The consumers of today are not the ones of yesteryear that watched passively as the real estate industry evolved into the giant that it is today. Today’s home sellers’ and buyers’ are more educated and more knowledgeable thanks almost entirely to the growth of the internet. This of course is not news to the agents and brokers in the daily practice of the real estate business. Before even making the initial contact with a broker today, a prospect has likely done some research on the internet and can spot an inept practitioner quickly.
Nearly everyone interested in selling a house gives at least initial consideration to going it alone without a broker. A relatively small percentage (industry experts say between 15% to 20%) actually takes the plunge and an even smaller number are actually successful. The primary motivation is to save money and to have more control over the process according to according sellers.
That final number of successful sellers is, however, getting larger by the day thanks to companies like Help-U-Sell, Assist 2 Sell, ForSaleByOwner.com, byowner.com , BrokerDirectMLS.com, FlatFeeDirect.com and others that offer more options to sellers who are no longer willing to pay the industry standard of around 6% to sell a house.
In spite of growing consumer demand for more brokerage choices, brokers willing to offer them are meeting resistance from the very state government regulators charged with protecting the interest of consumers.
Under pressure from industry trade associations and mega brokerages, State real estate commissions are imposing regulations and proposing legislation that makes limited service brokerages models impractical or impossible to operate without getting on the wrong side of the regulators in some states. Many brokers offering limited services believe that although these new minimum service rules and regulations are touted as consumer protection they are actually industry backed efforts to keep real broker’s commissions in the 6% range and maintain the status quo.
The supporters of the broker minimum service rules and laws say that without these safeguards, consumers suffer due to the confusion of brokers working with un-represented sellers.
Although the change may be slower than preferred by some, the real estate brokerage business is in a state of change and in spite of industry resistance, the menu driven model will prevail.
In Kentucky recently the State Legislature struck down a proposal by the Kentucky Real Estate Commission to impose a law on brokers that mandated a certain level of minimum service. Only two weeks later the New Mexico Real Estate Commission took an action that modified their regulations forcing brokers to comply with a certain level of minimum service. The language was very similar to the language struck down just two weeks before in the Kentucky Legislature.
The successful real estate brokers/owners going into the next evolution of the real estate business will be the ones that align the service that they offer with what consumers are demanding: more choices, more control and lower fees. In order to do that, brokers and agents are going to have to become more efficient in prospecting, marketing and transaction processing and stop relying on a sales agent to handle the process entirely.
There remains no question that the day of the full service high commission broker (aka Traditional broker) is far from over. There will probably always be a demand for residential brokers in certain specialties such as the luxury home market, international brokerage and circumstances where sellers can’t or don’t want to be involved in the process.
However, most markets in the United States are nothing like that. Most market areas are towns and communities where brokers, given the freedom to do so, will compete hard for the market share that they have. This higher level of competition will be good for consumers according to consumers groups, The Federal Trade Commission and the Department of Justice Antitrust Division who have all opposed industry backed efforts to set broker minimum service laws.
The reality is that there has been very little change in the real estate industry even during a time when practically every other industry has adapted to changing consumer demands and today all real estate agents still look about the same to the consumers. Competition based on price has been virtually nonexistent in the real estate brokerage business until now and there remains no justification for that.
Being in an industry that is so resistant to change offers some incredible opportunity for brokers with insight, courage and the acumen to capitalize on it by reinventing his business and his processes to better serve a changing customer base and gain tremendous market advantage.