In the age of discount firms, star agents, open data, and vast sums of venture capital, the traditional brokerage model for helping buyers and sellers of commercial and residential real estate is wobbling.
Almost everyone involved in the sales and marketing of real estate is scrambling to adapt through either technology, data or consolidation. Larger, traditional firms whose margins are getting thinner and thinner are trying to buy-in technology but whose tired brands and bureaucracy may leave them unable to integrate it effectively. Top agents and many small to medium brokerages fearful of getting left behind are lured to ‘Tech-enabled’ brokerage, Compass as it continues its US expansion fuelled by the deep pockets of the infamous Softbank Vision fund. And meanwhile, property listing platforms are introducing more and more audacious features like Zillow’s Premium Agent that level the playing field.
But beyond the tech, data and the ‘efficiency-saving’ propositions, it is difficult to see how buyers and sellers are gaining the value. The truth is no-one is looking for an agent, they are looking to sell their property or buy one. But the industry has become so enamored with its image – the conferences, the awards, the industry rags, the gossip that somewhere along the way the conversation has become entirely about the agent and the brokerages’ needs rather than the customers.
Bringing efficiency and convenience to a process not known for either is welcome but standing for efficiency alone is not enough. You cannot pursue efficiencies without giving up some ability to innovate. In Marketing, too much focus on efficiency can make you irrelevant overnight, in part because an operating model of “doing more for less” is not conducive to hiring top creative talent and engaging buyers and sellers through inspired creative solutions.
In an era when everyone has access to the same information, it is more about what you do with it than how big your data set is. While machine learning and AI will continue to be hot topics, how relevant information is served in an easy, digestible and timely manner is key.
If you’re struggling to find the winner in this model, you’re not alone. While a lot is happening I think the industry still feels quite opaque and most agree few buyers and sellers are happy with the old model and have a sense that things have to change, but no consensus yet of what that change will be. If you look out at the options for buyers and sellers it's difficult to know why you would choose one over another.
It would be foolish to predict the full demise of a model that still sees a total of $62B in commission fees going to residential brokers in the US. But the current process for helping buyers and sellers of commercial and residential real estate needs to adapt beyond the tech and the data.
So are we stuck in this situation forever? Where buyers and sellers just reach for the nearest recommendation of hot to help them buy or sell a property. It’s time to throw out the rule book and rethink some of the false promises being offered today.