Retail Real Estate Struggles (Part 2)
May 13th, 2011
As we discussed yesterday, the National Association of Realtors (NAR) has reported a 21 percent drop in membership since its height in 2006[1]. With reports hitting the news nearly every day about median home prices falling, real estate agents “working more for less money” and housing markets still struggling to recover, the news is not really all that surprising. In fact, the real issue may not be so much that NAR membership has plummeted to 1.06 million members, but that commissions have dropped substantially and that nearly half of all agents are closing less than 1 transaction a month. Furthermore, registered members in the industry are filing for bankruptcy at more than five times the national average.
At such a difficult time to be involved in retail sales of real estate, the NAR is also faced with another difficult decision: raising dues. According to Inman News, member organizations around the country say that they will lose members if the NAR raises dues by $40.00 a year[2]. NAR believes that it must increase its political activities and needs the money to do so. Other ideas are to eliminate a similarly-priced “special assessment” that currently funds public awareness campaigns designed by NAR to encourage home ownership.
No one disputes that this is a difficult time to be involved in retail sales in the housing market. It seems like most of the real estate agents experiencing true success in today’s market have developed a specialty area that caters to the unique demands of today’s buyers and sellers including investors. What do you look for in a real estate agent? If you are a realtor, how have you coped with the changing market?
The best comment will have the option of being interviewed for REJournalOnline to explain their strategies and why they are successful.
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[1] http://www.housingpredictor.com/2011/realtor-members.html
[2] http://www.inman.com/news/2011/05/11/association-execs-worry-nar-dues-increase-would-dent-membership
May 13th, 2011 at 7:30 AM
We need to eliminate the risk in Real Estate of the agents working for free. In an Alternative Compensation model, the buyer can pay for the services of their realtor, on a pay as the services are performed basis, thereby eliminating all risk that the realtors would ever work for free. The home BUYER that knows they are buying a home, has no risk, as they are in control of their own decision, so they have taken risk out of the equation. The buyer, for eliminating the risk gets the reward of a reduction in the sales price, a concession towards closing costs or as cash back at closing equivalent to the co-broker commission allotted for his realtor. The Seller and the sellers agent receive the exact amount they expected at the time the agreement of sale was signed. In business there is an expression, “Sometimes we can make money by losing a sale”
thanks for your time,
Glenn
May 13th, 2011 at 8:34 AM
While decreasing home prices, a slow economy and other factors are contributing to the current malaise facing the NAR, perhaps at the core of the current challenges is a more subtle, yet powerful reality of modern real estate - home buyers and sellers can now do more of what needs to be done themselves.
In many ways real estate sales have followed a path similar to that which faced travel agents a decade or so ago. Like in real estate, travel agents offered consumers a necessary and unique service. However, as the Internet matured and started to offer travelers more tools and research features online, they were able to provide for themselves the services once performed by a professional. As a result, the vast majority of travelers today use these do it yourself services to find the best prices and to create their own deals.
In real estate the tools that were once in the domain of real estate agents are now available to anybody who wants to use them. As more and more home buyers use these tools to find and research properties, take virtual walk throughs of homes and neighborhoods and get decision making information from hundreds of sources, many buyers are starting to question the value that their Realtors bring to the table.
It’s worth pointing out that most home buyers and sellers don’t have the knowledge and skills necessary to get a home buy or sell from contract to close. However, because home buyers are taking on more of the responsibilities for the home buy or sell themselves, fewer and fewer are willing to agree to a straight commission based compensation model. As an alternative, home buyers are looking for ways to purchase just the support/service that they need instead of an ‘all in’ or ‘all out’ commission model.
At Nucazza, our mission is to help home buyers to find resources, through Realtors, lenders and other real estate service providers, willing to work with them to on an al a carte basic to allow them to purchase just the support and guidance they need when buying a home.
These new models not only benefit the home buyers but also Realtors. Instead of being paid only when they are able to close on a home sale, Realtors who work on fee, hourly or task based agreements are paid directly for their time (in lieu of a commission payment), are actually working directly for the home buyer as a consultant and advocate and eliminate the risk that commission based models heaps on their shoulders (sell or else!). In short, these new models allow Realtors to be paid for their time and expertise just like other professionals.
We doubt that real estate will ever return to its former glory (late 1990s) even when the economy and demand for homes increases. The models have changes and newly empowered home buyers aren’t interested in models that don’t give them choice and transparency. Instead, real estate will go through a rebirth in which Realtors provide needed and valuable insights and tasks based on experience and understanding directly to home buyers and sellers who need that expertise in certain circumstances.
At the end of the day, it will be the consumers who are calling the shots (and driving the market) and not the NAR or Realtors.
May 17th, 2011 at 6:16 AM
It doesn’t seem like much of a race to see who wins?