Yesterday, Joseph Rand said something that I’ve been saying, publicly and privately for a long time. In response to Brad Inman’s article about disruption in the real estate industry, he said, “I’m more optimistic than Brad seems to be that brokerages can adapt, and that they’re the ones in the best position to improve the client service experience.”
According to Rand, the three main reasons why brokers have allowed the possibility of disruption to occur are:
- We don’t train agents to be great at their jobs of servicing client needs.
- We don’t hire for competence.
- We don’t innovate to find better ways to service our clients
The most dynamic challenge real estate brokers face today is NOT about changing their business model; it’s about improving the way in which they execute their existing model.
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And I couldn’t agree more. A couple of years ago I wrote a post titled, Vision, Values & The Real Estate Industry. I said, “People love to blame “the model” and the independent contractor status of the individual real estate agent on the inability of real estate brokers to lead. Furthermore, they blame this model for keeping a truly consumer-centric brand from being established. I think it’s crap.” I still think it’s crap. And if I’m reading him correctly, Joseph Rand thinks it’s crap as well.
“For a generation,” Rand says, “the real estate industry has been focused not on what clients need, which is a better transactional service experience, but with what we need — more leads, more sales, more money.” I’ve never seen a business that could sustain itself over the long haul without focusing on the needs of it’s clients. True business success comes from focusing on delivering an exceptional client experience. And not just to your external clients, but to your internal clients. This is as true for real estate as it is for any other industry.
Does This Require A New Real Estate Business Model?
Put simply, no. It is not the model that is broken. Bill Leider and I started our presentation to real estate brokers at Inman Connect in New York this year with the following statement: The most dynamic challenge you face today is NOT about changing your business model; it’s about improving the way in which you execute your existing model.”
There are fundamentally sound reasons for keeping the current real estate business model:
- It thrives best when you build and sustain lasting relationships.
- The best Brokers & the best agents have the aptitude to do that well.
- The vast majority of clients are not asking you to change your model. They are asking you to improve the quality of your execution.
- When well executed, traditional models can be highly profitable.
While traditional models are portrayed as archaic and obsolete by a small, but vocal contingent of newly minted tech gurus, in fact the opposite is true. If real estate is to be disrupted, it won’t be because of technology. Great brokers will adopt the right technologies. Rand concluded with this, “if we can’t find a way to provide agents and clients value, then we get what we deserve.” Well said, and true.
Successful businesses are built on three elements: culture, brand and values. Real estate brokers need to create thick layers of value, guided by a shared core mission (vision), driven by a clearly articulated set of values and aligned squarely with the products/services desired by their clients.
This is completely within their control.
Life this week has reminded me what people are looking for in their real estate professional (note I did not say REALTOR®): competence, trustworthiness, likability. Once you have that, it’s just a matter of never letting them forget you are in the business. Not rocket science but certainly not for everybody. I have a small brokerage firm but I do not believe that people hire the broker: people hire an agent. Agents who succeed realize they are small business owners and they behave as such.
The problem with repeating the mantra, “people don’t hire a broker, people hire an agent” is that it gives brokers an excuse to not act like business that has control over it’s brand. I fundamentally disagree that the two can’t live in cooperation with one another and be stronger as a result. \
Agree 100% Jeff – no excuses for poor, cowardly leadership, but the truth remains, in survey after survey, consumers say they hire the agent, not the company. Yesterday I perused the web for real estate teams and in almost every case, the actual name of the broker appeared in very small print at the bottom of the scroll. I had to search to find it. If we lose the independent contract wars, will the industry go all-broker? Now that would be disruptive. Thoughts?
I believe there could be a multiplying effect, Leslie. The two don’t have to live in conflict. The value of a strong, broker-lead brand and culture should be additive and valuable. That would not be disruptive, it would be powerful, however.
I have been completely baffled and surprised the real estate broker/agent “model” has not tumbled by now. Academically they have low barriers to entry, supplier and buyer empowerment, vertical, forward and horizontal integration threats, yet the system seems to work. I have asked myself many times, why? In fact the smartest people I know, those who study and consult business strategy around the world believe it is not sustainable, yet the model continues on and on.
The last five years I felt like the model held together because all parties in the transaction agents, brokers, consumers even bankers 😮 were anxious to take risk. I was convinced after the recession the smarter more empowered consumer would harness its empowerment and take a bigger lead in the sales process. I am not certain but this may still be a menace when most stressed markets begin to see confidence in the recovery.
However in the last year I have changed my mind just a little. There appears to be a niche for the true and sincere LOCAL relationship. Imagine that!!;) Further more the hyper local world is becoming more touchable and relationship-able through technology. We are now 4.9 degrees of separation from knowing everyone. And in the next decade, certainly the next five years, those brokers and agents who can understand where we are going and act now will still be enjoying a wonderful career.
So a few thoughts added to what you have posted so eloquently for brokers and their agents:
1. LISTEN on a hyper local level with Facebook, Twitter, blogs etc. using new data platforms such as Hadoop or others for example,
2. Act quickly and sincerely with a cognitive ability to interpret the data sets presented, leading to off line and online relationships
3. Deliver amazing CUSTOMIZED customer service (shock and Awe) online and offline.
4. Stay educated in mind, body, spirit and business. Yes, I mean all four! In other words all four can help generate and develop what you Jeff believe is the key to success (and I agree completely): CULTURE, BRAND AND VALUES
Oh Geez, I could go on for hours…….
Julie
Don’t make me force you to guest blog again, Julie. 🙂
If you refer to the “MODEL:” as broker/agent. That is not likely to change until some of the NON Broker platforms gains more traction .. IE. Zillow, Trulia, etc AND they will so, lets see where that goes..
The real MODEL we should be talking about is a Client Centric Model of real estate brokerage. That would be a NEW model. While individual agents will claim that clients are the center of their universe, It certainly isnt so with the bulk of the real estate companies anymore. Truely………….. they see the customer as their agents. The agent centric model is the real issue effecting the brokerage business. It is hard to serve 2 masters!!!
“The real MODEL we should be talking about is a Client Centric Model of real estate brokerage. ”
Is that not Redfin?
Respectfully disagree….the brokerage of the now should be focused on bettering the life and business of an agent by taking the things off of their plates that they should not be doing. If the brokerage does this, it will allow the agent to put more focus, time, money and energy on their client which will have a direct effect on improving the transaction for that client.
Brokerages need to be focused on the agent as the client, not the end user, the person that is going to transact with the agent and brokerage. It is singularity of focus that will improve the agents business and ultimately the experience of the client.
LOL! Thanks that was a very nice thing to say!!
I wonder why no one has thought of the idea of hiring agents as employees and paying them a living wage + commission. That would really change the business model and brokers would maybe spend more time training and retaining agents instead of spending so much time recruiting independent contractors who have an 80% drop out rate during their first year.
That’s how we do it here, and it doesn’t work either, if you do not Focus on the client. It is not the model.
Excellent post as always Jeff and right on point. The disruption in real estate is not going to come from a tech company taking taking the transaction right to the consumer and removing the agent or brokerage altogether.
My firm belief is that the disruption (is already here, btw) will come from within the current model where the brokerage of the future is focused solely on their client, the agent.
If the brokerage model of the future (or in our case, the now) is to be disrupted, it is by a model that improves the life, business and career of an agent by providing systems, branding, technology and training to that agent that will allow them to do more business.
By improving the life of the agent and allowing them to put greater focus on their business and ultimately their clients, the model will also improve the transaction for the client by osmosis.
The funny thing with this model is that it is not new, it is the way things used to be. The broker had a vested interest in their agents to see them succeed. Some where in the time continuum, we got away from that and the brokerage model that currently exists is likened more to a stationary store.
“By improving the life of the agent and allowing them to put greater focus on their business and ultimately their clients, the model will also improve the transaction for the client by osmosis.” << True business success comes from focusing on delivering an exceptional client experience. And not just to your external clients, but to your internal clients.