Brokerage Models, Consumerism, Franchisors, REALonomics, Technology in RE
The Second Economic Wave
November 29, 2006 by REALonomics · 1 Comment
The Second Economic Wave in the development of the real estate industry began in the mid 1970′s and continued until approximately 1993-94.
There are three primary events in Second Economic Wave, which I refer to as the Agent-Centric Era. These three factors fueled this era and gave impetus to the beginning of the most rapid set of changes to occur in the real estate industry. The events are:
- The introduction of the real estate franchise concept to the industry;
- The first computerized Multiple Listing Service;
- The advent of the personal computer;
The Real Estate Franchise
It might surprise the reader to learn that franchise concepts were embryonic as early as 1906 with the founding of Coldwell Banker. However, it should be noted that Coldwell Banker did not begin its franchising efforts until 1982.
RE/Max, was founded in 1973 in Denver, Colorado, and in my opinion is the historical axis upon which all real estate ownership business models spin. The RE/MAX concept was not just a franchise but a watershed economic model representing a shift from Broker/Owner controlled commissions to Agent-Centric businesses that would empower the agent as independent contractors with fee-based obligations the Broker.
This development shifted the focus of control from brokers to agents and further defined territorialism, creating competing and powerful national brands within the local Boards of Realtors.
The end result, much ignored by the industry, is the manner in which the franchise movement actually empowered real estate agents, who could now, more than ever, shop the competition for the best environment, highest commission and greatest level of freedom. These are very important concepts in the development of the real estate industry’s business models.
Computerized MLS
Franchising in and of itself created a new climate in real estate business development. But by itself, it could not completely transform the industry because the business of real estate was still operating in a geographic, territorial boundary controlled by the local brokers and their Board of Realtors.
Something began to change in 1968. One of the local Board of Realtors located in Long Island, New York, made an attempt to automate the MLS book by use of computerization of the property data. This was truly visionary, despite the failure of their first attempt. Seven years later (1975) the Long Island Board of Realtors successfully created a computerized Multiple Listing Service.
Whereas franchising began the process of tearing down the local real estate geographic territorialism by introducing national networks, it was the computerization of the MLS that would ultimately prove to be the second major step in unleashing the full power of technology within the Real Estate industry.
Personal Computers
The third component of the Second Economic Wave was the introduction of the personal computer into the industry mix. With the advent of the PC a door was opened that would allow real estate practitioners to tap into the computerized MLS system from just about any location, office or home!
This development began to loosen the iron grip Brokers had over agents and property information. The PC is the third leg the Second Economic Wave that would ultimately give rise to the Agent-Centric Era, an era that meant less dependency on the broker-controlled office environment. Agents, if they preferred could actually meet sellers and buyers in their homes!
These three developments formed the DNA for a new business model that would begin to emerge within the real estate industry. It is important to note that I have concluded the Second Economic Wave with an approximate date of 1993-94.
In 1993-94, real estate professionals began to play with a whole new toy that would further redefine the industry; the World Wide Web (WWW), a.k.a. the Information Super Highway (the Internet). By 1994 the real estate industry’s first property listings hit the Internet, making property information available to the consumer without the constraints of “brokers, boards, books, and buildings.â€Â
Toward the end of the Second Economic Wave, we have an industry that is rapidly becoming Agent-Centric.
As mainline brokers attempted to control their broker-centric environments, agents demanded more freedom a greater piece of the financial pie. This is the Agent-Centric Era and it would give rise to a Third Economic Wave, the Consumer-Centric Era.
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In 1991, I was with a franchise in north Louisiana. I had a great idea – let’s put our listings on a computer and hook it up to a modem and advertise it and see who calls in to view the listings. The phone rang day and night. The next idea was to change the delivery method for all MLS information. I decided, along with my broker of course, to put the entire local MLS on the computer. At that point in time, if a customer wanted to see info on a property, we could download and print it out and HAND it to them. In our opinion, all we were doing was changing the delivery method of the information. We got everything set up and were ready to advertise when a call came in from the Louisiana Real Estate Commission – cease and desist. My how times have changed. All of this information is now available 24/7 worldwide through the interent. I believe that what we were doing, in the context of the above article, is jumping directly from the Broker Centric model to the consumer centric model and it was too radical for the time. 10 years later, however, it was commonplace.