The Current Real Estate Model Is In DANGER


The current real estate model is dying but are brokers still in denial?

Remember the travel agent? When it was time for vacation, you would stop by the neighborhood travel agency to grab a Disney brochure and book your trip. We thought that was simple.

Following the success of several travel websites, consumers no longer saw the value in booking with a travel agent. They could shop around and compare prices and destinations, view photos of hotel accommodations and read reviews from other travelers.   Consumers realized that by doing a little legwork from the comfort of their sofa, they could really cut down on vacation expenses and service fees while getting very competitive rates.

For those in the travel industry, especially those small neighborhood agencies, it was a painful transformation. Well you don’t have to be in the business to predict that the real estate industry will be next if the agents and brokers continue on their same path.

There are already some big hints at the decline of the traditional real estate model in the consumer’s mind, as over 90% of consumers initiate their home search by looking at online listings on sites like Zillow. The For Sale by Owner model continues to gain traction, with Philadelphia being one of the hottest growth markets for private sales. There’s no doubt that the reputation and the relevancy of the entire industry is at stake, and real estate agents and brokers are approaching the crossroads.

And the real estate industry knows it.

NAR Danger report The National Association of Realtors (NAR) commissioned an independent study to take a hard look at the issues that threaten the future of the industry. The recently released “DANGER Report” (The Definitive Analysis of Negative Game Changers Emerging in Real Estate) details today’s problems and what changes agents and brokers will need to make to be relevant or even exist in the future.

If you’re a real estate agent, broker or NAR official, the 166 page independent report isn’t pretty, but it’s accurate and in my opinion hits the bull’s eye dead on.

You can click here to download the full DANGER Report, but here are three of the topics that the DANGER report identifies as near term threats to an outdated business model.

  1. Too many real estate agents with too little knowledge or education.
  2. Commissions are too high when compared to other industrialized countries.
  3. Too much personal promotion and not enough looking out for the customers' best interests.

After reading the report on a national real estate blog and then combing through a couple dozen comments from real estate brokers and sales people, one thing was crystal clear. The overwhelming majority of respondents blamed part-time agents for giving them all a bad name and hurting the industry, and they completely ignored the rest of the report!

There is little doubt that there are too many real estate sales people who lack knowledge, regardless of whether they consider themselves full-time or part-time. For that matter there are too many brokerages also. But I’m hard pressed to think of an industry that doesn’t utilize the resources of well qualified part-time individuals. After all, with modern day technology, aren’t we all available 24/7 if we want or need to be?

No, it’s just not that simple and this DANGER Report spells that out page by page.

For decades consumers have been at the mercy of an industry that not only controlled the advertising when you wanted to sell your house through their broker-owned MLS system, but also dictated what services you would receive and how much you would pay for those services. As the industry evolved, nearly every real estate broker entered into controlled business arrangements with both mortgage lenders and title insurance providers so that they could profit from those services as well.

As many of us have been predicting for some time now, the party is coming to an end.

Yes, thanks to twenty-first century technology consumers have information at their fingertips and they’re not asking for options, they’re demanding them. The industry that was once in complete control of how consumers bought and sold real estate is now trying to figure out how to reinvent itself and survive.

It will be quite interesting to see how this plays out over the next five to ten years. One thing is almost for certain… Consumers will have more options when it comes to buying and selling real estate, likely making the process more transparent and less expensive.


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