The Brokerage Business: Disintermediated, or Simply Undervalued?

(Above, L to R) John Featherston, RISMedia; Hoby Hanna, Howard Hanna Real Estate Services; Kuba Jewgieniew, Realty ONE Group; Rory Golod, Compass; and Frank Gay, JP & Associates REALTORS® Franchising, discuss “The Future of Real Estate: Which Models Will Win?” at RISMedia’s 2019 Real Estate CEO Exchange. (Credit: Korin Krossber of PlanOmatic)

If you ask Kuba Jewgieniew, the brokerage business caters to relationships, not transactions.

“In the past 15-20 years, the residential real estate business has been complacent; it’s been on auto mode,” explained Jewgieniew, founder and CEO of Realty ONE Group, during “The Future of Real Estate: Which Models Will Win?” at RISMedia’s 2019 Real Estate CEO Exchange, held in New York City September 18-19. The event gathered more than 300 at the Marriott Marquis in Times Square.

“We understand our business better than do,” Jewgieniew said. “This is our unique opportunity to get away from auto mode.”

During the panel session, Jewgieniew and brokerage executives Frank Gay, CEO of JP & Associates REALTORS® Franchising; Rory Golod, Compass’ New York regional president; and Hoby Hanna, president of Real Estate Brokerage at Howard Hanna Real Estate Services, dissected their individual operations, as well as their approaches to disruption, centered on the industry’s No. 1 question:

Which business model will win?

“We’ve got lawsuits out there questioning our business practice, we’ve got iBuyers coming in and people saying in the next 10 years they’ll be 20-30 percent of the market,” Gay said. “In our model, we’re looking for either that full-time agent or the producer—those are the people that are hopefully going to still be standing.”

“We are in a world where there’s far more money, technology and incredibly talented people that are trying to replace us than fight for us,” Golod said. “The scale is totally stacked against us. I’m agnostic to the model—there’s room for 100-percent splits, there’s room for iBuyers, there’s room for more traditional brokerage models.”

(L to R) John Featherston, RISMedia; Hoby Hanna, Howard Hanna Real Estate Services; and Kuba Jewgieniew, Realty ONE Group, at the CEO Exchange (Credit: Korin Krossber of PlanOmatic)

According to Golod, the best bet for brokers is supply—creating it, and creatively marketing it.

“What I would encourage everyone to do is find a way to make your inventory unique to you,” he urged. “The only way we’re going to get our agents and consumers working on our companies’ platforms, and not the companies’ that are trying to replace us, is via inventory.”

Compass is accomplishing that through Compass Coming Soon listings, along with Compass Bridge Loans and Compass Concierge, which enhance the firm’s overall value, Golod said.

In a similar vein, Howard Hanna Real Estate Services is differentiating inventory with “Find It First,” a coming-soon feature on its website.

“The MLS doesn’t love it,” Hanna joked.

For the Hanna family—in the brokerage business, in the conventional sense, since 1957—an agent-centric focus has helped keep the organization thriving. Today, Howard Hanna is the No. 5 Power Broker in the U.S.

“We all started out as real estate agents or loan officers in the business, so we understand what our salespeople think about and what challenges are there,” Hanna said. “We get to know our people. People need to be rewarded and recognized by the ownership and the leadership. It can’t all just be about, ‘How can we eke out a little bit more margin out of the commission?'”

According to Jewgieniew, as commission dollars get pinched, attractive compensation structures, along with best-of-the-best culture, marketing and technology, are going to matter more and more.

“The pressure on GCI continues, and the trend going forward is that the GCI will suffer, so agents will continue to look for value,” Jewgieniew said.

To deliver on value, Howard Hanna has heavily invested in technology, including MoxiWorks and RealScout, to build efficiencies for its sales team.

“We believe that the agent has to be treated well, cared for and given the support they need,” Hanna said. “Technology will not replace the transaction or the agent, but we made big investments through MoxiWorks and RealScout how we create data and bring more data to our agents, and use that data to make the transaction easier or simpler.”

To define their organization’s value, JP & Associates REALTORS® decided to implement a six-transaction productivity standard, coupled with robust technology and training.

“Productivity is a big differentiator that separates ourselves from the other 100-percent transaction fee companies,” Gay said. “Our goal is very simple: to be the most productive company in the country. We do over 100 trainings a month, end-to-end, stitched-together technology.”

Additionally, the brokerage caps fees at 25 transactions, which helps improve retention, especially for the highest-performing REALTORS®.

“We realize our operation and our program attracts a lot of top producers, and we don’t want to continue to charge them transaction fees,” Gay said.

At Compass, agents come first, as well—but what of the company’s compensation packages, which have been criticized as excessive?

“If you could actually just go buy agents, our job would be a lot easier,” Golod said. “We’re in a people business, and there are some agents who’ll be moved by , but, ultimately, once that is no longer available, they’ll move to the next company that has another offer.

“We believe the most underserved consumer is the agent,” he stated. “We want to build the platform that helps power them in a way where they can do 10 times as much business as possible. It’s not just technology—it’s in terms of providing programs and resources and tools and human support.”

Another crucial differentiator? The ability to scale. Competing domestically is one thing, but at Realty ONE Group—approaching marketshare in 50 states—the focus is moving outside the U.S.

“We have a very good footprint, we’ve got great people, and we’re going to scale and disrupt and get marketshare,” Jewgieniew said. “We’re in the people and relationship business, and are really passionate about who we are and our brand and what we’re willing to achieve, and killing it together across the globe.”

Who’s Coming Out on Top?
As consumers demand more from their REALTOR®, the brokerage business is transforming, from clearinghouse and facilitator to full-on service and support. According to the panelists, it all comes down to value. What are you offering? Is it in need of retooling? How are you communicating your value? Is it effective?

“Disintermediation of the broker is the big white elephant in the room,” Gay said. “How do we make money in different places in the transaction, and for the consumer side, how do we provide value, whether it’s data and technology, experience or service? We all have to get smarter.”

“The agent will stay at the middle of the transaction,” Hanna said. “There will be tremendous consolidation in the industry, and we’ll start to get it right with data and information, and hopefully make this infrequent, expensive, confusing transaction maybe just a little bit easier.

“We believe our model and business plan makes sense,” he said. “At the end of the day, buyers and sellers want to achieve one thing: purchase a home or sell their home, and we give the agents the resources and tools they need to create customers for life.”

(L to R) John Featherston, RISMedia; Kuba Jewgieniew, Realty ONE Group; Hoby Hanna, Howard Hanna Real Estate Services; Rory Golod, Compass; and Frank Gay, JP & Associates REALTORS® Franchising, at the CEO Exchange (Credit: Korin Krossber of PlanOmatic)