Guerilla Training Blog by Matt Jones

The Evolution of Real Estate (Part 1)

When CNN’s Pulse on America program featured us two years ago, they were investigating an interesting phenomenon in our industry. It seems that today there are two real estate worlds coexisting simultaneously. Like in the movie The Matrix, there was the “perceived” world and then thee was the “real” world. In our industry there is much the same today. Those agents who are practicing real restate this new way, are doing quite well — many better than ever. But those who are hanging onto the old-school real estate model are finding themselves working harder and harder and making less and less money. In order to understand this “new way” of doing real estate, we must first look at the history of real estate practice and see how it has evolved.

The 1960s and 1970s: The Broker-centric Era
The 60s and 70s were quite literally the “golden age” of real estate (think Century 21’s gold blazers): a time when the real estate industry as we know it today was born. That original giant, Century 21, and other companies like Coldwell Banker, ERA, Prudential, Wychert, Long and Foster, etc., are responsible for pioneering many of the techniques that have become synonymous with real estate practice. The then novel ideas like geographic farming, sphere of influence marketing, floor duty, open houses, model homes, and so on, have now all become today’s mainstream methods of gathering customers.

I call this time in history the broker-centric era, because the broker was king. The broker owned the office, the listings, the signs, did the advertising, and generated the sales leads. He provided the agent with training, tools, and work space. It was also broker-centric in that broker kept most of the money. A 50/50 agent split was the norm, and that was after taking any franchise fees off the top. Real estate brokerage as we know it was in its infancy and many agents did quite well.

The 1980s and 1990s: The Agent-centric Era
Sometime in the early 1980s, top producing agents began to wake up to the fact that they were “doing all the work” and they were not getting what they felt to be their fair share of the money. Enter the agent-centric era. Companies like Realty Executives, Re/Max, Keller Williams, Exit Realty, and many others began to spring up, offering the top producing agent much more money. But like any other industry, there is no “free lunch”.

The additional agent compensation (today’s average agent split is now 62%) came with a price. Along with shifting brokerage commission dollars to the agents, brokers began shifting much of the associated overhead to them as well. Desk fees, office rent, telephone, fax, and copy fees, administrative fees, transaction coordination fees (to name only a few), became the norm in those agent-centric model companies. The agent was now king, but he had to finance his own kingdom. The agent did his own advertising and provided his own sales leads. The money for the agents became marginally better, but the overall customer experience (as measured by customer satisfaction levels) began to erode, as more and more agents were driven by independence and money.

2000 and beyond: The Customer-centric Era
Around the turn of the century, real estate began to change again, this time brought about by the Internet. Today’s information-empowered customer is now king. In both the broker-centric and the agent-centric models, the real estate professionals (either brokers or agents) were in control. Today, however, the customer is in control, and the customer demands excellent service. If he doesn’t find it with one agent, he will move on to another.

And now that the customer is king, the key to success in today’s fragmented real estate market is learning to gather customers, and then learning to serve them well. In an article I wrote for Broker Agent News, I describe at length the market dynamics of today’s customer. Essentially, today’s customer is different, and understanding and adapting to those differences, will make you wildly successful in our current market environment. Those agents who take the time to learn real estate this “new way” will dominate the real estate landscape over the next decade while those who don’t will be looking for new careers.

In my next post, I will begin to develop that foundation. How can an agent transition to the new age of real estate? How can you thrive while those around you are floundering? I believe you can! I believe you must! Stay tuned…

Series NavigationThe Evolution of Real Estate (Part 2) >>


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