Brokerage Models

Take Two and Call Me in 2012

We simply do not want to understand the Evolution of the Real Estate Industry nor do we seem to have the resolve to reinvent our out-moded models that are incapable of producing the necessary economic results for Broker-Owners.

Franchisors are powerless without Broker-Owners and the old line franchise arrangements are no longer applicable in the The New Real Estate Economy.

Reality is always a very tough pill to swallow. It goes down, it seems, with the greatest degree of difficulty. Acceptance of reality is the great precursor to popping the pill.

Let me break it to you gently…the way we did business will no longer produce the ROI and sustained profitability required by Broker-Owners for the risks they take.

Tests have been run. X-rays have been taken. MRIs and CAT scans have been completed. The economic blood work has returned from the lab. The diagnosis is in…the party is over…without radical changes in lifestyle and barring miraculous intervenion, we are most likely terminal.

The Way We Were

The primary fuel for traditional brokerage profitability used to be control of property information coupled with free-flowing access to mortgage money. The relationship between brokerage profit and the control of information and lending is being redefined and will become more complex and demanding, creating fewer Brokerage successes but better leveraged and approriately balanced lending portfolios for banks.

Unfortunately, the banks have little interest in the survival of Broker-Owners or the real estate industry as we have known it. Add to this the new reality Owners are facing…the rapid accelleration of change and the inability manage forced transformation.

According to John Krainer, a Senior Economist on banking, “Fannie Mae, Freddie Mac, and Ginnie Mae now own or guarantee an overwhelming share of originations…at the same time, non-agency mortgage securitization and loans retained in lender portfolios have largely dried up.”

What is the current financial stability of Fannie Mae and Freddie Mac, the guarantor of the overwhelming share of originations? They are on the brink of collapse, still running seemingly insurmountable losses.

We are entering an era that will be characterized by cautious and tempered lending. This translates into fewer transactions per Broker-Owner across the board. There will be less to live on and it will be more difficult than ever to compete for what little is there. Behind this, our NAR membership continues to remain ridiculously bloated.

The Way We Ought to Be

A solution being formulated and floated by REALonomics could be called “The Property Metrics and Monetization Model” or simply put we shift our economic model to developing and marketing property metrics and away from sole dependency on closed transactions. We are now being forced to monitize our greatest asset in ways never before realized.

The monitization of our greatest asset, property and local information, are both pieces of the new economic opportunity we face. The bitter pill we must swallow (many are still in denial) is that we will never again return to what we have known and called “normal.” Deny as we may, we are never, ever returning to a business climate in any way resembling 2000-2006.

Broker-Owners should be in the business of developing metrics and monetizing property information for profitability. Tall order and tough sledding. We have given away so much that regaining a foothold may be the greatest challenge of all.

Our New Economic Mother Board

The New platform will not be predicated on Social Networking models, although these are key distribution portals that need to be tapped by Broker-Owners.

The new economic reality we face demands that we create an entirely new platform that will provide us an economic mother board for plug-n-play brokerage in the new economic environment.

The mother board contains the processor for property and local information models accessible and marketable to consumers through multiple portals. Buying a house is the secondary economic component of our new model math, rather than the primary.

• Improved property and local information access
• Improved property and local information packaging
• Improved property and local information deployment
• Improved property and local information monetization

In the new global economic environment the game consumers want to play is played on a whatever, wherever and whenever game board with access to all things real estate. Real estate is being democratized.

Speed and precision are going to become operatives, coupled with unrestrained access for the consumer.

Problem at hand: While NAR spends money lobbying for the salvation of an already dead model, the globalization of information will overtake it and us. There are really only three options for the industry.

Option One. NAR could become the leader in real estate information management on a global scale and re-empower Broker-Owners with marketable solutions that leverage consumer relationships.

Option Two. Owners could take back the property databases they own by creating their own transparent and exportable solution forming a new business model focused primarily on using property information as the commodity for profitability.

Option Three. Non-Brokers (entities outside the industry) could implement property information systems that sideline traditional practitioners. This is already underway.

Our industry is in a self-induced form of deterioration. Yes, I know that once again statements like this will bring about more labeling of me as counter-productive and produce quiet whispers of “he’s not a team player…”

My only answer is “Take two and call me in 2012.”