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The New Economic Realities of Today’s Real Estate Brokerage Firm

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By Mike Pappas

RISMEDIA, August 9, 2010—The last five years have been a roller coaster ride for real estate brokerage firms both nationwide and here in Florida. Today’s broker must balance the consumer and associates needs while maintaining profitability.

That hasn’t been easy. Some brokers have chosen to dramatically reduce or eliminate services, programs and space while others have expanded services with the goal of growing their associate base to sustain their profitability.

In 2005, Florida median home/condo prices were double or triple today’s levels. Financing was quick, easy and plentiful; social media and Internet leads were in their infancy; developers were paying out large commissions; associate splits were commensurate with production; new real estate licensees were abundant. It was every broker’s dream.

The New Reality
Efficiencies through technology, increasing agent productivity, economies of scale, expanded services and re-shifting marketing dollars have become the new model for success.

Size Matters
With the rise in associate splits and the drop in median price, a broker needs more associates and higher productivity per associate.

Yesterday, at 6 units per associate annually and a $350,000 average price, an office would need almost 50 associates to produce $100,000,000 in sales. Today, increasing associate production to an 8 unit annual level and a now a $175,000 median price, it takes 71 associates to produce the same volume. Compound that with a 5-10% increase in split payout to the associates and you need 100 associates in 2010 to yield the same company dollar as 50 associates in 2005.

Many firms today are led by a top producing broker who is trying to juggle selling, back office needs and associates demands. It’s no wonder today that many owners see the benefits and advantages, including increased personal profitability by merging with another firm. Mergers and consolidation, as we saw in the late 90’s, are once again becoming commonplace. It’s not unusual to receive two or three calls a week from broker’s expressing interest in merging with our company.

Internet Recruiting
Today, there are only 25% of the numbers of new associate licensees as compared to the boom market. With unemployment at over 10%, the pool of talented potential real estate associates is strong. Tapping into that market and reaching those who are “unaware” of a real estate career is more important than ever. One study suggests that as many as 70% of the current work force is languishing at their jobs.

Investing dollars in Internet job portals is one answer. However, one must have a system to inform, follow through, touch and track these potential associates until they become licensed and hopefully join your brokerage firm.

Training is critical to lay a competent foundation.

Educating our associates is more intricate today than ever before. Not only are we instructing on sales techniques and dialogues, today’s successful broker has expanded their training to short sales, social media marketing and lead management. Talking to and reaching generations X and Y is as important today as was reaching the baby boomers of yesterday.

It’s all about position on the Internet and virtual processes.

Just as the old adage about real estate is true—location, location, location. Position, position, position differentiates your listings on the Internet. Lead generation and conversion is the future. Positioning your listings first on the major portals—Trulia, Zillow, Realtor.com, HomeFinder.com etc. is the key to this critical strategy.

Technology tools like lead management, drip marketing, contact management with database integration will be a necessity for the next generation of real estate associates.

Full Service is a Necessity
Lastly, the predictions of full service real estate firms have come of age in this complicated market. The need to control the sale and give the customer a competitive and effective one-stop experience has moved firms to create joint ventures in mortgage, title and insurance. Like an orchestra director, we need to coordinate a positive closing experience for the consumer while bringing in necessary revenue to support the increased demands of a broker today.

It takes more resources, expanded services and a first class management team to attract and retain quality associates who will provide a superior experience to the customer. Operating a brokerage firm today has changed dramatically from 5 years ago. The firms that are positioned to thrive into the future have adapted to the new realities of today and beyond.

About the author

Michael I. (Mike) Pappas, president and CEO of The Keyes Company, is responsible for providing the company’s strategic vision, overseeing operations, and planning expansions and acquisitions. Mike is currently Vice Chairman of the National Association of Realtors Big Broker Advisory Board. He is also serving as a director for the Trulia.com Advisory Board.

For more information, visit www.keyes.com.

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