Real Estate Brokerage Is Changing to a Virtual Brokerage Model

Real estate offices are closing all over the country. Real estate agents are hanging up their licenses in every state. The traditional bricks-and-mortar real estate brokerage is hemorrhaging, and all that keeps this archaic business model alive is consolidations. As offices close, some agents quit, but the survivors move their licenses to another sinking ship, a ship that looks just like the last one and often with the exact same name on the bow.

A large franchise office closes it’s doors, no longer able to keep the lights on after more than a year of operating in the red. The agents are worried sick, not knowing what they will do, until their savior walks in the door.

A broker from a large bricks-and-mortar across town with the same franchise offers to take all the agents in with the exact same contract terms: each agent pays $600 per month and keeps 100% of their commissions. The agents sigh in relief and quickly sign the new contracts like sheep to the slaughter.

Since the broker can’t generate enough leads for the agents, and since the agents aren’t selling enough to make the broker enough money on commission splits, any kind of split wouldn’t make sense for the broker today. A sharp broker will charge each agent a monthly fee. He laughs all the way to the bank, because with 60 agents paying $600 per month, he’s making $36,000 a month just for living.

Three years ago I sat across the desk from a franchise broker who looked at me and said, “Well, we’re feeding the business every month. You have to do that when times are tough. But we’ve been through tough times before, and we always come out okay.” I remember thinking to myself that was a silly thing to say coming from a man who told me he had no business plan, no budget for marketing, and no written vision for the future of his business. Unfortunately, that same broker just issued a press release that he is permanently closing the doors of his bricks-and-mortar and will be hanging his license with another bricks-and-mortar. Another consolidation.

This broker is merely jumping from one sinking ship to one that hasn’t sunk yet. The new ship has plenty of leaks, and it may take a while for folks on the Titanic to wake up. Bricks-and-mortar real estate brokerages that stubbornly refuse to bridge the gap to an entirely new business model will die a slow and painful death. It’s one thing for brokers to ride their own ship down, but it is quite another thing altogether for those brokers to sell tickets to real estate agents with promises they can’t keep.

The most unfortunate thing about all of this is that the agents who think they are doing what it takes to survive are only re-arranging the deck chairs on the Titanic. Many of them truly do not know or comprehend how precarious their fate is. Many of them do have an uncomfortable feeling, and they know something is wrong with their business model. Just like so many of the passengers on the Titanic near the end who smiled and kept saying, “Don’t worry, everything always works out alright,” traditional agents continue to greet people with a smile and wait for the phone to ring. But the ship is tilting, and they are at risk. They just don’t know what to do.

This is the great dilemma of being stuck. It is the classic inability to think outside of oneself. Traditional brokers and agents who have operated within a traditional brokerage model for many years struggle to think in entirely new ways. What makes this especially difficult for so many is their discomfort with technology and the Internet. Some simply refuse to learn the technologies. I know of a top producer who refuses to adapt, and he sincerely believes he can delegate many of the responsibilities to his assistant. Few assistants are going to spend night and day learning and adapting for a boss, and if they do and leave someday, where does that leave the agent? Even successfully delegating leaves serious challenges in bridging the gap, which I will share later.

There’s been a huge change, but not all agents and brokers recognize what is happening. Most do not comprehend that they are in the middle of a major earthquake. Therefore, they continue to do what they always have done. Underlying all these changes is something very big that traditional brokers are missing. Just as it is powerful forces that move tectonic plates deep below the earth’s surface, we are experiencing powerful forces causing an earthquake in the real estate world. As with so much in life, what we see on the surface is merely a symptom of a deeper and much more significant movement that is actually the driving force. It is this driving force that many brokers and agents have not recognized.

Here is the first tectonic force that is at the root of all these changes effecting the real estate industry: a change in consumer behavior. Granted, it’s a huge change in consumer behavior. It’s so big with so many implications, most people don’t comprehend it.

The full description of these changes in consumer behavior would be quite long, but here is a brief summary in the context of the real estate business. Consumers are no longer willing to be sold with obnoxious advertising and told what to buy and when to buy it. Consumers are sick and tired of interruption advertising, of billboards, of high pressure salesmen, of telemarketing, and of misrepresentations and boldfaced lies. Consumers have had it with professional conflicts of interest. They’re fed up with only getting partial information upon which to base their most important decisions. Consumers want and demand freedom to control their own destiny. They don’t like being controlled. They don’t like being manipulated.

The second tectonic force effecting such dramatic changes in the real estate industry is powerful in its own right, but also acts as a catalyst for the changes in consumer behavior.

The catalyst that has empowered consumers and is forcing these changes that are the death knell of traditional real estate brokerage is… advances in technology.

The traditional brokerage business model has been totally unequipped to deal with these tectonic shifts. The impact of the real estate recession has accelerated this process to be sure, but only in time. Had it not been for this recession, the impact of these changes in consumer behavior would have taken longer, but the impact would ultimately be the same. The recession has acted like a diversion, however, distracting real estate agents from the real cause of their doom.

I’m reminded of the newspaper salesman who tried to sell me expensive print advertising recently. I ask him, “Why would I advertise in the newspaper when it hasn’t sold any of my real estate listings in the past year? Help me out. Why should I advertise in your paper?” His response while soft-spoken and polite, was of the same mindset as many real estate brokers today, “Well, you don’t want to be left out when your competition is advertising, do you?” In response to my blank stare, he pleaded, “When business is slow, it’s not the time to stop advertising. It’s the time to advertise more than ever!” That’s when I could no longer contain myself, and I broke out laughing. We used that line in sales 30 years ago. Are they still using that line? Yes, they are.

Apparently, that kind of sales pitch still works with many real estate agents and brokers, because like flies bouncing off the plate glass windows in a futile effort to escape from bondage, many agents are still doing what they admit doesn’t work very well anymore. Whatever we were doing that was not working before must be done twice as fast now. If the ship you are on is sinking, be quick about your business and jump on another ship just like the last one. Such behavior is insanity and a ticket to failure.

More real estate brokers have filed for bankruptcy protection in the past two years than at any time in U.S. History. And the earthquake has not ended as many bricks-and-mortar brokers are on the verge of closing their doors soon.

It is the early adopters of new business models and new technologies who will be the millionaire real estate agents in the years to come. Because time is truncated with the accelerating pace of the growth of technology and the use of the Internet, those who pause too long to think about doing something will be left so far behind, they may never catch up. Think of a space ship going into warp speed. Those who missed the flight will find themselves light years behind their colleagues. This is how it will be for traditional real estate agents who insist on staying behind.
There is an answer, and it means embracing technology, new marketing methods, new tools to reach clients, and mastering the Internet as a powerful medium.

Chuck writes about real estate and marketing for agents and brokers at http://www.MyMarketingPlan.biz.

“I literally give away 30 years of real estate law, real estate negotiating and sales experience free on my website and blog.” COME AND GET IT FREE! Chuck practices on the beautiful Olympic Peninsula in Sequim and Port Angeles, Washington. He is a Broker/Owner/Realtor of a successful Internet real estate brokerage, a professional author, and father of two professional athletes.

Article Source: http://EzineArticles.com/expert/Chuck_Marunde/129290