Part I - The Aging of the Industry

The real estate industry is faced with a number of crises that threaten to eradicate the strength of the industry as a whole. The agent and the broker are aging and are not being replaced by young, strong leaders in the industry, a situation which will only lead to a weakened position while the industry defends its business model against technology, rapidly changing demographics, and eroding consumer contact.

In order to retain control of the residential sales transaction, REALTORS® will have to adapt to the needs and preferences of the market. They will need to embrace new business models, and they will need to be more educated, more technologically advanced, and better trained to communicate in an increasingly multi-cultural environment. To survive, they must provide an environment which attracts young people to the industry.

In his new book scheduled for release in November, The Eight New Rules of Real EstateJohn Tuccillo, consulting economist to the National Association of REALTORS outlines one of the major challenges facing the real estate industry - an outdated business model to which the aging Realtor and broker are clinging despite numerous signals for change.

Tuccillo calls the old business model the "gateway" model, a pre-technology invention. "The consumer contacts the real estate agent or broker and the door to the remainder of the transaction is opened. The real estate practitioner guides the customer through the maze of mortgage application, title search, home inspection and settlement. There is a great deal of handholding, document transportation and arranging involved....the real estate practitioner is the gatekeeper and is first on line when compensation is distributed," writes Tuccillo. "Consumers had to contact the agent or broker and then all the other service providers could be accessed (mortgage lenders, attorneys, etc.) The Realtor controlled the transaction."

However, he warns, the model is changing due to technologies that automation service delivery such as listing information, mortgage applications and approval, title search, appraisal, and more. The day will shortly come when the home can close with an electronic signature, speeding the transaction process. Many tasks currently performed by humans are and will be performed by machines, and the broker and Realtor will become a transaction manager - one who assembles the "jigsaw puzzle" of the home purchase and sale. The key to success in the new business model will be improving marketing, distribution and communication channels.

Other service providers have already cut into the agent's territory. No longer is the Realtor the first point of contact for the consumer. Consumers are taking the home search and listing process into their own hands. A look at the proliferation of on-line listing services, most of which do not include recommending a Realtor to facilitate the transaction, tells the story. Major lenders are soliciting the homebuying consumer directly to pre-qualify borrowers before they shop for a home...or talk to a Realtor.

As other industries muscle in on the turf, Realtors remain bafflingly reluctant to adapt and take control of new business models that can help them regain control of the transaction. This inability to adapt to change can only be linked to the aging population of the real estate industry which have shut out youthful recruits by making the industry not only obsolete in many functions but unprofitable as well. It is a case where too much experience has become a handicap.

According to NAR research, successful agents and brokers have been in the business the longest. Realtors who have been in the business 16 to 25 years make more than $20,000 more than the Realtor with one to five years experience. The typical Realtor has been in the real estate industry for nine years, while brokers have been active nearly twice as long. Seven out of ten brokers (67 percent) have been active for 11 or more years. Less than 12 percent of brokers have five years or less of real estate experience.

The average age of brokers has remained fairly consistent according to NAR research, but the agents have steadily become older with a median age of 48 years. In 1978 the median age for agents was only 42 years of age. In 1996, only six percent of agents are under the age of 29, and eight percent between the ages of 30 and 34.

Today, the average REALTOR® is a 48-year-old female earning about $37,000 annually. Higher incomes of about $50,100 are reported by those who worked longer hours, hold broker's licenses, and are between the ages of 45 to 54. Licensed brokers earn approximately $65,100. According to the Residential Sales Council, the CRS designation makes a radical difference in earnings, with the average designee earning approximately $85,276 and of about 55 years of age.

Realtors and brokers who do the best in the industry are the ones who make real estate their first career. The median gross personal income of the Realtor who has never had another career is $46,300. Those who join the real estate industry from another career make a median gross personal income of $32,900, a difference of over $13,000.

Making real estate a first-choice career seems to propel the rookie into higher levels of management. More than one out of every ten brokers (11 percent) reports that real estate was their first career while only five percent of sales agents began their careers in real estate.

Clearly, recruiting needs to take place during the career decision making process of the high school and college years, before candidates choose other careers.

Coming Friday: Part II - The Changing Demographics of New Homebuyers

Published: October 15, 1998

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.