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Real estate’s most profitable years are coming, but brokers who want their piece of the pie will have to make some changes, according to panelists at Inman Connect Las Vegas on Tuesday.
In a session called “Broker Realtalk: How to Optimize Opportunities and Maximize Profitability in Today’s Market,” Joe Skousen, CEO of Inside Real Estate, presented a slide showing that broker profits have fallen from 22.4 percent in 2012 to 11 percent in 2021.
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Clelia Peters, Joe Skousen and Chris Heller at Inman Connect Las Vegas on July 30, 2024
“We’ve just come through this tough market,” Skousen said.
“We’re at this point where we are about to see some of the most profitable years that have ever been seen in this space. Not everyone here will experience that. Many here will and some will be out of the business. That’s the divergent trend that you will see.
“But there are very profitable, very exciting years ahead. But it tells you some change is needed.”
That change is not going to come from nipping spending in the bud, according to Chris Heller, president of OJO.
“You’re not going to cut your way to profitability,” Heller said.
“You have to grow revenue. It’s not by doing the same thing that we’ve been doing. It’s not by doing more. It’s not by running faster. Most of you can’t run faster; most of you can’t do more than you’re doing.”
That means either doing something fundamentally different and/or fundamentally changing revenue sources, according to Heller.
“Where are those additional revenue streams going to come from?” he said.
Skousen agreed that fundamental change is needed and said brokers had a few things to consider.
“The first is your model itself,” he said. “What are your agents paying for today every single month, outside of you, outside of your stuff? Because they spend more money today than they ever have — do you realize that? While your margins are weaker than they’ve ever been, possibly.
“There’s a fundamental question as to what part of what they’re spending today are you not getting, and why not? Why are you unable to capture that piece of revenue? Can you ask yourself that question and find some opportunity?”
Heller agreed and added a corollary to that: “What are you spending on for your agents that they are not utilizing?”
Brokers are constantly competing to recruit and retain agents by offering more and more tools, but then they have trouble getting agents to adopt them, Heller noted.
“Maybe it’s time that we say, ‘OK, look, I’m not going put resources into that. We’re not going to keep trying to lead the horse to the water and force them to drink. Maybe there are companies that we can leverage to do those things, provide those services, so that we can reallocate things, the things that will actually move the needle,'” Heller said.
Agents are currently paying up to half their commission for leads that end up in deals, according to Skousen.
“Do you bring deals to your agents? Do you actually bring deals, not just leads?” he asked.
“Do you know how to coach them? They spend a lot of money on coaching in this space. Do you know how to help them run a profitable business themselves?
“The top teams, they’re paying big splits. Some of the brokerages in the space are seeing the highest splits they’ve ever had. Part of that is because there’s business consulting built into the business. So there are a number of these ways where you actually can drive pretty rich and recurring revenue streams.”
Another area brokers should consider is: “What is your primary value?” according to Skousen.
“Are you a brokerage house? Are you a place to hang a license? Are you a place that provides an office? What more can you be in this environment?”
Brokers should be asking themselves what they are good at offering, according to Heller.
“We often try to be all things to all people,” he said. “That’s hard to do.”
Brokers should remember that they can ask their agents what they want from them, according to Skousen.
“You can go actually talk to your clients and say, ‘What are you spending on that you’d like me to cover? If I gave you someone that would do anything you want, what do you need them to do? How do you need them to help?'” Skousen said.
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