Brokerage Models, Franchisors, REALonomics, Technology in RE

Dear Owners, the Border Patrol is out in Force

Business, whatever shape or flavor, always seeks to define itself in term of “the market” its product or service intends to enter, and then builds its operating model around this concept. Real estate brokerage business models have been less deliberate about this than their mainline counterparts, opting to use the “wing-it” method of market management!

Dear Real Estate Company Owner, the Border Patrol is out in force and your business borders are being restricted and artificially defined by entities and persons whose motivations are not always in your best interest.

Market definition has become the single most powerful component in the New Real Estate Economy and there is battle raging over what constitutes these borders and who will control them.

Those possessing the power to define markets are those with the power to control them and therefore, exercise influence over the resultant economic benefits to be extracted from them. We believe this about soda pop, the automobile industry and healthcare; why don’t we believe it about the real estate industry?

Example: The economic model espoused by franchisors capitalizes on the broker/owner’s rights to a piece of the “market” and seeks to control that definition via the franchise model terms and conditions. In this sense, Franchisors are the Border Patrol. The success of their business plan and its economic survival is dependent upon their imposition of the old geographically define notion of market area and they, to their credit, have succeeded in capitalizing upon it. While controlling owners with imposed markets, franchisors play by a completely different set of rules…an open market model…wherein they control the players on the real estate chess board.

REALonomics has written about Premission Based Real Estate and how the model definitions of our industry are restricting our ability to be competive in the Consumer-Centric Era.

A Botched Model?

What we have created within the industry that defines our markets is now collapsing before our very eyes. Why? Because the consumer doesn’t recognize our in-bred definition of “the market” and prefers to altogether ignore our silliness in favor of their own self-definition of market. The consumer seek a democratization of all things real estate, while we as an industry continue to quibble about lines, demarcation points and MLS property information defined as purely a local market matter.

In addition to the consumer redefining “market” for us, a cadre of what I have termed “The Non-Brokers” have recognized that the consumer wants to approach relocation, property information access and the buying and selling of real estate in ways antithetical to traditional real estate brokerage market models.

New Players – New Rules

These non-brokers are the Trojan Horse entrants who, with agility and exactness, have begun to penetrate markets and erode the broker’s grip on consumer loyalty. For now, let me just say “this is very big!”

The Non-Brokers have a different approach, for example, Non-Brokers:

1. Don’t seek or need anyone’s permission to operate;
2. Don’t care who has a real estate office(s) working in the market;
3. Don’t have historical connection or alligiance to the RE industry;

What the “Non-Brokers” realize is that our traditional definition of “market” is our Achilles heal and with appropriately applied technology services made available to consumers via that Internet they can capture the consumer’s attention and extract a mother load of capital from multiple markets.

The “Non-Brokers” have their own set of rules…the one’s they are writing. They are not members of the local or National Association of Realtors (NAR), nor do they pay homage to our inane claims to rights of passage to the markets.

Borderless RE

My business blueprint for competing in the New Real Estate Economy, the Third Economic Wave, characterized by a consumer-centricity, is a lot like Ronald Reagan’s view of the Berlin Wall: “Tear down this wall!”

Borderless brokerage is a reality, we just aren’t living in that orb yet. Our challenge is to create and implement the corresponding business models that will allow us to define our markets horizontally, not just vertically, as we have done in the past.

What is your market? How do you define your market area? Or, maybe I should inquire with respect to whom it is that is defining your market for you. What is the manner in which your company builds multi-market penetration models that are streamlined, consumer friendly and able to operate with tremendous fluidity?

Do you, as an owner, have a market definition that allows you to be competive and produce a sustained ROI?

Do you, as an owner, have a platform that allows you to effectively service consumers in multiple markets?

Do you, as an owner, understand that those who have the power to define markets also have the power to control them?

Do you, as an owner, have the will to address the definition of “market” to your own advantage, which will enable you to recruit agents in any market who are not attached to a building (the icon of the vertical market model) but to your value propositions as a company?

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