Pete Flint, one of the co-founders of Trulia, and Robert Reffkin, the CEO of Compass, predict that the traditional real estate model will die. (Read the recaps of their forecasts from Inman Connect New York here and here).
I disagree with their assessment — the traditional real estate model is alive and well at many of the big companies, but more importantly, in the myriad of small independent brokers that form the unsung backbone of the industry.
I agree with Flint that a “tsunami of technology” is coming and that it will transform many aspects of the real estate transaction.
Business @ The Speed Of Thought
Nevertheless, these types of predictions date as far back as 1999, when Bill Gates published Business @ the Speed of Thought and argued that the internet would “disintermediate” (replace) real estate professionals by bringing buyers and sellers together directly.
Rather than coming to pass, the exact opposite has happened: the number of FSBOs has declined from 20 percent in the early 2000s to 8 percent, half of which are intra-family transfers due to death, divorce and other factors (2017 NAR Profile of Buyers and Sellers).
Moreover, it has become increasingly apparent that technology is not a replacement for a human being, but a tool to be used to accelerate and enhance the search and transaction process.
Artificial intelligence works great for linear problem solving, but it probably has decades to go before it can accurately read human emotion and make an appropriate response to it.
A case in point, Real Scout’s Andrew Flachner explained that it took over a year and millions of training sessions to teach Real Scout’s algorithm to differentiate between the various rooms in a house.
Hans Guth, in the comments section of the article where Flint predicted the demise of the traditional brokerage, summed it up like this.
Where Reffkin really missed the mark
Reffkin’s assertion that, “Agent teams will replace the brokerage firm” is flat-out wrong. Every agent team in the country must operate under a licensed real estate broker — that’s the law.
If anything, there seems to be an emerging trend afoot of teams launching their own independent brokerages to develop their vision and value proposition to fit how they do business — not how their current brokerage conducts business.
The ‘stealth’ model of real estate
My biggest takeaway from Connect this year was that we have two very different models operating side by side in real estate, and it has been this way for decades.
The first model is the one everyone recognizes and talks about — it’s about GCI, profitability, a structure that often is agent-focused (rather than consumer-focused) and is male-dominated at that top.
To illustrate this point, of the top 100 producing firms in California, only 14 are run by women.
The second “stealth” model has been operating virtually unnoticed in tens of thousands of small (and some very large) brokerages where value and culture matter and a customer focus is paramount.
For all the hype about Keller Williams being a cult and its emphasis on profit share, there are three key value components of its culture that underpin its massive success:
1. Mission: To create careers worth having, businesses worth owning, lives worth living, experiences worth giving and legacies worth leaving.
2. Core belief system (WI4C2TS):
- Win-win: Or no deal
- Integrity: Do the right thing
- Customers: Always come first
- Commitment: In all things
- Communication: Seek first to understand
- Creativity: Ideas before results
- Teamwork: Together everyone achieves more
- Trust: Starts with honesty
- Success: Results through people.
3. KW Cares: Last year, over 70,000 agents participated in “Red Day” where KW agents contribute to their community. KW Cares teams are also among the first on the ground following major natural disasters such as Katrina and Harvey.
It is these same components that are at the heart of most successful smaller, values-based brokerage models.
Based on my interviews with over 40 successful female brokers, there are four other major components as well:
- The no. 1 thing that agents want is to know that their broker “has their back.”
- Agents also want to know that their broker has the contract expertise they need to navigate the legalistic waters of today’s real estate environment as well as providing them with the technology and tools they need to grow their businesses.
- Successful value-based brokerages form “business families” that not only work together, but also play together as well. They are often immune to recruiting efforts because the close connections agents have with their broker and their fellow agents.
- They volunteer and actively give back to their community.
Now compare this to the Compass model (as Reffkin and others described it at Connect).
- Hefty signing bonuses and stock options for agents (reports of up to $1 million and more for top producing agents and teams (“whales”).
- Great looking tech (hardly revolutionary).
- A customer relationship management (CRM) for the company’s 2,000 agents. (Will top performers make a shift when they already have a productive system in place?)
- Targeted digital marketing.
- New solar sales signage.
I was sad to hear that Realogy’s new focus is upon being agent-centric, rather than consumer-centric.
In 1998, Coldwell Banker led the consumer-focused culture with tools like Personal Retriever, and in 2002, it was the only national residential real estate organization selected by the National Concierge Association to receive the prestigious membership affiliate for the concierge programs.
There’s no question that both models work — the real question for the industry is which model will have the most staying power as we move into the next decade and beyond.
For additional information on the power of culture see Inman’s latest special report: “the keys to a strong company culture.”
Bernice Ross, President and CEO of BrokerageUP (brokerageup.com) and RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles. Learn about her broker/manager training programs designed for women, by women, at BrokerageUp.com and her new agent sales training at RealEstateCoach.com/newagent.
