NAR: Industry Filled with "Fruit Flies" and "Zombies"; Stresses Need for Simplicity in Changing Markets

by devteam July 9th, 2012 | Share

The National Association of Realtors® (NAR) Strategic Issues Workgroup</bheld a series of structured discussions last February with brokers, salesrnassociations, real estate consultants, economists, and technology experts andrnasked them two questions:  What do yournsee as the future of real estate over the next few years? What will be thernmajor changes in the real estate business ahead?  From the responses NAR has issued a reportrntitled Simplify! Real Estate Trends in arnTime of Uncertainty.</p

The report says today the real estate field is filled withrn“fruit flies” and “zombies.”   Agents,rnbrokers and consumers tend to focus on the short-lived trends which arernproliferating like fruit flies such as a hot New Mobile app.  A controversial blog or a twitter tweetrngenerate immediate interest and excitement then disappear.  Zombies, on the other hand, are real estaternprofessionals who are simply going through the motions without thinking aboutrnwhat may lay ahead saying that this will pass and everything will be back tornnormal again.  That attitude is arnpowerful obstacle to meaningful change on any level.  </p

In their research, the authors say, they saw many creativernbrokers and agents redefining their business model.  Some have left one business behind to creaternwhat they think will be the future. rnBusiness cycles always seem to produce the most creative responses onrnthe downside; as one broker said, ‘I am taking the leap what do I have tornlose?'”</p

Through the discussion groups the authors identified eightrnwords that encapsulate trends in the industry. rn</p

Simplify:  Brokers agents and associations are leaner andrnmore focused.</p

Consolidate:  Firms and associations are consolidating andrnmerging.</p

Collaborate:  The new business culture is collaboration.</p

Enrich:  Consumers are demanding are richerrntransaction experience.</p

Dream:  Homeownership is losing its appeal as arnpromise dream.</p

Embrace:  Technology must be embraced as it impactsrneverything.</p

Leadership:  Times of uncertainty call for leadership atrnall levels.</p

Evolve:  Real estate and association business modelsrnare evolving.</p


The authors stress the value of simplicity because consumersrntoday are bombarded with information about real estate, the economy, andrnfinancial markets while dealing with concerns about their own jobs, savings,rnand retirement plans.  The real estaternindustry clearly has an opportunity to simplify the customer experience, andrnbring greater clarity to the transaction and provide trusted advice.  The need for simplicity is already drivingrntrends in real estate</p

In an era of digital mobile and social communication buyersrnand sellers have no problem gathering vast amounts of information but in manyrncases they don’t know what is accurate, relevant, or important when buying orrnselling of a home.  The same problemrnexists in other areas of the real estate industry; it’s not always easy forrninstance for a buyer or seller to understand the nuances of the agency brokerrnrelationship.  Products studies show thatrnsimplification often results in increased sales.  </p


The industry is also simplifying through consolidation.  Participants said there were too many agents,rnbrokers, associations, and MLS organizations and some forecast a steadyrnreduction in their numbers over the next few years.  The extended downturn has been particularlyrndifficult for brokerages with modest profitability where cutting expenses evenrnfurther is no longer an option. rnTechnology has also made it easier for agents, brokers, and associationsrnto operate effectively with fewer people. rnOther factors leading to consolidation are aging professionals who mustrndecide whether to groom a successor or sell the business while larger companiesrnwith access to capital can pick and choose acquisition and merger targets.</p

The consolidation trend has also impacted associations andrnMLSs and many are considering mergers or consolidations citing reasons ranging fromrnmaking life easier for members to enhancing the value of membership.  Like brokerages many associations have cut allrnpossible expenses and overhead and now face tough decisions on core services orrneven survival.</p


Another rising trend is collaboration.  Traditionally the real estate industry hasrnbeen extremely competitive as agents vie for customers and brokers seek productivernagents.  While that isn’t going to changernanytime soon there are clear signs that collaboration is an emerging trendrnparticularly with younger real estate professionals who are used to working inrnteams.</p

One of the benefits of collaboration for brokers and teamrnleaders is a smoother more consistent delivery of services to the customer and anotherrnis an increased sense of belonging which can reduce agent turnover and improverncustomer acquisition.</p


The participants saw as a consumer trend the seeking ofrntrust, transparency and an enriched experience. rn”Mobility speed and personal service are critically important forrnserving today’s consumers.  Butrnunderstanding local markets and building relationships with buyers and remainrnthe keys to success in the real estate industry”.</p

Establishing trust remains a vital issue for buyers and sellers.  Along with trust consumers want greaterrntransparency at every stage of the process. rnReal estate professionals need to be straight shooters with theirrncustomers.</p

Due largely to the trust issue some buyers prefer to spendrnhours searching for homes on third party sites before contacting an agent andrnthen are reluctant to provide personal information for fear they will bernbombarded with unwanted sales materials. rnYet when they are ready to act they want immediate attention.  Once contact is made it is important that thernagent stay in touch using the consumers preferred method while helping therncustomer sort through data, negotiate the transaction, and navigate the rest ofrnthe process.</p


There is a pronounced trend toward more renters and fewerrnowners.  Demographics drive the housingrnmarket and they are changing.  “Millennials”rnhave not entered the market on schedule, preferring to live in urban condos orrnrentals and are also a generation saddled with debt and problems entering thernjob market.  Some professionals arernconcerned that the nation’s long period of economic and financial stress hasrntrained a generation that home ownership is not worthy of pursuit.</p

Other factors are impacting homeownership.  Experts expect an increase in non Caucasianrnhouseholds some of which are comfortable living in multi generationalrnhouseholds, impacting household formation. Homeowners expect to stay in theirrnhomes longer, an average of 15 years compared to eight only six years ago.  Meanwhile the housing market continues tornchange; home ownership levels have fallen to the 64% range from their peak atrn70% five years ago.  Homeowner attitudesrnhave been affected by concerns over foreclosures, falling home prices andrnshadow inventories.  At the same timernthere are indications that global buyers they pick up some of the slack asrninvesting in the U.S. is becoming more attractive to a fluent overseas buyers.</p

Embrace (Technology)</p

Many new types of technology companies have entered the realrnestate industry over the last 10 years. These companies compile information, buildrndatabases, and develop tools to attract consumers and generate revenue fromrnagents, brokers, and advertisers’.</p

Gathering and storing data is much easier than turning it intornknowledge and wisdom.  Being able to askrnand answer consumer questions he’s one of the uniquely valuable servicesrnprovided by real estate professionals.  Advancedrntechnology is more likely to improve agent and broker productivity than replacernthose players but massive shifts in technology present particular challenges tornan industry that has historically challenge lagged in innovation.</p


Theirs is much uncertainty in the industry; will thernrecovery continue?  What will happen withrnforeclosures and the shadow inventories? rnBrokers and agents tend to have three visions of the future; gloom andrndoom, a steady state, or cautious optimism. rnSince there is evidence for each of these it will be important tornprofessionals to pay attention to shifts in consumer sentiment and policy positionsrnand to stay in touch with the lending community. </p

Underlying all three visions is a feeling that the industry’srnproblems are beyond its ability to correct. rnMassive institutional problems and governmental influence and controlrncreate a feeling of impotence and anger; nonetheless agents, managers, andrnassociations need to make wise business decisions in this time of uncertainty.</p


Simplification, consolidation and collaboration are blurringrntraditional roles and workflow models will have to improve.  Traditionally there is a hierarchy ofrnservices within real estate; agents serve consumers, broker serve agents, andrnreal estate associations and MLS organizations serve their members.  That model has been challenged by Internet-onlyrnbrokers, companies that focus on For Sale By Owner listings, and leadrngeneration companies.</p

There are other signs the structure may be changing; many agentrnteams operate as virtually independent businesses; some brokerages are takingrnmore control over agent training, technology, and service delivery to create arnnew consumer brand, turning the focus from the agent to the brokerage.  Brokers have to generate online traffic torncompete with the lead generation companies and find other ways to provide valuernto their agents.  Some companies haverndeveloped segmented business models offering agents a choice of “full service”rnor “freedom shops.”  MLS sites now offerrngateways to the public and associations are also engaging directly withrnconsumers such as publishing market updates advocating housing issues andrnwatching neighborhood improvement projects.</p

From the standpoint of the consumer, a simpler real estaternindustry makes a lot of sense, providing greater transparency and streamliningrnthe transaction.  Technology has made consumersrnless dependent on agents, brokers and an MLS Systems for information.  Having fewer players in the mix could alsornreduce the number of transaction-related charges and fees for buyers and sellers.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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