WASHINGTON (March 17, 2003) – Consolidation, rising costs of technology, the way brokers and agents do business, and regulatory impacts are the most likely changes that will drive the real estate industry in the next three to five years, according to a provocative new study completed by the National Association of Realtors® Research Division.

"The Future of Real Estate Brokerage: Challenges and Opportunities for REALTORS® "presents an overview of business models and strategies—old and new. In-depth data analysis provides perspective on the drivers of change in the real estate business to help broker-owners and firm managers make long-range plans.

The report includes a comparison of three major business models in the industry and concludes that each model has characteristics that enable them to succeed, but that change will affect all models. The 30,000 traditional brokerages represent the largest number of firms. The vertically expanded brokerages are those with more than 200 agents that have broadened operations to include ancillary services. Agent service bureaus are a form of traditional brokerage that offers a 100 percent commission to agents.

The NAR study also explores how growth opportunities spawned by the Internet and potential changes in regulatory policy have given rise to three emerging models:

• Unbundled service providers that present an a-la-carte menu to consumers;
• Market makers that employ varying electronic platforms that may include auctioning, with the real estate professional adding value through new services during the process;
• Corporate ownership of residential real estate brokerages firms owned by non-brokerage companies; this model has the potential to change the competitive landscape of the industry most quickly by acquisition of existing brokerages with great market share.

This thorough study builds on established NAR research on firms, members, homebuyers and sellers, and creates a picture of past, present and future changes in the real estate industry. The report also looks at how firms adapt to developments in technology and economic and regulatory environments, and how those developments have influenced the evolution of business models that may become dominant in the future. For example, in the area of consolidation, the study notes that concentration is low in real estate brokerage, but the market share of the top firms is increasing, and that by 2001, the top 250 companies represented 24 percent of all agents and one in six home sales.

"This is a think-piece with a long shelf-life that will serve broker-owners and managers for a long time to come. It examines the deeper issues facing today's real estate brokerages and suggests models based on what business strategies a broker decides to embrace, and how to be successful in every business model," said David Lereah, NAR's chief economist.

"Brokers pondering long-range planning can use this study to guide their choices: Do I want to add services or sell my business? Do I want to take on a partnership? Which of the present trends will survive and prove most profitable? The study also speaks to real estate agents, by pointing out what their options are in the long term in whatever strategy or model their broker chooses, and helps to answer questions about 'where do I go, what do I do,'" said Ellen Roche, vice president of Research.

"This is a must read for anyone in our business. This summary describes the real estate business as it is today and then provides provocative scenarios that are likely to occur in the near future. Not only are present practices identified, defined and evaluated with anecdotal references, but also future events likely to impact our present practices are examined. I am particularly pleased with the depth of information provided by the Research team," said Hal Kahn, broker-owner of Kahn, Realtors® , Newburgh, N.Y., and 2002 chair of the NAR Research Committee.

The Future of Real Estate Brokerage: Challenges and Opportunities for REALTORS® is available for purchase from NAR's Customer Service. To order, call 800/874-6500 and ask for item #186-72-LN. For more information, visit http://www.Realtor.org/research and click on Business Research Products.