This is a philosophical analysis. Real estate is changing. And for those of you who have been in it awhile, you will recognize that the changes are fundamental. In our region, there are 11k agents on the local MLS, and inventory is scarce, because many sellers are still not out of the woods on their pre-'08 mortgages. If they get above water soon, inventory will flood the market, which is exactly what we need to have happen. Volume.
However: Even if the inventory problem gets solved in the next couple of years, the technology issue is unavoidable. The industry is getting more competitive. New marketing platforms appear as quickly as animal species disappear from the earth. Bionic roaches will be doing our listing photos before long.
When your new listing is up for fifteen minutes and there's already an auto-generated video on someone else's website, complete with a cute feminine voice cooing about how sexy it is to have two parking spots so you'll never be short on parking, and all your pics have been filched, the kid on the side bar of that site who pays $150 a month may well be the one to get the call on your listing. Not to mention that the consumer is savvy to sales and marketing ploys. It's all white noise now. It is harder and harder to appear any different from anything or anyone else.
But there's something else fundamental going on, on the infrastructural side of the business. If you pay attention to the national market, you will see that the business model for real estate brokerages has changed its tune. For example, in the Twin Cities, real estate agents are not charged desk fees anymore. This is a five year-old phenomenon there. That's right. They don't pay their brokerages fees. Buyers and Sellers are charged a flat rate for a transaction. Usually it's around $500 per deal. That fee goes to the brokerage. The transaction fee of 4-7% on avg. all goes to the agents working the deals. This is because brokerages understand that agents have a choice about who they work with, and because we are being gouged by our associations, listing services, insurance, you name it and there's a fee for it!, we are going to be much more savvy ourselves about which brokerage is the one we are going to play with.
On these seas, it is harder and harder for the antiquated companies to stay the course and keep using agents as cash machines.
Are you a jazz musician stuck in 4/4? Just as pop music is seeing some 5/4's and at the very least some syncopated 6/8's (Thanks, Sting!), a 7/8 is on the horizon.
So, it's a blessing and a curse for agents. On the one hand, Glengarry Glen Ross is upon us. The sharks are in the water. On the other, it's the onset of a golden age in real estate in which the competition for brokerages is as stiff as it is for us brokers on the ground. And as a result, they have to compete for our business.
There is a new kind of model that has emerged, with a support system built into the infrastructure of the business. This model is set up to charge the brokers very little desk fees with a very small split, so that for each transaction we complete, we keep most of the money we make so we can pay our fees and our marketing bills and our sign costs and insurance and our various technological platforms that are proprietary and required to do business.
All these factors are imminent: Good branding, low split, low cap, decent tech, some support on the transactional side, and residual income in the form of recruitment programs.
We're all moving from F# to A, and the big bands of the industry don't want to take it to the bridge. Even if they have the desire, they missed the change. The music industry went indy, and killed the studio system. This is the same deal.
In the Pacific Northwest, there has been until now a simple choice to make when selecting your brokerage: Infrastructural support, high costs; or DIY it and pay very little. The middle-ground has been found. When you are looking for your office, whether you are brand-new to the industry or have your own office and are looking at it in terms of enticement of new agents to your roster, in my estimation there are not many choices now.
And I promise you that in the next two to five years, the west coast is going to go the way of the mid-west. Desk fees and splits are going to drop across the board, branding is going to get far better, and as an agent you are going to have much more control over your own destiny in the simple choice between agencies. My company may not be the best one forever, or even for very long. But it is without a doubt the most user-friendly model in existence this year, and I suspect for some to come.
Where does your agency stand in this analysis? Because JB already hit it and quit it.
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