By James A. Crumbaugh III
RISMEDIA, October 8, 2009—In my ongoing series about the virtual culture, I’d like to write about what I see as its future. This article is going to be based on the assumption that the economy will continue to improve and by doing so the state of our industry will also continue to improve.
With that said, let’s take a look at all of these 100% commission real estate companies that are sprouting up like locus devastating an entire country. I don’t think a day goes by that I don’t hear about several more 100% companies opening. What I do find interesting is that, in every case I have come across, they are still tying themselves to a brick and mortar office.
I recently had the chance to visit with one of the most knowledgeable gentlemen I have ever met in this industry, Mr. Ben Phillips, vice president of New Product Development at Realogy. I was sharing with him that I have found that the Realtors we are attracting absolutely do not care about having a brick and mortar office. In fact, our Bank of America partners and I have found it remarkable that our Realtors don’t use their conference rooms even though we have a national contract allowing our Realtors to do just that. The Realtors we are attracting are independent, educated, experienced, and did I say independent?
All these new 100% concept companies are offering, at times, deals for the Realtor that are guaranteed to close the company down. I have seen ridiculously low prices for the E & O coverage. Anyone who knows this business recognizes that the company has to be supplementing the cost. I have seen packages with 32 different programs. What I’m not seeing is a value package from these companies. It takes a minimum of $100,000 a year to offer an IT Department to support the Realtor’s effort, and another $100,000 at the very least to make sure you have a back office application that supports the Realtor’s compliance efforts. You can offer 100% all day long, but if you don’t make compliance a top priority, you will not only be closed down, but you will jeopardize the public, as well as the Realtor’s career.
Now, let’s discuss the future. Again assuming the economy continues to improve and our industry continues to improve, we are going to see a serious paradigm shift in the real estate brokerage industry very quickly. Realtors being Realtors now have dozens of choices of where to hang their licenses and keep 100% of their commissions.
In a couple of years when the market is healthy again, how many Realtors do you think will agree to give their broker 10% to 40% of their commissions when all they have to do is go down the street and keep 100% of their commissions? The answer is very few.
So what does that mean to the future of the brick and mortar companies? It means extinction. There is no way you can offer the 100% concept and operate a brick and mortar office. I truly believe that, because of the technological revolution, we have proven that superior supervision is achievable in the virtual culture, and that was the one remaining issue that most concerned the industry.
In the next 10 years, the virtual culture business model will be the primary business model in the real estate industry without a doubt. I don’t know if we’ll be number #1, but someone with our business model will be. We are what RE/MAX was in 1973.
James A. Crumbaugh III is CEO of Allison James Estates and Homes. Crumbaugh may be reached by calling 1-866-463-5780 or emailing him at firstname.lastname@example.org.
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