Four Top Real Estate Business Trends (And Why You Should Ignore Them)

Real estate brokerages are constantly evolving to better meet the needs of their clients and to differentiate themselves from the competition. Some are even changing their entire business model, offering homebuyers and sellers alternative ways to conduct transactions in hopes of becoming disruptive forces in the industry.

But when it comes to buying and selling a home — typically the largest financial transaction of most people’s lives — clients are often better served by working with a brokerage that retains tried-and-true business practices. This isn’t the time to be risky. It’s just as important to know when to be smart and strategic.

Here are four top examples of current industry trends and how resisting these can actually improve a brokerage’s reputation and help cultivate a better relationship with buyers and sellers:

1. Consolidation

A number of national brokerage firms are actively seeking to increase market share through both consolidation (buying the competition) and the recruitment of successful agents in their market area. But is that the best way to grow market share, especially when agents lured that way may end up doing fewer transactions?

Culture and environment matter much more than many agents realize. Time and time again, I’ve observed agents’ sales productivity decline when they move to a brokerage that’s focused more on market share than cultivating agents. A culture shift that makes agents feel less supported can affect how they do business. A brokerage that wants to keep top agents must focus on organic growth and give agents a reason to stay. It’s not just about the money for talent; it’s about culture and giving agents more than just a desk. Training and onboarding the talent quickly enables a company to succeed and grow. An independent local brokerage treats agents like more than a number. When agents see their company is investing in their professional development, this creates a corporate culture where they feel valued, are better equipped to succeed and want to stay.

Of course, consolidation can be a great tool if the focus is on acquiring the right partner: A company that shares the same culture and values that will allow both firms to benefit through shared tools, coaching, support and systems. These are the things that make a great real estate company better.

2. Direct Homebuying

An increasing number of brokerages and investors are getting into the business of direct homebuying, or purchasing houses directly from sellers at a discount and then reselling at a profit. Various companies exist that enable people to buy and sell properties direct without an agent and are expanding into additional markets, while national powerhouses have also jumped on the bandwagon.

Many independent local brokerages, however, have made a conscious decision not to engage in direct homebuying. Why? The market is strong, so it’s not necessary to resort to direct homebuying. In addition, I believe direct homebuying is fundamentally bad for sellers since homeowners typically end up with a lower sale price than they would get on the open market. As agents, we have a fiduciary responsibility to buyers and sellers. Even if a homeowner is under duress and needs to sell quickly, they are far better off letting their agent create an aggressive pricing strategy that generates multiple offers in a short period of time, which is ultimately better for the consumer’s bottom line.

3. Virtual Closings

Closing on a home virtually is gaining popularity, with supporters citing convenience as the main reason. But for buyers, a closing is almost ceremonial, with buyers, sellers, brokers, attorneys, the lender and title company all at the closing table, each having played a unique role in the transaction. There’s that special moment when the deed is pushed across the table and the keys given to the buyer. Virtual closings for refinances are one thing, because no one is moving and it’s more convenient for the client. But for purchases, they essentially deprive the buyer of a special occasion.

Agents should walk clients through the process of what happens at a closing, why being present matters and why the experience gained simply can’t be replicated virtually.

4. Alternative Commission Models

Sellers are no longer limited to working with full-service brokerages. There are many new business models available, from sliding scales to discounted flat fees. But are alternative commission models really in the best interest of a client?

A 2017 National Association of Realtors report found that sellers using discount brokers or choosing to sell on their own received a lower sales price — by as much as $90,000 — than those who used a full-service brokerage. Most people aren’t familiar with the sales process or the local market and have limited access to qualified buyers interested in purchasing.

A full-service brokerage spends a tremendous amount of time honing the professional skills of its agents, so they will use those skills to devise a pricing strategy to get the seller the most value. Some sellers may indeed be capable of negotiating on their own behalf, but really it’s the great agents — the ones who can negotiate their own fees — who advocate aggressively for the seller and get the seller the best deal at the end of the day.

Bucking these top four real estate industry trends is ultimately good for business — because it’s good for buyers and sellers.

Four Top Real Estate Business Trends (And Why You Should Ignore Them) curated from Forbes - Real Estate