The largest affect on the real estate industry in 2001 will be the slowing of the U.S. economy. Post-election, the nation will settle into a more regulated environment in an effort to curb inflation. In some parts of the nation, inflation is already out of hand, particularly with regard to housing. Home affordability has dropped below 30 percent in California. Dallas/Fort Worth is already shifting toward a buyer's market as diminishing consumer confidence leaves properties reduced and unsold.

Meanwhile changes are occurring in the real estate market, centering around the compression of commissions. More consumers are going online to find homes and demanding better service. Meanwhile the industry is shifting away from fiduciary relationships toward facilitating and non-agency forms of representation. Agents who have forgotten the lessons of the past may be unpleasantly surprised by the change of the marketplace when they have to provide more service to get a home sold than in the fleeting seller's market.

All of these issues have one word as a common denominator - service. Commissions, representation, and work ethics all relate to the same thing - what services are offered, how much service is provided, what the agent charges for services, and how the service level is perceived by consumers. Service will be the yardstick of 2001, and the measure of service will lead to new trends and countertrends.

Because service will become a bigger issue on several levels, in 2001, you will see the real estate industry begin a gradual shift from being broker-centric to consumer-centric. There are too many pressures on the industry which are driving change for it to continue as it is.

Transactional brokerage

Trend: The national move toward reduction of broker liability through transactional brokerage. States are moving toward the statutory adoption of non-agency relationships with regard to real estate brokerage services, with the purpose of abrogating the common law of agency. Oklahoma just passed a statute allowing licensees to operate as single party brokers or transactional brokers. Using the statutory language, the local boards are printing their listing agreements with disclosure addendums which spell out the two representation options to consumers. Single party brokerage is positioned less favorably, warning the consumer that if he or she contracts with a broker for single party brokerage services, the consumer could be subject to vicarious liability. This is the most strongly worded consumer disclosure in the nation. Yet to be proven in a court of law is whether transactional brokerage places the consumer equally at risk of vicarious liability. Other states such as Michigan have passed laws enacting transactional brokerage for the purpose of doing away with dual agency. Single agency representation is an option which may be offered by a brokerage, but the option of single agency is not included on state-mandated disclosure forms given to consumers. Consumers are not being told that agency level service is available to them.

Countertrend: Fiduciary representation will grow. As real estate transactions slow down due to the economy, title companies and attorneys will be less content to wait for business from agent referrals and will be more inclined to market directly to the consumer themselves. Real estate brokers working as non-fiduciaries give these closing agents the wedge they need, primarily because they are essential to the transaction, whereas non-representatives are not.

Attorneys and other closing agents will start to market fiduciary-level service as a contrast to the watered-down representation offered by real estate practitioners as facilitators. Real estate practitioners have held themselves out as experts in the real estate transaction, but when face to face with the customer, the licensee will have to disclose that their representation may change should the agent have the opportunity to bring the other party to the table. By announcing to the seller or the buyer that the relationship is contingent upon representing others, the agent introduces seeds of doubt into the relationship, causing the seller or buyer to wonder if the agent is capable of working in the seller's best interest.

Real estate brokers who operate as single agents will have a built-in marketing advantage regardless of how fees are paid or by which side of the transaction. Any professional whether it is a real estate agent, attorney or title company officer, who is willing to represent the consumer's best interest will have a marketing edge with sellers and buyers. The threat of lawsuits for fiduciary failures will be replaced by the new threat of other parties taking business away from the Realtor.

Commissions Trend: Commissions are being challenged.

The real estate industry has been experimenting with new economic models in a big way in 2000, and the momentum will grow in 2001. The growing number of buyers who use the Internet to find homes and home buying information will promote the online services and fee reductions. Several e-brokers whose business models are based on reduced fees or partial fees rebated to their principals at closing are leveraging the technologies of the Internet to acquire and serve customers in a medium they like. Competitors in these markets are being asked why they, too, can't reduce their fees.

Countertrend: Fee-for-service brokerage services will grow. As brokers are challenged to justify their commissions, they will find that assigning values to certain tasks which are in demand by consumers will allow them to capture a segment of the market that they might have lost otherwise. Fee for service allows agents to serve die-hard FSBOs for example, who don't want to pay commissions but are willing to pay fiduciary-quality fees for some services. Full service brokerage commissions will be applied to hard-to-sell properties, and some sellers may be willing to pay bonuses above customary fees to get a home sold. Commissions will be more likely compensation for the sale of homes which have built equity.

Since service is what consumers are paying for when they engage a broker and/or agent, the expectation of service will continue to be high from consumers. A fee-for-service schedule will enable brokers to limit liability while retaining a high sticker price for limited services performed.

The Internet

Trend: Buyers flock to the Internet. Buyers are going to the Internet to view homes but they also go there to retain autonomy. They can gather information at will and view many homes at one time through the miracle of high-speed Internet connections at their offices. The Internet has helped to shift the real estate industry's focus from the seller to the buyer. However, buyers mean greater liability to the real estate broker. Buyers account for approximately 95 percent of law suits, so the real estate industry has been reluctant to come up with a model to serve them besides buyer's agency. Buyer's agency still is embraced by less than five percent of Realtors. So far, buyer's are being steered by Internet listings partners to participating listings agents. Listings are regarded as a valuable commodity by online listings services because they attract buyers, but buyers are not buying homes from using the Internet. Less than four percent of Internet buyers closed on the homes they found on the Internet, according to the NAR. Conversely, agents have been serving a seller's market. Too busy to do more than allow their listings to be posted online, many still do not actively market their services online, despite proof that buyers are increasing their use of the Internet in the homebuying process.

Countertrend: Agents will turn to the Internet The listings-centric business models of online lead generation tool providers to real estate agents will change to enable them to serve buyers more efficiently. As the economy slows, more listings will appear unsold on the Internet and take longer to sell than they did during the seller's market. Agents will become more interested in capturing both sides of the transaction, and will be less cavalier about prejudging online buyers. Today, they jump at the ring of the phone but allow e-mails from buyers to go unanswered. The new economy will raise the online buyer's status and e-mail will become as compelling a contact tool for agents as cell phones. All communication tools will become more important, and agents will require more support from their brokers, Realtor associations and training schools to improve their communications and their response rate online. While one out of ten Realtors actively markets on the Internet, that number should more than double as Realtors embrace the Internet as the most cost and time-effective means of improving their service level. Other agents who are less willing to improve their services will find themselves dropping out of the industry, as they have historically when the market shifts.

2001 will be the year of the Internet-enabled agent. Communications companies such as FireTap and Wyldfyre will improve access to MLS information with new technologies including wireless information coding and hardware access to match the broad band-width capability of the online buyer. Wireless devices will tap into the MLS for instant updates on the database, including notification of new listings. MLS organizations will continue to merge, and some will be served by online MLS access companies such as Wyldfyre who can merge their databases for easy online property searches. Service providers who have faced reluctance from Realtor customers will find that if they offer training along with the sale or subscription to their products, that they will have a ready market.

The change of a market is also the opportunity for brokers to clean house. As unmotivated agents drop out of the industry, the broker is able to change hiring policies. In order to keep training costs low, brokers will begin to look more favorably on computer experience than sales experience. To cut costs, brokers will regionalize as the e-brokers are already doing, using a central processing office and encouraging their agents to operate more independently. The trend toward reducing broker liability will continue and will be placed more squarely on the shoulder of the agent. Look for state requirements and regulations to tighten with regard to new agents entering the industry.

Published: September 15, 2000

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. 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. To contact Blanche, email her at . For more articles by Blanche, click here.