SAN FRANCISCO — New technology can help small, independent real estate brokerages compete with franchises that have become household names by besting their larger competitors in online marketing and customer service.
But don’t expect the big brokerages and franchises to give up market share without a fight. Many are led by capable executives who are well aware of the changes taking place around them, but who face institutional resistance to change.
Once the big-name brokerages unleash their considerable resources on improved customer relationship management, consumers may be more likely to seek out a brand name than an individual agent.
Those contrasting views of whether big brokers or small shops will dominate the future were presented at Real Estate Connect San Francisco by Kris Berg, the co-owner of a small San Diego-based brokerage, and Rob Hahn, a consultant who’s advised some of the biggest brokerages in the business.
"I don’t see this as an argument of who’s better — there’s always been room for both," Berg said. But technology that empowers consumers is swinging the pendulum toward small brokerages, Berg said — and she doesn’t see it swinging back.
Berg explained the decision she and her husband, Steve, made last year to sever their ties to a nationally known franchise and strike out on their own last year, in a column she wrote for Inman News (Berg and Hahn are both regular Inman contributors).
After moving their own ad spending from print to online, starting a blog, and communicating more with clients by e-mail and text messaging, the couple started questioning why they needed to be affiliated with a big brokerage. They tried moving to a small boutique brokerage before starting their own company.
"Our hope is that it will allow us to be more nimble, more consumer-centric, more efficient and thus more effective," Berg wrote at the time. "Most importantly, it will allow us to be more in control."
Berg revisited that point in her debate with Hahn.
"We were making a pretty good split — it wasn’t about money, it was about control, and it was about value," Berg said of the decision to leave their big brokerage.
Big brokerages, Berg said, are only as good as their weakest agent. In an environment where "success depends on grabbing the most bodies you can, your brand is going to suffer."
Berg said she and her husband made the decision to work with agents who shared their values, and would reinforce the culture they wanted to create.
Technology makes it possible for small brokers to perform the services once provided by large firms, such as marketing listings, promoting themselves, and taking care of back-end chores.
"Sometimes I received a negative value, because we are all competing in the same space," Berg said. When her brokerage got to a listing syndication site like Zillow first, she said, "they trump my brand there."
Berg’s company, San Diego Castles Realty, has just four agents and brokers, including Berg and her husband. But on a per-agent basis, it’s outperforming the big-name companies, she said.
"Very few — fewer and fewer (potential clients) pick up the phone and say, ‘Hello, big brokerage? I want you to sell my home. Send somebody over right now,’ " Berg said. "They are looking for an agent," not a brand, and getting smarter about how they go about finding that agent. …CONTINUED
At the same time, agents are realizing that it’s not that hard to get their broker’s license, or to run a small company.
"I have the same attorney, and E and O (errors and omissions insurance) carrier as my last brokerage," Berg marvelled.
Before long, she said, "I think market share will collectively belong to the small broker."
But Hahn pointed out that the technology that, among other things, empowers agents and small brokers to market themselves independently, is expensive to develop. Companies like Trulia, Zillow and Google require tens of millions in venture capital to get off the ground.
If agents can achieve success with a free blog, imagine what big brokerages will be able to do when they invest $5 million in a custom blogging platform, Hahn said.
More significantly, Hahn expects big brokerage companies will develop "enterprise class" customer relationship management (CRM) tools that will once again allow them to "truly own the customer relationship."
Large brokerages, and name-brand franchises and their company-owned brokerage offices still earn most real estate commissions, Hahn said. The leaders of those companies are aware that the competitive landscape is changing, and will adapt.
There are a lot of very smart, motivated people leading the big brokerage companies, but political and organizational issues make it hard for them to push through change.
Eventually, the big brokerages "will wake up, and defend the billions in wealth, profits and investment tied up in these organizations," Hahn said.
He pointed to Redfin — which recently announced it had turned its first monthly profit in June — as an example. The Redfin model is all about controlling the customer relationship through enterprise class CRM and customer service, so that the brand, not the agent, is at the center of the client relationship, Hahn said.
"When they came out, I said this is the future of what the big brokerage might look like," Hahn said. "There is nothing in their model that is not scalable."
Berg was unfazed by such arguments. Small brokerages can control their marketing channels and message, and the quality of service delivered to the customer, she said.
"You lose the ability to do that with a big brokerage, and I don’t know any way around that," Berg said. "I can syndicate my listings to the world, I can do a blog, I can do a Web site … in our little core neighborhood, they know us. I don’t need your big, fancy gazillion-dollar CRM."
To Berg, the "hardest nut to crack" is the mid-size brokerage. Once a brokerage reaches a certain size — a dozen agents or so — additional employees are needed to review files, keep books and train agents.
Before long, "you are moving back to the big broker model," Berg said, and "standing outside the licensing examination room" to recruit fresh agents.
Hahn dismissed the notion that large and mid-sized brokerages can’t maintain their quality control and deliver high levels of customer service — it just takes the will to enforce discipline, he said.
"It’s not necessarily that I want to see big brokers win … it’s what I think will happen," Hahn said. Within two to three years, he said, big brokerages will make "strategic, structural changes to survive, and this will have immense effects on the real estate market."
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