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Traditional Real Estate Agents or High-Tech Realty…which Way to Go?

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By Alan Shafran

RISMEDIA, June 2, 2011—One of the most common topics I am asked to speak on is the team structure vs. individual agent vs. models of the future. Although I feel that a team structure is not the only way to go, I am partial to it and most certainly feel it will dominate our industry in the future. There is a plethora of different approaches one can take to reach success, but I don’t think I will receive any argument from REALTORS® that our job is only getting more demanding and consumers are becoming more educated with more tools at their disposal.

Other than the rare specialty type markets, such as super high-end, etc., I feel that individual agents will be increasingly challenged. There are exceptions to every rule, but let’s talk about the masses.

The high-tech, discount, limited service and lack-of-experienced-agents model came about shortly after the Internet arrived on the scene in a big way a little over 10 years ago. Some discount tech real estate companies received start-up venture capital and lots of hype about their new model. I remember speaking to one such company’s first CEO at a conference and challenging the model. I was unsure about their systems because I felt that consumers were not ready to not be hand-held through the process. So we waited and we watched. We saw millions of dollars go into this company’s advertising and much more. Their model was based on having the real estate agent’s job broken into a few different components. Each component—whether admin or sales—was on salary. Some components received small bonuses for deals done. The company encouraged the consumer to do most of the home search online and rebated 50 percent of the commission to them at the close of escrow. The company was eventually forced to change their structure to a more traditional model, which did away with salaried agents. Back then, and still today, I feel that most real estate consumers still need hand holding, great advice and experience as it relates to one of the biggest decisions of their lives.

Mobile technology and information has changed the business. How is our business changing in front of our eyes? Well, you’ve probably heard me reference this before…mobile technology and information has changed it all. So what has changed today from the past? Today’s high-tech, discount companies are attempting to pave the way for the same high-tech experience that failed in the past. Let’s review one of today’s popular discount company’s systems to the best of my understanding. They have a national website that gives consumers good data in an easy-to-read format with easy delivery. I haven’t seen any of their offices, but I’m assuming they don’t use much space in order to keep overhead low. They hire online transaction coordinators for salaries, they hire internal agents to take calls and make appointments and they have field agents who show properties. My understanding is that the internal agents are on a small salary and small bonus and the field agents receive between $1,500 to $2,000 per transaction, plus small bonuses depending on how the client rates them. And yes, they also rebate approximately 50% of their commission to the consumer.

What does their customer receive with this model? They offer a lot of data, property history, etc. The customer of course is lured in by the money they appear to be saving and their website is very attractive and easy to use. As I mentioned in a previous article, it is critical for us to always ask everyone we come in contact with, relating to our business, about their experience with different agencies and companies. What I found is that consumers really liked the transparency behind this company, when it comes down to making their decision on a $200,000, $500,000, $1 million home, yet they want the confidence and knowledge that comes from experience. Their timing is much better in the tech world due to the mobile technology revolution. I do feel there has always been a customer that wants the limited service discount model and I don’t think that will change. The question has always been, who’s the new discount agent and what are they trying to do differently? I’ve watched this process for 20 years now; technology or no technology. It’s hard to stay in business if the customer leaves with a less-than-satisfactory experience.

So where does that leave us? What does this mean? I do feel that this challenges our industry to look at our models and push for change. Within the next five years, I feel our industry will experience similar revolutions to what other industries have already experienced. The proverbial street of business is getting smaller and there is not enough space for everyone. In my area in San Diego, there used to be Circuit City, Good Guys, Best Buy, Fry’s and many more large regional electronic stores. Now, it’s just Best Buy and Fry’s…and Best Buy dominates. Used to be Barnes and Noble and Borders. Now it’s just Barnes and Noble. Used to be Blockbuster and they ate everyone as the clear dominator. Then came Netflix and the idea of online and direct digital rentals, which has now forced all the Blockbuster stores around my area to close.

The customer needs more transparency in all facets of our industry. They demand more experience, local and broad market knowledge, leadership, and customer service. Ask yourself, what do you demand of other industries? What turns you off and on from doing business with a company? What kind of customer do you want to be working with? Based on those answers, is your business built to please your customer? Let’s wake up. The middle is shrinking. So here’s my prognostication…there will always be discount brokers…they will now take the form of high tech companies. There will always be full service brokerages…just far fewer of them. Only the companies, teams and agents that can offer the customer the full service, transparent experience will be left standing. Agents doing business the same way they have always done over the past 20 years will find it more difficult to transact business every year. Who’s in the middle? How do we stay out of the middle? Those are just a few of the questions we need to answer as an industry. Answer them and act on them. I don’t feel there is just one right answer here. Mostly, I see real estate companies reacting to the consumers’ latest demands and changes in our world. I challenge the biggest, largest, and most successful companies to break the mold and lead the way.

Alan Shafran is in the top 1% of Prudential agents worldwide, president of ShowingSuite.com and author of Blueprint for 100 Deals. For more information, please email Alan@AlanShafran.com or visit http://www.AlanShafran.com.

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