, Bob Hale, Darcy Dougherty, Jerry Matthews, Judith Lindenau, Ty Strout, Peter Shuttleworth and a number of others who truly care about this industry and are providing tremendous leadership at the state and local levels in meeting these challenges.  

And, I must mention the important role being played by the industry’s observers, coaches and consultants in helping brokerages and associations through these changes.  People like Jeremy Conaway, Steve Murray, John Tucillo, Bill Lester, Jim Sherry, and Larry Romito are making us deal with those tough decisions.

Every industry has its pioneers, innovators and outside-the-box thinkers.  And right now, this industry needs all of them it can get! 

I discussed some of them earlier.  The biggest one I think is simply an extension of an overall societal trend – the desire for instant gratification.   They want information now, they want to be contacted now, and they want their demands attended to now, and they want the level of service to be consistent, predictable and professional. 

Sadly, as an industry we’re not doing a good job in meeting that expectation.  For example, REALTOR.com recently reported that one of the reasons for changing their business model was that their research showed that 70% of the e-mails sent by potential buyers to the listing agent went unanswered!    

The most likely reason is that these folks were still months away from a list or buy decision and agents are geared toward serving those whose needs are in the 30-day window.  Hence, REALTOR.com got the undeserved reputation for passing on “lousy leads”, meaning many inquirers were simply putting a toe in the water. But agents don’t think about incubating a lead for several months.  They response would be, “Call me when you’re ready to buy or sell.”

Any wonder these folks end up at Lending Tree where they are “incubated”, which results in the agent then having the option a couple months later of buying that customer back for a referral fee?

      Brokerages need to take a hard look at this fast growing “tectonic plate shift” in our society and begin revamping their internal tracking and service delivery systems to deal with today’s emerging consumer.  Otherwise, the coming “earthquake” will shake them right out of their competitive position.

REALTOR^® associations and MLS’s have a critical role to play – if they’ll accept it.  In many communities and states, their fundamental challenge is much the same as their brokerages – change to being truly market and customer-driven, or cease to be relevant in today’s market.

Far too many associations are still operating as traditional “local Boards” where success is being measured by how many people attended the last monthly luncheon. 

Meanwhile, many of their brokerages are flailing and headed toward failure, albeit more slowly in a hot market because sheer volume is keeping many of them afloat.  What they need is the same innovative aggressiveness and leadership from their association that today’s cutting-edge brokers are giving their organizations.

Associations must redefine and reinvent themselves to truly become their members’ (and more particularly their brokers’) business partners. 

The biggest one will be getting a handle on the cost of labor.  Most businesses have an average labor cost between 37% and 50%, depending on the nature of the business.  In real estate it’s roughly 80%. 

Second, the overall real estate business model must change from being agent-centric to company-centric.  Firms will have to exert more control over the services their agents deliver to ensure quality and consistency.  Granted, this may spell the death knell of the long-revered independent contractor status of agents in which they were a “business within a business” which meant a long, loose leash. 

But, today’s consumers are demanding consistency – which is why they want and expect that hamburger to taste and look the same whether they buy it in New York or California.

We must become decidedly entrepreneurial and be prepared to accept some level of risk that goes with being out in front.  We need to partner with our brokers and position ourselves as a resource that can help them adapt and prosper in this changing environment.  That means shedding “sacred cow” and “feel good” programs in favor of devoting more and more staff resources toward direct broker and agent support programs.

That means many Associations must rethink their staff mix and be prepared to significantly upgrade their staff skill sets to match their members needs.  It also means changing the prevailing “corporate culture” of most associations from one of rule making to one of customer service.  And to make that happen we must understand that sometimes it’s easier to change the people than it is to change the people. 

The Orlando Association, along with some of the nation’s more progressive large locals like Houston and Chicago, are tackling one very real challenge head on – identifying the “best practices” in the real estate transaction and promoting them nationwide as voluntary standards that consumers should expect.  A daunting task at best.

To that end we recently hosted the nation’s first-ever conference on real estate standards of practice in Orlando, co-hosted by Houston and Chicago Associations.  Over 240 top leaders representing almost 100 large local and state associations spent two days focusing on the whole area of “standards”.

The participants’ overwhelming consensus was to pursue the idea of developing a national set of voluntary “best practices” and this effort is now underway.   

Frankly, and as a journalist by training I hate to admit it, but most of the influences on my “vision” have grown not form reading, but from endless discussions either in person or via e-mail with practitioners, industry leaders, and my counterparts across the country. 

Another major influence has been attending events like the Great Ideas Conference, listening in NAR and FAR meeting forums, reading industry periodicals, and engaging in deep discussions at seminars like NAR’s AE Institute – places where some of the best minds in the country and the industry share their thoughts and ideas.

Put simply, “embrace change”.  Have the courage it will take to face the new reality and make the changes in your business or association that are being dictated by a changing consumer and a fast-evolving market.

But embracing change isn’t easy.  Changing is hard – especially in an industry dominated by 50+ boomers like me.  But it appears that success today means that significant and at times drastic change must become a constant thread in our all business plans.

Sadly, the tea leafs, the demographics, the consumer research results, and the current societal trends tell us that we must – and they’re telling us we must do it must faster than we’d really like.