Brokerage Models, Consumerism, Editorial, Franchisors, Model Perfect, Transparent RE
Obsolescence, Demons & Neo Design
February 16, 2008 by REALonomics · 7 Comments
My real estate brokerage ownership and management experience involved two companies. I’m one of the fortunate ones, having got out of both with proceeds from the first and a cash sale of the second on April 22, 2005, at the peak of the market. In short, I came out somewhat sane and lived to talk about it.
My ownership experiences created the foundation for REALonomics, new real estate model math. I’m no longer a believer in the traditional brokerage business model. It cannot sustain owners and provide them with the return on the investment they need to justify their risk and certainly in most cases provide them with an exit strategy. More importantly, the model is increasingly being rejected by the consumer, who favors less control and much, much more transparency.
The fickle markets, all-wise consumer, transaction complexities, capital and legal risks and the arcane nature of the industry itself have rendered the notion of a broker-centric business model nearly obsolete. Want the unvarnished truth? Of the dozens of broker/owners I speak to each month, almost none of them believe in their model, not with the passion necessary to an ongoing and profitable business endeavor. My broker/owner friends are just stuck knee deep in the cement of a dead model.
Power brokering is becoming highly irrelevant. My broker/owner colleagues, nearly to the person, shake their heads and mumble, “…not worth it…I’m keeping the doors open so my agents can make money…and even they aren’t making money any more…”
Our Quickening March toward Obsolescence
Has the pace of change created an every quickening march toward functional and more importantly, economic obsolescence? Yes, it has! To a large degree the idea of opening a brokerage, complete with agent office space, desks, computers, copiers, coffee room and the assortment of industry trinkets that have little or nothing to do with providing consumers access to property information and homes, seems frightening and very risky.
Ours is an industry where owners just won’t let go of themselves, even after staring into the mirror of obsolescence, where we see ourselves, tired, lonely, frustrated, isolated and economically challenged.
The Broker-Centric era (the first economic wave) and Agent-Centric era (the second economic wave) business models are in a final march toward obsolescence. In effect, neither owners nor agents can afford to push the model much further into a future where liquid property information will abound, consumers will bask in the democratization of real estate and we will service transactions from wholly new vantage points.
This “march toward obsolescence” is a not an industry death knell. More accurately, it could be described as the introduction of a new “script” that charts the direction for highly innovative blueprints that finally redefine how we interface as an industry with people in the Consumer-Centric Era (the third wave of our economic development).
Exorcising the Resident Demons and Myths
Like Emily Rose, we are possessed by many demons. In order to build a neo design we will need to cast out the old counter-productive forces that have taken up residency within our business models and whose negative influence permeates the industry. We are possessed of many…most must go…some will be allowed to remain, temporarily, due to necessity…others can be tamed and trained, perhaps.
The long held notions, superstitions and fairy tales about real estate brokerage will need to be addressed, as these have long held sway over our creative capacity to reinvent, paralyzing us and placing us in an economic stupor.
We must cast-out the idea of property information control and open a transparent portal for the consumer to enter into new conversations with us about real estate investment, where we are truly qualified, trusted and knowledgeable about their investment strategies.
We must expunge the idea that bricks-and-mortar retail models in fixed and defined metro market service areas can continue to produce adequate ROI. We must drag the demon of overhead, kicking and screaming out into the open market where it can be exposed for what it truly is, the enemy of owners and franchisors.
Our demons are legion…they do not come out easily and when they finally do they leave a mark, a dent, a scar that says, “We once lived here.” Our resident guests impact our economies of scale, our market agility and most importantly, our long term survival.
Etch-a-Sketch®: a Neo Design
In 2008, REALonomics will etch concepts for the creation of a neo design. We will put it on paper (well, in the blog) and make the model ideas accessible to you. We will interview brokers, agents, industry leaders and of course, real people who buy and sell real estate. Novel, eh?
Changing our industry’s design is daunting. We need to take a look at our sprawling geographic markets, such as California, Florida, Phoenix, Las Vegas, Chicago, Atlanta and the rest and ask “what can work here, now and tomorrow?” Our industry should deliberately engage in designing the optimal consumer-centric, consumer-partnered, brokerage services model, replete with features necessary to the era in which we live.
Baseline business modeling begins with unfettered access to property information…sketch it in!
Baseline business modeling includes a renewed commitment to standards of practice that please the consumer and create a new, more comfortable reality…sketch it in!
Baseline business modeling marries cultural realities to the real estate transaction prototype…sketch it in!
Baseline business modeling has something to do with expunging the ego-centric expressions and components from the industry that continually project a self-serving, money-grabbing image…sketch it in!
Baseline business modeling is predicated upon a model for all participants, one with the highest possible qualifications for entry…sketch it in!
Baseline business modelling requires rigorous adherence to qualification standards for owner/operators, agents and core service providers…sketch it in!
Finally, baseline business modeling demands adequate ROI when measured against the risk of capital, creative and intellectual investments of the players and principals…sketch it in!
Our impending obsolescence is merely temporal. Our model is being replaced, part-by-part. Can we, those of us within the industry, shake the demons that possess us and sketch a new, highly productive model that will propel us into the future? REALonomics thinks so…sketch it in!
Related posts:
Bravo et encore! Your best post to date–thoughtful and provocative. Now, bring it home Donald–show us the way, the truth and the light:)
Tim – We believe we have brought it home via e-Partner’s open market model where broker/owners can enlarge their market management, recruit agents ubiquitously and add new revenue streams to the bottom line from such things as core services and advertisement revenue streams.
Now, we have gone a step further and partnered directly with the consumer via http://www.CityBlogUSA.com or, in your case, http://www.MassachusettsBlogPage.com. Or, even closer to home BOSTON CITY BLOG. However, you can expect more specificity from REALonomics in the days and months ahead.
The Way: decreased reliance upon fixed based, bricks and mortar operations that only produce revenue from restricted markets;
The Truth: our traditional business model that attempts to somehow balance broker-centric and agent-centric models will no longer produce adequate ROI.
The Light: REALonomics…convincing owners to acknowledge, once and for all, that our lack of consumer-centricity and our clunky retail models are going to be replaced, if not by us, someone else. Preview this presentation.
Thanks for your feedback…REALonomics
Don–I’m looking at things more through a web 2.0 lens that fosters community, relationship buidling, distributed content (audio, video and text), content ownership, scocializtion of media, tools and voice, friend-of-a-friend networking, microblogging etc. Also, my focus is more on the hyperlocal than the regional. My approach is based more on attraction rather than promotion. I think your a very smart individual who is very much on track to charting a successful course for the future. My only word of caution, based on my experience, is to not get so attached to a single immutable model (e.g. web 1.0, homegain, housevaules, etc.), but to embrace change and always be ready to re-purpose your vision in an ever- chaging lanscape. Here’s a meme that I have recently embraced: “We are all media companies now!” (yes even us brokers/agents)–and only those who are the best at producing quality content in multiple formats will succeed. Don, be happy to exchange ideas with you anytime.
As a highly productive agent with 21 years of experience, I agree with almost everything you wrote.
My only disagreement is with your position/statement: “all-wise consumer”. Having easy access to a lot of information does not make a person wise. Having access to a lot of information is one thing, knowing how to apply it effectively is another matter altogether. If anything, the deluge of massive amounts of real estate information available today can make it harder for a consumer to sift through it and determine which is the best course of action to take.
This is similiar to the easy access the consumer has to almost unlimited stock market information – it does not automatically enable the consumer to reap huge profits from investing in stocks.
Jason – Nice post. After 25 years in the business, I agree that my wording was not what I wanted it to be.
You are correct; “all-wise” implies much more than I intended to imply. My intent, was to convey the implication of a consumer who has almost unlimited information access, creating a growing level of knowledge, but not necessarily wisdom.
Wisdom, as we both know, is the application of knowledge within a proper framework, involving many things. Thanks for helping me!
Donald Teel, Founder – REALonomics
Donald – I applaude what you are doing and sincerely wish you the best of success.
I am unfortunately pessimistic about how much our industry can truly improve. The reason for my pessimism is because I believe that the root cause of the numerous problems we have in our industry is not due to poor business systems or models, but due to flaws in human nature. If human nature were not so flawed, the industry would by itself implement the things you are advocating. Human nature being what it is, few people are willing to constantly examine their lives and practices to see how they can make it better.
It always amazes me when I see broker managers and company owners conduct their business in a manner that is harmful both to themselves and to the agents working in their offices – it is so self defeating.
Keep up your crusade Donald – I believe your message can make a positive difference in our industry despite the big obstacles.
Jason – Pessimism is sometime created by being too close to the problem or, perhaps wound up in the issues.
Our industry IS morphing and this transformation is accelerating almost daily.
Your amazement at owners/managers who make decisions and conduct business in ways that are “harmful harmful both to themselves and to the agents working in their offices” is something I have been writing about for a long time. See http://www.ePartnerUSA.com.
Owners are essentially trapped…yes, I know the song about self-perseverence. The industry’s models are design to lock owners into positions that produce little or no ROI except during robust markets.
It’s the model, Jason…the model.
I will forward to you an article I wrote a long time ago, entitled, “Why Do We Do What We Do When We Don’t Have to Do What We Do?”
Thanks for the comment.
REALonomics