"The revolution in the accumulation, interpretation and transmission of information has dramatically changed the nature of the real estate business. It has changed from a business where people skills were paramount and information was the sole property of the Realtor to a business in which information is democratized and knowledge creation, as a service to the consumer, drives success."
"Real Estate Confronts Profitability: It's Time For Brokers And Agents To Remargin Their Businesses," (RealSure.com, Free) by Stefan Swanepoel and John Tuccillo, RealSure.com.
When it comes to how consumers are represented when they buy or sell a home, technology and consumer demand have given real estate consumers more alternatives than ever.
However, because consumers need such representation so infrequently, it's not always easy to know which alternative is best for the job.
"Real Estate Confronts Profitability" the latest in a line of five "Confronts" white papers by RealSure.com, is a free publication designed to enlighten real estate companies about changes in the industry, but it also provides insight for consumers who need to know about those changes.
"The new models are in the emerging state because many of them have not quite developed across the country, but clearly the consumer has become frustrated with the old traditional model -- a non-negotiable, take-it-or-leave-it attitude," typically with a fixed commission for services, said Stefan Swanepoel, who along with John Tuccillo authored the report.
Swanepoel, a real estate industry visionary and real estate technology guru, is managing partner of RealSure Inc., a Laguna Niguel, CA-based research and business consulting firm for residential real estate, mortgage and title companies. RealSure Inc. also trains 200,000 real estate professionals each year.
Tuccillo is a real estate and housing finance economist who, for a decade, served as chief economist for the National Association of Realtors (NAR) and now operates his own strategic business planning consulting firm.
Swanepoel concedes, thanks to technology and the media's attention to real estate issues, consumers are more educated about buying and selling homes than ever, but because they don't use that education more than a few times in a lifetime, they may not always be aware of their choices.
"I'm not implying consumers are stupid. Home buying is complex, it only occurs once or twice, so it's not the kind of thing a consumer has a lot of exposure to. They are already paranoid about the complex transaction, with multiple choices (in representation) it's going to be confusing," Swanepoel said.
"Where's the consumer going to get an unbiased qualified opinion. I think your (the media's) reach (on the subject) is not as powerful as it could be," he added.
Here's the white paper's look at consumers' alternatives and some examples.
Buyer Brokerage: An outgrowth of efforts to separate simultaneous representation of both the buyer and seller, buyer brokerages that represent the buyer were virtually unheard of a decade ago. Historically, sellers were represented by the agent and when the buyer came to market the seller's agent often took on the questionable role of dual agency, a potential conflict of interest. Among the new alternatives, the buyer brokerage has had the most impact creating the Real Estate Buyer's Agent Council, an NAR affiliate, and other networks.
One-Stop-Shops: Perhaps the real estate industry's unwelcomed impetus behind lenders vying to get into the real estate business, one-stop-shopping for real estate nestles real estate buying and selling, mortgage, relocation and other related services under one roof. Introduced decades ago by large real estate operations, the approach is designed to provide most or all the services a consumers needs for the real estate transaction and thereby make the transaction more efficient and perhaps more economical. The Internet further helped popularize the trend and most real estate companies now offer some form of services integration. Weichert Realtors and John L. Scott are examples
New Paradigm Companies: Virtual realty spawned by the dot com era leveraged technology to offer a faster, cheaper and more convenient real estate transaction experience, but most of these companies, like much of the dot com sector, where quickly voted off the technology island because they had more Internet connections than business acumen. The effort did give rise to "click-and-mortar" real estate as traditional companies raced to build Web sites and add other technological breakthroughs to the real estate transaction. Ultimately, technology revolutionized real estate and virtual realty's survivors, along with technology savvy consumers, changed the way the industry does business and how much it charges for its services. Survivors include eRealty.com, zipRealty.com, and YHD Foxtons.
Annuity Agencies: Aimed at real estate professionals, rather than consumers, a business model that divvied up and repackaged commissions catapulted RE/MAX into prominence in the 1970s and 1980s. A similar model based on profit sharing and residuals, allow agents to earn incomes even after they stop listing and selling real estate. It's a draw for baby boomer real estate professionals who are contemplating slowing down, if not retiring. Examples include Keller Williams Realty and Exit Realty.
Fee-Based Services: Not to be confused with the For-Sale-By-Owner (FSBO) market that helped fuel it, fee-based services typically offer a menu of services from which consumers can choose, paying only for those services they need. The draw for savvy consumers is a cheaper transaction. The recession of the late 1980s and 1990s prompted some traditional agents to become "discount agents," break away from larger companies and use the approach to keep afloat. Julie Garton-Good started the 1,000-member National Association of Real Estate Consultants in 1999. The Help-U-Sell franchise is another example.
Superstores: Born of mergers, acquisitions and consolidation, real estate conglomerates appear as uninviting as an unkempt Walmart, but once inside consumer choices and the possibility for savings can be staggering. The best known, Cendant, is the mother of all one-stop-shopping outlets and can likely offer consumers some variation of all types of consumer real estate transaction representation available. Cendant owns NRT, the holding company for Coldwell Banker, Century 21 and ERA and can also offer consumers everything from hotel accommodations and rental cars to relocation services and vacation planning along with traditional mortgage and real estate services.
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