Trend 9: The Evolving Real Estate Value Proposition

Redesigning the Brokerage Relationships with Agents and Consumers

This is the second blog post in a series of ten that covers the trends that will shape the residential real estate industry in 2019 and beyond according to the publication, Swanepoel Trends Report 2019.  The views, thoughts, and opinions expressed in this post belong solely to the author, and not necessarily to the author’s employer or the publication cited.


Running a real estate brokerage “ain’t what it used to be.”  That is pretty much an understatement.  Today, brokers walk a tight rope between serving their agents and the consumer.  Tilt to one side too far and a brokerage risks plummeting to irrelevance.

The Swanepoel Trends Report examines the changing relationships between the broker/agent and the broker/consumer and suggests ways in which all sides can win if they embrace certain strategies.

The Broker/Agent Relationship

Brokerages’ compensation models have evolved over time.  From the early days of 50-50 splits to 100% desk fee models to hybrids somewhere in between, the permutations are endless.

Agent’s are now more independent than they have ever been before.  They only want to pay for what they feel they need from their broker and many agents are now accustomed to paying for services from private vendors apart from their brokerage.  As a result, the agent relationship with the broker has eroded.

Other market changes have led to a further deterioration in this relationship.  They include:

  • affordable technology solutions
  • an agent’s ability to conduct business from anywhere through the use of mobile devices
  • relatively inexpensive digital marketing solutions
  • online education and training
  • third-party lead generation sites like Zillow, REALTOR.com, Facebook and Google
  • the popularity and growth of ‘Agent Teams’ within brokerages

When you combine all these factors together, the classic partnership value exchange that once existed between broker and agent is now a shadow of what it once was.

Brokers today are struggling to find just the right formula of agent splits coupled with the services they provide.  Because of how fast our business changes, a formula that works today may not be relevant in six months.

The Consumer Value Proposition

Brokers at one time had the ultimate value proposition, “Come see us because we have the keys to the kingdom.”  The kingdom being the entire listing inventory in a marketplace.  If a consumer didn’t use a broker, they were screwed.

. . . and then everything changed.  Listings started to be displayed on public websites for all to see.  No longer was the consumer beholden to the real estate broker.  For some reason, brokers were slow to realize that this advantage went ***POOF***.  In fact, there are still brokers today that advertise, “I can show you any home in the MLS.”  Really?

Enter the iBuyer players.  These companies look to capitalize on the consumer’s perception that brokers are no longer needed on both sides of a transaction.

These companies will typically provide a cash offer and quick settlement to a home seller to lessen one of the pain points in a real estate transaction; the ‘placing your home on the market and having strange people schlep through your house’ portion.  Granted, the offer is generally 10-20% below the true market value; however, the convenience is worth the money to some sellers.

Couple this recent iBuyer trend with the rise of discounted brokers, and the real estate industry needs to reconsider its value proposition and communicate it clearly.

Re-imagining the Brokerage Value Proposition

The Swanepoel Trends Report makes nine recommendations for brokerages to re-imagine their value proposition.

1.  Develop Direct Consumer Relationships – Provide services to consumers that will supplement what agents do (i.e. iBuyer program).  Brokers can also provide tools that can help their agents provide a higher level of service to the consumer. (i.e. transaction management platforms, Customer Relationship Management (CRM) systems).

2.  Become Better Rainmakers – Brokers need to start generating leads again.  They used to do this through newspaper advertising and other print resources but that train left the station years ago.  They have been slow to the digital and content marketing table because of the investment that it takes to understand how to attract buyers and sellers.

3.  Reduce What Agents Do Not Value – Let’s start with office space.  It used to be a place where agents went to draw up contracts, make copies, or access a company provided computer system.  Not anymore.  With the advances in technology, agents can operate remotely and utilize cloud-based systems.  Brokers need to rethink how much office space they really need and adjust accordingly.

4.  Develop Specialist Support Regions – Take a fresh look at the role of a branch manager.  Their traditional function has always been ‘do what needs to be done.’  That could include understanding technology, coaching, recruiting, staff oversight, financial manager, and transaction trouble-shooter.  That’s quite a list.  Multi-office companies should develop a network of specialists who assist agents or the company in specific parts of the business to provide better service.

5.  Scale or Specialize – The message here for brokerages is ‘know what you are.’  Boutique style firms who specialize in a certain segment of the business (i.e. urban living, condos, property management) will continue to do well.  The mega-office brokerages, while challenging to operate, tend to have numerous sources of income (i.e. mortgage, title, insurance) and can weather tough times.  The middle-tier will increasingly be squeezed.

6.  Add Affiliated Businesses – Brokerages who diversify their services and create a network of affiliated businesses that compliment the consumer experience will add value not only to their bottom line, but to the agents that work for them.

7.  Redefine Consumer Messaging – If you’re value proposition as an agent or brokerage consists of holding open houses, showing homes, and writing up contracts, you are about to become an endangered species.  These functions are becoming commoditized.  An agent’s arsenal must include knowledge of the local market, pricing strategies, counseling, negotiation, and transaction management.

8.  Help Agents Expand Their Services – In addition to the previous recommendation, brokerages can support their agents by assisting them in expanding their service menu.  Moving services, utility transfers, and home staging are examples.

9.  Encourage Agents to Get Buyer Agreements – In the very near future, the buy side compensation offered by companies will more than likely drop.  Discount brokerage models and iBuyer programs are already slashing at this fee.  Agents and brokerages need to communicate the value of a buyer’s agent and then charge for that service.

My Take

The trend outlined in this blog post should be a wake up call for most brokerages because the changes occurring in the industry are sweeping and fast moving.  If companies aren’t anticipating, discussing, and implementing some of the recommended courses of action at their planning and strategy meetings, they will soon find themselves behind the eight ball with no way to win the game.

Up Next:  Trend 08:  Blockchain + Real Estate; Redesigning the Brokerage Relationships with Agents and Consumers


SOURCE: Rand, Joseph and Swanepoel, Stefan. “Trend 9: The Evolving Real Estate Value Proposition – Redesigning the Brokerage Relationships with Agents and Consumers.” Swanepoel Trends Report 2019, edited by Stefan Swanepoel, 14th Annual Edition, RealSure, Inc. and T3 Sixty, LLC, 2019, pp. 28-42.

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