From November 2000 to March 2001, the Strategic Issues Subcommittee of the National Association of Realtors held structured discussions and focus group sessions with brokers from around the country on key trends in the industry. What the 20-member subcommittee found were dramatic indicators of changes on the real estate horizon.

Key trends are impacting every aspect of the industry, said the report, including :

• New expectations on the part of consumers
• A rise in technology changing the roles between agents and brokers
• Increased competition while commissions levels fall
• Alternative business models changing traditional service delivery

"Our committee was constantly pressed to absorb and interpret the comments of brokers and consultants," said Jerry Matthews, executive vice president of the Florida Association of REALTORS and chairman of the committee.

The New Consumer

According to the report, there is a "new consumer" who is "technically competent, has access to deep pools of information, and demands to be included in the decision process." The new consumer is price-sensitive, but willing to pay premiums for services and items perceived to have high value. They expect "superb customer service, attention and communication," and are prompt to give feedback, positive and negative.

Financial considerations and scarcity of time are reasons consumers are may prefer "one-source" solutions that extend beyond the sale or purchase of real estate. Consumers view the home transaction as part of their overall financial picture, compelling real estate professionals to "expand their knowledge base, training and services." "Realtors will need to understand the broad financial picture to serve clients effectively, said one committee member."

Technology-changing information to new service models

The widespread posting of listings, neighborhood, demographic and other information on the Internet has empowered and confused the consumers, says the report. Brokers are now in the position of having to broaden their services to help consumers interpret the information they get off the Web. Some brokers feel that the abundance of information is one of the drivers pressuring commissions. Brokers are finding that the transaction is becoming commoditized, with price as a determining factor for consumers who compare mortgages, title policies, homeowners insurance, and other services. To compete on price, brokers may need to add value to the transaction, such as offering extra services.

Pricing impacts profitability

According to the report, the net profit per transaction for a real estate company is moving downward to a recent broker's estimate of about $150 per transaction side. Net national actual commissions percentages are about 4.2 percent, said one consultant.

Top agents are taking higher commission splits, and competitors are leveraging Internet technologies to compete on price. Meanwhile, brokers must invest in expensive technologies.

The possible entry of banks into real estate generated three different responses from brokers. Some felt it was important to keep banks away, while others want to offer financial services themselves. A third group felt that banks and insurers would have little effect. Some brokers felt that traditional brokerage may become a "loss leader" in order to sell other services such as "mortgages, insurance, financial products, appliances, or home ownership services."

"I was most surprised by the brokers that said their position vis a vis the agents was at risk," said Matthews.

A key finding of the report was this statement: "A strong real estate market may be hiding structural problems within the industry - such as the decline in brokerage profitability - that would be more apparent in a slower market."

New Business Models

Experimentation with new business models is likely to continue, with new definitions of what is traditional real estate emerging.

One broker said, "We are in transition from one basic controlled business model to a marketplace that has a large variety of models: everything from low to medium to high cost models to low, to medium, to high service models."

"In the race toward a new business model that makes economic sense to the new consumer as well as the real estate firm, I think there will be no one winner," observes Matthews. "Instead there will be multiple winners with very different business models. And that will be a challenge to other firms and the Realtor organization."

Among the new models making headway or under consideration in real estate organizations are:

• The concierge model - providing consumer access to third-party or in-house service beyond brokerage services to maintain full commission structures, and continue service revenues throughout the seven-year home ownership cycle.

• The Internet model - E-firms generally serve as a bridge to the price-conscious FSBO market, enabling brokerages to serve constituencies that might otherwise choose alternatives to full-service real estate brokerage services.

• The P-to-P model - Peer to peer models enable networked brokers to share information as an alternative to the MLS cooperative model.

• The NASDAQ model - As in the securities industry, brokerage firms would buy homes from sellers and resell them to buyers, cutting costs, paperwork and time to closing, which would stimulate more transactions.

"Many of the most drastic new trends had strong advocates on both ends of the spectrum," said Matthews of the committee findings.

Published: June 11, 2001

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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.