Wednesday, September 11, 2013

The Next Big Thing for Real Estate Brokers

Until the last few years, real estate brokerages' business model keyed off brokers' exclusive access to local multiple listing services (MLS). Brokers all sold the same product. They still do.

While it's true that some firms try to specialize in certain niches, they still all sell the same stuff. Walk into, say, Rodeo Drive Brokers and tell them you want to invest in low-income rental housing in Compton, and they'll take care of you. And while individual brokers may specialize to a degree--say, in REO (foreclosures) properties--they'll say yes if you want them to help you buy a suburban tract home out of their territory.

The question for brokerages: What's the difference between you and the one down the street? The same is true for individual brokers.

Joel Burslem of 1000 Watt Consulting wrote a terrific short article for Inman News that addresses the issue. He says that instead of clinging to the mindset of being the consumers' gateway to homes listed for sale, brokers--and brokerages--need to drop their all-encompassing search engines, and, in his words, "get narrow."Getting narrow means focusing on homes, say, located near the best private high school or favorite restaurant row or whatever.

What real estate brokerages--and brokers--lack is branding, and by branding, I mean a je ne sais quoi attached to a name. Remax isn't qualitatively different than Sotheby's. Or Century 21 or Keller Williams. They aren't different because their  Glengarry Glen Ross business models have keyed off the same exclusive MLS access and sharing of broker commissions rather than some unique quality that's theirs, and theirs alone.

Individual brokers sometimes advertise service, often referring to themselves with such monikers as "your trusted advisor"or other sloganeering (a new favorite is "prosperity through real estate achievement") attempting to present the broker's service as a value-add to the consumer. While it's true that the most successful brokers are those who work the hardest, the fact remains that a conscientious new licensee or part-timer can serve a client with the same degree of quality that a broker who bills himself or herself as the "Top Producer," and charge the same fee.

As far as the consumer is concerned, objective correlation for service quality doesn't exist. Brokers don't have branding in the way that Sears or Saks Fifth Avenue has.

Both demographic and technological forces will cause a move to true branding. For the next few years, the seventy-eight million Baby Boomers will have the greatest influence on the market. But there are also eighty million so-called Millennials right behind them, and they are better educated, more tech savvy and demanding of authenticity. And they will dominate the market.

Right now, one-fourth of Realtors are 65 and older, while only six percent of them are under 34, according to a National Association of Realtors survey. Yet, a related survey notes, the average American worker is 41, and the typical age of a first-time buyer is 31.

The old ways just won't work for them. And that's what will cause the Next Big Thing.