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Franchisors are powerless without Broker-Owners and the old line franchise arrangements are no longer applicable in the The New Real Estate Economy.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

Syndicated from e-Partner

For centuries the notion of turning lead into gold has captured the imagination of countless Alchemists, all of whom were doomed to failure.

The real estate industry’s economic model has been for decades akin to conjuring concoctions that claim to convert the weight of our tarnished enterprise models into shining bars of profitability.

We have not always understood the true alchemy of our industry and the relationship between the decline of profitability with the introduction and application of new technologies to our industry.

Each of the two great historical shifts (economic eras) in our industry have occurred with the rise of new technology, the independence of agents and the empowerment of the consumer. Consider the following diagram and then listen to the accompanying presentation.

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Tenus Terminatio Cuspis?

This Post Syndicated from e-Partner

Ours is an industry with legacy. The brokerage business has seen many booms and endured many busts.

Many have come and most have gone.

Road kill has always been a part of the mix; the strong eat the weak and the weak find refuge in other endeavors.

The real estate industry has always been a town occupied by heralded gun slingers whose reputations have become the stuff of legends. Sometimes these are brands, other times they are movements, fads or personalities that come and go with the wind.

We have always been a tad reckless; that’s why we are a business model willing to predicate its economic viability on the unpredictable and unenforceable productivity of independent contractors. Let’s admit it, the business cultures we have created have typically been less than IBMish.

Nonetheless, we have moved from era-to-era, cycle-to-cycle and shifted from mode-to-mode, surviving the financial droughts of summer and living through the long, frigid economic nights of our many winters. We are an industry that could legitimately lay claim to squeezing blood from turnips.

We have historically endured and outlasted our most caustic critics who have mocked us at every turn and likened us to dishonest snake-oil salesmen.

Yes, we’ve been brought back from the dead a number of times. We are a cat with nine lives and most of them have been used up.
Are we now reaching the termination point? Are we, Tenus Terminatio Cuspis?
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Owners on the Edge of a Razor

Syndicated from e-Partner

Owners are engaged in the delicate balancing act; walking on the razor’s edge, barefoot.

Slicing into Profit

The razor upon which owners must balance themselves is now slicing so deeply into revenues that profitability is now proving more and more illusive. Today’s Broker/Owners are confronted with an economy that is not rebounding fast enough to enable them to survive.

e-Partner has long held that Broker/Owners are the financial backbone of the real estate industry and that their survival should be one of the top priorities of our industry through 2010.

Our Bleeding Feet

The razor’s edge takes no prisoners and yields no concessions to owners who are struggling to meet their ever increasing general operating expenses. Trapped by the same economic factors faced by other businesses, owners are looking for ways to decrease fixed and personally guaranteed obligations.

e-Partner talks to owners from every brand and those who are independent and the story is generally the same. There are simply too few closing and too much bricks-and-mortar operating expenses. “There is just not enough transaction commission to meet the monthly demands we have,” one broker/owner told us.

Mandatory Agility

Agility, created and sustained, is the first of the Ten Commandments of the New Real Estate Economy.

Although we are not quick on our feet, the razor’s edge is sensitizing us to perils of standing still for too long in one place. Our bloated organization body weight presses down on the sharp stainless steel edge and this slices away large chunks of capital required to sustain retail models.

New principle: the razor’s edge is now an owner’s continuing reality and he/she/all of us will learn to walk on this edge nimbly and quickly or, we will be cut to pieces.
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The Four “Bs”

Let’s get down to some serious industry transformation discussions regarding the “Four Bs.” The Four Bs are the fundamental building blocks that heretofore drove the real estate industry’s models with respect to consumer relationships and Broker/Owner profitability.

Brokers, Boards, Books and Buildings remain the economic blocks that continue to drive our brokerage profit models. Three of the four are still alive and kicking. What are the Four Bs, how do they function and what, if anything, do they mean to us now? More importantly, how do they meet contemporary consumer expectations?

Broker/Owners are literally the financial backbone of the real estate industry. e-Partner and this blog, REALonomics, support the importance of sustaining the roll Broker/Owners play in perpetuating real estate transactions and indeed propping up the industry at large. It is Broker/Owners who literally guarantee the financial stability of the industry. They are real estate’s preeminent risk-takers.

They are almost always the sole guarantors of market presence and it is they who take most of the personal financial risk for the real estate organizations operating within thousands of communities.

Fact: Broker/Owners are losing their ability to produce and sustain profit for their local brokerage firms. The risks now out weigh the rewards, as many are discovering. TWe are facing the financial collapse of many Broker/Owners.
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