Innovation in Real Estate Brokerage — Are we really different or did we just change clothes?

(Note to consumers just passing through: Kris is on her industry soapbox again. Read at your own risk and with plenty of coffee on hand. Tomorrow we will try to talk about something more fun — like short sales or termite fumigations.)

Are we really so different?

I had the pleasure of moderating a main session panel last week at the Inman Real Estate Connect Conference on “Hot New Real Estate Companies: Tomorrow’s Real Estate Brokerage Today.” The three panelists brought different offerings from the 31 flavors menu for delivering brokerage services to real estate agents, but my take-away was that their approaches weren’t so fundamentally dissimilar at all. This left me wondering if the brokerage of the future is really going to look so different, whether we aren’t still resisting significant change, and if just maybe I am wrong in my thinking that the traditional big brokerage model we have grown up with can’t be sustained in the future.

Scratch that last one. I don’t think I’m wrong.

As agents and brokers alike have been slogging through this trying housing market and economic crisis, many are hurting, and with more than mere flesh wounds. Combine the market troubles with a morphing social dynamic, morphing in the way we communicate and, as consumers, in our expectation that power be wholly abdicated to us in the form of unfiltered and unlimited information, and we have a big, fat catalyst for industry change. But change and innovation come in many forms. They can be little adjustments or they can involve taking the house down to the studs and starting over. So which is going to carry the real estate industry forward? More importantly, which is going to best serve our customers?

It’s Still a Numbers Game

There is no doubt that Sherry Chris, President and CEO of Better Homes and Gardens Real Estate (BHG), is innovating. BHG, a Realogy company (also known for their familiar Century 21 and Coldwell Banker brands, among others), is giving a face lift to the traditional full-service broker image. Their site includes a blog, video, and an overall hip vibe; I likened it to waking up one morning and suddenly realizing that your parents just might be “cool.” The front facing theme is consumer-centric. But, I am left with the nagging sense that underneath the pretty web site is the familiar big brokerage in chic sheep’s clothing.

One of my big issues is this. While admitting to being a real estate agent has never elicited a response of awe and admiration, the agent has suffered a significant blow to the ol’ image over the past decade, and it hurts the entire industry. In large part, this was been due to an open-door hiring policy which left us overpopulated, underqualified and unaccountable. Many of us have screamed for tougher licensing practices but, recognizing that our Scantron-and-number-two-pencil method of vetting real estate professionals will not be replaced anytime soon, we are left to hope that brokers will self-police. Yet, the traditional brokerage model remains dependent on critical mass.

Glenn Cohen, Founder and CEO of Expert Realty Services, admitted as much. Glenn is an innovator in that he is harnessing powerful web applications to generate “leads” for partner brokers. Expert is not a brokerage per se. When challenged on the idea of the numbers game, he conceded that most agents will fail, so his and the broker’s solvency relies on “partnering” with the largest number of agents. Unfortunately, I see where that approach has gotten us.

To Sherry’s credit, she acknowledged that the early decade boom years brought too many, poorly qualified agents into the field and that we need to improve the quality of agents, which leaves me confused as to how we accomplish this with a model that is still brick and mortar, high-overhead dependent. Will a big brokerage like BHG ever turn away an agent “applicant?” Can they afford to and still pay the bills? Or will they still approach agent recruitment with a “throw it all against the wall,” actuarial table approach? Are we attacking the “problem” by just changing clothes when we are still virtually the same underneath?

The Consumer is King

All of the innovators, at least in their front-facing image, are acknowledging that the consumer is king. They are reaching out through content and rhetoric. Assuming for a moment that this is not lip service but is truly an attitudinal shift, is this commitment to higher quality and higher service scalable?

A couple of weeks ago we had a little blog debate going on this topic, and I asked Yuval Degani, Co-Founder and President of Dream Town Realty about the issue of scalability. He’s not sure. First a disclaimer: As I read the “about” pages on Dream Town’s site, I found that their business model and their philosophy represent everything I want to be when I grow up. They are what you might consider a “boutique” brokerage — not too large, awesomely tech-savvy, and focused on serving the customer first and the agent second.

How Dream Town strikes a chord is in their marriage of forward movement (technological innovation), a winning attitude (the customer comes first), and a hometown feel (agents as local experts providing a full-service, high-touch, superior experience). This is our model in a nutshell, but we can pull if off because we don’t view our agents as pure profit centers. Our agents are not our only, or even our greatest, source of income. Steve and I pay our bills by representing clients. If we ever moved away from being working agents to the roles of managing brokers alone, could the model pencil out? How do you keep that homegrown feel?; how do build a business around selective hiring practices and high standards of professionalism, experience and knowledge among associate agents while growing profits? How do you avoid becoming a numbers game? If world domination is the end game, then I concede that you can’t, which is precisely why I see the brokerage landscape of the future being dominated by a big collective of little guys.

A case of want versus need

I mentioned that there were some striking similarities among the panelists. The lingering idea that more bodies is better, that more agents equals greater profitability was just one of these. The other was that each held the belief that it was incumbent on the brokerage to provide the agents with all the “stuff” and, in fact, that the agent not only demands but needs the stuff. This is where I see us falling behind in our thinking.

Yuval said that, where technology and “lead” generation are concerned, the agent and the small broker simply cannot accomplish on their own what the large broker with millions of dollars in capital backing can. I disagree in a big way, and in looking at the relationship between agent and broker, I find a parallel in the evolving relationship between the agent and the consumer.

It wasn’t too terribly long ago that home buyers needed me for listing information. Today this is not so. I still have value, but my value has been redefined. You need me for my intellectual properties, and you need me for the service. If you are selling, you need me for my systems and efficiencies and knowledge that allow me to expose your home more professionally and broadly than you could, or than you care to devote the time, energy and resources toward. So goes the agent-broker relationship.

It seems like only yesterday that I needed a company brand for credibility. I needed the resources of a big company, both the fixtures and the systems, because there was an economy of scale which I couldn’t touch on my own. Today, I can work from anywhere. I don’t need the desk and computer bank and copiers; I have my own. I don’t need the listing feeds; I can place my listings any place my broker might, and in doing so all roads lead back to me. I don’t need the brand; I long ago branded myself. Group print advertising rates which used to be a huge benefit of associating with the 1000 pound gorilla are now an antiquated concept.

Admittedly, many agents may not want to think that hard, so there will always be a place for the high-overhead brokerage. But as we march forward in our social evolution, the numbers who will need help grasping technology or will need to be spoon-fed a business plan will diminish. As virtual office space becomes more the norm and less the exception, I believe we will be finding more agents concluding that the shiny office supported by company voice mail and e-mail systems and an administrative staff a dozen deep are “wants” and not “needs.” And when that happens, there will be more resistance to paying for something that is not truly necessary in conducting our business.

So we are left with the true value of the brokerage being in the areas of training and “lead generation.” Training is another topic entirely and for another day. As for lead generation, I see it becoming a footrace of sorts among the competing brokerages to generate the most “leads” (consumer contacts and inquiries) to placate and feed the largest number of agents. More agents equal more money. But then, haven’t we come full circle? Aren’t we back to what we are now? And just where did the customer go in the equation?

It looks like I may have more questions than answers, and perhaps I am even over-thinking the problem. But somebody needs to. The customer is telling us load and clear that the old, familiar ways of delivering our services are no longer good enough. They are demanding more: More honesty, more information, greater skill, and greater care. I just hope we are really listening.

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