How Agencies Will Survive – Part 1 – Real Estate
In this first post in a series about the evolving agency landscape, we’ll focus on the challenges real estate agents and brokers face.
‘Are Real Estate Brokers Obsolete?’ is the title of a highly debated article Bruce Kasanoff wrote on Forbes.com last year. When the concept of real estate brokers first took off, brokers were the only source of information about a property, and there weren’t many possibilities to advertise.
The internet has changed all that. In his article, Kasanoff states that apart from opening the door to let buyers into a property, 95% of what a broker does, can now be done by technology. Provocative, isn’t it?
Yet, technology such as internet-based real estate platforms Redfin, Zillow and Trulia haven’t put real estate agents out of work. Redfin CEO Kelman admits that his initial idea to radically disrupt the industry failed because ‘People couldn’t get into houses, they wanted advice‘, and ‘We thought we could make the business more virtual than it was‘. Pete Flint of Zillow Group actually expects the role of the real estate agent will change ‘surprisingly little‘ in the next 5 years. It wouldn’t be a good idea to take that as an incentive to embrace the status quo!
There’s no denying that the times are changing for real estate agents. There are more challenges ahead than just technology, such as attracting younger agents. One thing is certain: agents and brokers who manage to embrace technology as an ally against the undeniable disruption of their industry, will have a major advantage in the coming years.
What Challenges Do Real Estate Agencies Face?
1. Talent, or How to Attract, Keep and Rejuvenate the Workforce in Real Estate
Research from boutique real estate marketing firm Imprev shows that a whopping 86% of top real estate industry executives say ‘recruiting agents’ is their most critical business challenge.
In fact, the top three challenges are all about recruiting and keeping people, with 50% of real estate leaders struggling to attract younger team members.
Getting young people excited about a career in real estate (RE) should be a top priority. According to Deloitte’s Commercial Real Estate Outlook, ‘the average age of employees in the real estate industry is 40-50 years. Over 65% of senior leaders will retire by 2020 and the next level is not prepared to fill the vacuum. The good news is that a thoughtful and effective talent strategy need not be expensive – it’s more about innovation and a willingness to flex outmoded assumptions that hold a company’s talent hostage to pre-technology, pre-mobility thinking’.
With 32% of home buyers being millennials, born between 1980 and 2000, attracting younger people to the industry is not only necessary to step in for the older generation once they retire.
Young people simply prefer to buy from young people, or at least from people who understand them. Agents can adapt to meet millennial expectations by getting the knack of smart phones, texting, apps, sites and social media. This needn’t be a struggle, or a revolution that happens overnight.
When there are a few young employees around, they stimulate the rest of the people to embrace new technology. Millennials know first-hand the importance of using smartphones and mobile apps to get work done and bring a ‘mobile-first’ mentality. Without some young guns around, people tend to stick to the tools and devices they are used to, and miss out on opportunities to improve how they work. No matter how efficient an Excel sheet can be, at a certain point in time it’s good to consider using a CRM (customer relationship management) tool.
2. Tech, or How to be Ready to Face the Future
To attract younger real estate agents, and to sell to a younger generation, mobility and technology are key. You can’t expect home buyers to ignore the devices they use in everyday life when they’re in the process of buying a property. Texting and social media are basic ways of communication for most home buyers, but perhaps not for the median 57-year old realtor.
When a large part of the people who will use the technology are not digital natives, it’s important to get them on board in any way you can. Use software that is intuitive and easy. Provide adequate training. Help people out. But always insist on the importance of working with technology. As Melissa Zavala writes in ‘Should brokers dump tech-resistant agents?‘, try to make tech accessible to all. In some cases even hire somebody to do the digital work for an old-school agent who prefers to stay far away from scanning documents or updating social media channels. The real work of a real estate agent is still largely face-to-face.
As Kendyl Young, real estate agent in Glendale, California puts it so nicely in a thought provoking piece titled ‘Everything the tech gurus are telling you is bullshit, and here’s why’: ‘With each passing day, I am convinced that a lasting and enduring business is made with an authentic connection to the people in my community. Technology simply gives me the opportunity to make more of those connections.‘
Mobile devices definitely allow people to make more connections, and make it possible to work anywhere, anytime. When you’re in the business of buying and selling houses, and almost all of your work is done out of the office, you appreciate the flexibility. Tablets and mobile phones decked out with the same applications you use in the office really make life easier. Or so they should…
Using too many devices, tools and systems can be a pain. When asked what their most critical technical challenges were, 54% of real estate executives said: ‘Getting our systems working together’.
The second item of this list highlights a potentially more upsetting side of real estate technology. Real estate portals make it easy for home buyers and sellers to do much of the work themselves that was traditionally done by real estate agents and brokers. These portals are changing the industry, but it doesn’t look like they will replace agents and brokers any time soon.
As a study done by Realtor.org reveals, firms do expect industry competition to increase in the coming years: 48% predict this will come from non-traditional market participants. At the same time, real estate firms growth hasn’t slowed down, with 45% of firms currently recruiting agents to support business growth.
Real estate agent Christine Freimand describes the added value of a personal approach in a comment section: ‘First, third party sites like Trulia and Zillow are rarely as accurate as the local system that licensed real estate agents have access to. Routinely, those sites will list houses as “active” that are already under contract or worse yet, have sold. Second, (…) there are many agents who are highly effective and honest negotiators (…) who contribute immense value to the tricky process of navigating offers, counter-offers, appraisal shortfalls, and inspection negotiations. Buyers and Sellers often get emotional and take things personally during these conversations. A good agent can achieve better outcomes for all parties by being a buffer and an arbitrator. (…) good agents bring value not just in their market expertise and negotiating skills, but also with their in-depth knowledge about home remodeling and repairs, which is crucial during inspection negotiations. (…) Yes, in this age of technology, anyone can FIND a house on their own, but a highly skilled agent will assure the client gets the highest outcomes with the least stress, for what is usually the biggest purchase of one’s lifetime.’
Even when attracting younger real estate agents and when tech is used in the best possible way, bringing in customers is still the focal point of any agency. There, the challenge lies primarily in the economic situation. In Realtor.org’s research, 59% of RE firms have as a major concern millennials’ ability to buy a home due to stagnant wage growth, a slow job market and their debt-to-income ratios.
Having good systems in place for lead generation and following up on leads will assure real estate agents don’t drop the ball on a lead. The most important success factor for a real estate agent is his or hers so called Sphere of Influence. The old deck of business cards and a little black book has been replaced with contact management tools that are either part of the specific real estate CRM solution, or everyday tools like Google Contacts can do the trick. Leveraging the agent’s past clients and referrals, makes it easier for any agency to help people buy and sell houses in the best possible way.
Let your voice in the discussion be heard in the comments section below. What are the biggest challenges you see for real estate agencies?
Next week, we’ll be investigating how financial agencies are facing disruption in their industry.
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