One of the most pervasive trends on today's Real Estate industry scene is the out migration of Sales Associates from traditional office environments. Leading the trend is the fastest growing business model in the industry: The Freedom Shop. In many markets around the country Freedom Shops have grown to be one of the largest firms. Startled by the growth of the Freedom Shop, long time one hundred percent Brokerages are promoting their discounted "Work At Home" programs and traditional split shops are introducing "Virtual Agent" programs at a record pace. Leading industry training "Gurus", presentations and articles are extolling the virtues of Agents working at home as a way to maximize their income while freeing themselves from Brokerage's influence. Business consultants are encouraging their Brokerage clients to adopt the new trend as a key to the reduction of "Bricks & Mortar" overhead. The effort has been so successful that in many major firms the Agent desk ratio has dropped to two-thirds desk per Agent.
Understanding the profiles of Agents who are joining the "Work At Home" movement is critical to understanding the phenomenon and its potential ramifications. Last year the election seemed to be favored by the low production non-achievement oriented practitioner. Today however the user profile is remarkably different. The current class of recruits being drawn into these programs appears to be an even mix of high performance, new, and low production Agents.
As their median age increases to over fifty-seven and the realities of retirement loom on the horizon many high production Agents see the low structure environment as an avenue to maximizing their income after expenses. Many of these veterans are at the peak of their personal achievement curve and are more impressed with the costs of a full service firm's marketing and technology overhead than its effectiveness. In short many are feeling self assured enough to opt for a low cost glide path through the sunset phase of their careers. While they may have traditionally migrated to a 100% environment they soon discover that at eighteen thousand dollars per year plus this option may not be so attractive.
The advent of the new Agent opting for the low structure low cost venue raises an even more interesting question. While many argue that the traditional Brokerage business model didn't do enough to mentor, monitor and indeed control Agent activity there is little question that at least it tried. The specter of new Agents building a responsible career or business without even the most entry-level influences is startling indeed. Yet this appears to be exactly what is happening in many cases.
So if these arrangements are making the Agents happy and are at the same time effecting a much-needed reduction in Brokerage overhead what is the problem? Quite simply this trend ignores the third party to the arrangement; the consumer. As is all too often the case many within the industry are failing to take notice of the fact that there is a new consumer in the Real Estate transaction equation. Almost gone is the subservient hero-worshipping profile of the post World War II consumer who would follow their professional leader anywhere. In their place the industry is now learning to deal with an Internet empowered and educated individual who is demanding to be the center of a predictable, responsible and accountable transaction.
At the same time this new consumer is being further educated and informed by a wide range of Internet based alternative and peripheral Real Estate industry players. In many cases these entities are building new business models that center on consumer actualization and protection.
To better understand the true ramifications of this issue one must study the professional malfeasance history of both the legal and medical professions. For years the leading abusers of legal and medical ethics and standards of practice have been those practitioners who choose to practice in isolated settings free of peer review and group policies. Single-handedly they managed to generate outrageous and negative images for their professions while at the same time driving Errors & Omissions insurance premiums to almost unbearable levels. The evidence supports the concept that without an appropriate level of standards oriented influence even the most ethical of individuals slowly erodes their standards of practice to be more responsive to immediate economic goals and objectives than those driven by a commitment to professional standards. Imagine the impact of this concept in a down market where feeding one's family becomes the overwhelming cause.
Recently many firms and individuals in the industry received notice of significant increases in their E & O insurance premiums. This is not a coincidence. The insurance industry uses individuals called actuaries to monitor industry behaviors and predict risks and loss ratios. Mold is not the only driving factor here. If E & O carriers foresee the impact of the current Agent migration in terms of anticipated standards of practice will they also predict the emergence of a whole new breed of "Street Agent" who operate outside of any system of management, review or monitoring.
A careful review of these circumstances suggests strongly that the industry needs to take immediate action. The industry is by definition a community whose citizens are vulnerable not to the best of the breed but to the worse. Other professions have allowed their traditional image of professionalism and self determination to override their sense of the common good and in the end watched as all fell prey to the deeds of a few.
If the industry is going to promote consumer related activities beyond the firm environment it must also establish standards of practice, monitoring and communications to govern these activities. It must recognize the fact that electronic monitoring, transaction management, precisely documented standards of practice and compliance data collection will be the minimum tools necessary to protect the public and the transaction.
Most of all the industry must understand that if it fails to take these basic steps to protect the consumer someone else will. There is no shortage of third party players who are closely watching these circumstances and that are prepared both financially and philosophically to move between the industry and the consumer. While Real Estate may remain a challenging sale, consumer protection has never been simpler.
