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CEO’s Message: Back to the New Basics

Jim Harrison: MLSListings Inc CEO and President

Jim Harrison
President and CEO, MLSListings

The intent of this column is first to provide an update regarding the dramatically changed real estate world in which we are currently operating. Second, it will suggest a productive response mechanism for real estate business persons and professionals who should be considering how to integrate this information into their day to day lives.

Author Doris Kerns Goodwin pointed out in her book about the lives of Franklin and Eleanor Roosevelt during WWII, that the period was No Ordinary Time. More than ever before this term now clearly applies to a real estate industry and marketplace that is being subjected to change, transition, and, yes, disruption at an unprecedented pace.

The business and professional transition currently being played out on the real estate industry stage is most impressive. All of the changes and transitions that have emerged over the past 10 years are in full force and effect. New real estate service providers are becoming operational. Entire new business models and genres are appearing on the real estate scene. In short, the industry is experiencing a virtual renaissance driven by investment, creativity, and innovation.

This renaissance is being presented at three different levels. Major organizations such as Google, Amazon, Facebook, and Wall Street have either announced or demonstrated an interest in participating in the consumer’s real estate experience. These giants will make an impact on the real estate industry by doing what they do best. Wall Street will continue to invest billions of dollars in new and disruptive “alternative” entities. Amazon will do what it does best which is to sell things using a very intimate approach. Facebook’s real estate programs will benefit from the fact that it holds very personal lifestyle information about millions of consumers. Google will base its participation on the fact that it is “knowledge central” about everything These entities will be willing to trade their unique competence for a mere 30% referral fee.

At the second level is the impressive number of high tech discount players that are offering a whole new approach to the consumer real estate experience. These folks don’t see themselves as being cheap but rather as being techno fused, efficient, and effective. They are offering consumers lower commission rates because they can.

Redfin, Purplebricks, and Redefy are only three examples of this new brokerage business model. These upstarts are gaining huge market share quickly. Some experts predict that collectively they will do over 70,000 transactions in 2017, totaling more than $25 billion in sales volume.

The third group of new entrants is entities that a year ago no one in the industry had ever heard of, called iBuyers or Direct Buyer, programs. There are now almost a dozen companies vying to compete in this space. The concept here is simple yet revolutionary. iBuying is largely based upon the fact that a growing number of consumers are rejecting the real estate experience being offered by the traditional agent and brokerage. As a result, many are delaying or rejecting the idea of entering into the traditional real estate buying and selling experience.

Firms in this space are offering a more consumer-friendly option. Contact them and they will make the consumer a market level and “defect adjusted” offer to buy the property straight out and close as quickly as 72 hours. OpenDoor, OfferPad, Knock, and Redfin are all playing in this space.

Those who see this as a fantasy play would do well to know that OpenDoor, just one of this species, is currently expending over $100 million per month for a total of some $1.3 billion just in 2017.

Another market force that will have a powerful impact is called eClosing. This movement, driven by the title and mortgage sectors, seeks to empower a closing that can occur within two weeks of contract. Transaction incorporating this enhancement will require a unique set of agent competencies and tools.

On the solution side, when the 2018 edition of the Swanepoel Trends Report is published in February, it will present a new business model designed to assist existing brokerages to accommodate these new developments. Based upon two years of research done by Jeremy Conaway of RECON Intelligence Services (Mr. Conaway also services as MLSListings’ Strategic Architect), the Swanepoel Report will introduce the Management Empowered Brokerage Business Model (MEB). The MEB was designed to provide a road map for brokerage success in the new market environment discussed above.

To date, the industry’s response to these developments has hovered half way between denial and rejection. Despite the remarkable changes that are impacting our lives from almost every other industry we interact with, many of our practitioners simply don’t believe that this level of disruption and change is poised to impact our industry.

The truth is that it can and it is.

Crafting our response to these developments may be one of our most important decisions ever. Consider the following recommendations.

  • None of the forces, trends, or disruptions discussed is capable, in and of itself, of generating a “100 year” flood. However, there is a clear sense that, taken together, they have the potential to affect such a level of change.
  • None of us have ever been through this experience before. It behooves us not to compare the current situation to anything we have previously encountered. Let’s not waste our time.
  • This is not a situation that can be met with innuendo, rumors, hearsay, or wishful thinking. The discussion required to meet this challenge must be fueled by facts, research, and real (rather than experiential) expertise. What we don’t have we must acquire.
  • The foundation of this new real estate environment is not based upon any of the factors, assumptions, or foundations our industry has long held sacred. Its foundation is comprised of new generational, technical, demographical, financial, and lifestyle realities.
  • Solutions based upon legacy and protectionism will not work. The winning passion must be based upon creativity, innovation, and competitiveness. Nothing less will meet this challenge

Yesterday, today, and tomorrow our industry has and will continue to experience the effects of a virtual renaissance driven largely by third-party investment, creativity, and innovation. It has not been, nor will it be, a fun experience. That sentiment aside, however, it is important to understand that this movement will create more opportunity for everyone in the industry than any other force in the past 20 years. This movement is spending billions of dollars to make our industry better.

Study these developments, become a student of industry change, and, most importantly, see yourselves as a beneficiary, rather than a victim. It is your industry and marketplace to lose. The most important elements of the struggle will be taking place in your mind. Let’s win this one together by celebrating the new basics.

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