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Will Real Estate Agents Survive?

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By : Beth Prince    99 or more times read
The real estate world has been undergoing dramatic changes ever since the bubble burst. The number of licensed agents nationally, and in CA particularly, has dropped dramatically with no inclination of slowing down. Why? Because agents are fighting to find buyers who can qualify for a loan under the new requirements and sellers who want to sell in this market. At the same time agents are struggling to pay their Association and MLS Dues, advertising costs, website maintenance, and most of all, the high monthly/recurring/franchise fees that most real estate firms require. On top of all of this money that goes out, they are then forced to give a huge percentage of their commission to their company as well!

With the market being saturated with foreclosures, bank owned and short sale properties the agents’ income model has dramatically changed. Not only have the prices dropped dramatically causing a huge reduction in their income per closed transaction, but these types of sales can take up to a year or longer to actually close! This makes the recurring expenses that have been an integral part of doing business as a real estate agent an increasing hardship, forcing more and more agents out of business.

What does this all mean for the future of real estate agents? On one side this is a positive change that will force out the less serious and less experienced agents leaving only the strong, more experienced agents that are dedicated to the industry. However, it is not only about the agents. It is time for the real estate industry to change and adapt to the changing market. With the onset of all the changes to the world of real estate, agents are scrambling to find a way to survive in business models that are out dated. The Internet has changed the out dated image of the Realtor from a boss in an expensive Italian suit, sitting behind a desk, in a fancy office, to the
“on the go” tech savvy Realtor holding a smart phone who is always able to be in the right place at the right time. Emerging from this evidenced need for change we see a new world of online real estate brokerages on the horizon.

Online Brokerages are popping up everywhere, creating new hope for struggling agents. These companies were initially perceived as a foreign idea but prove to be catching on quick. This new business model varies by company but they all share the practice of offering their agents 100% commission. As well as this attractive incentive, these firms simply require a small fee per closed transaction and a small or nonexistent monthly fee.

Take Real Estate eBroker for example, they charge their agents no monthly or recurring fees. The only cost to agents is a $500 transaction fee and $135 risk management fee per closed transaction. This model is becoming more and more popular as agents are swarming to them, steadily growing their numbers while conventional brokerages’ numbers drop. While some agents were hesitant to make the change at first most are seeking out those who already have to find out more about these companies.

They must like what these agents have to say because these types of firms are not only becoming popular to struggling agents, but to established agents as well. These agents have a different reason for joining these online based brokerages. They are established in their markets with a significant client and referral base. They therefore do not utilize most of the offerings supplied by their brokerage and are tired of giving a high percentage of their hard earned money to them for not much in return. According to a First Tuesday Journal survey only Brokerages with this new online business model are growing, where the typical brick and mortar operations are increasingly losing agents. These models are obviously working!

So, what is so attractive about these companies? These firms are online based meaning that for the most part they do not provide office space or machinery for their agents to use. With most agents working primarily from home offices, anyway, this does not pose much of a problem but allows the company to keep expenses way down thus passing their savings along to their agents. However, being online based means that these companies are technologically based and therefore are always up to date on technological advances. This knowledge is used to benefit the agents through improvements to the various products/systems that are used by the agents.

Online brokerages offer many other benefits as well. Real Estate eBroker provides 24/7 support, as well as, leads to their more than 1200 agents from a dedicated team of knowledgeable employees, as well as, training for new agents. Other benefits online companies provide are combining loans with their real estate business, providing agents their own webpage, offering in house escrow services, marketing tools and other programs to promote their agents’ services to the public. This model seems to be a “win win” situation for everyone: agents, clients and the online companies themselves.

These new online companies may not have well known names such as “Prudential“ or “ReMax” but recent research proves this to be unimportant to potential clients. Studies show that 80% of today’s home buyers and sellers started their real estate transaction on the Internet searching for property, not for an agent or broker. This survey showed that from a very comprehensive list of criteria that is important to a client, such as price, property condition, location, level of service and etc. The company’s name/brand found itself on the very bottom of the list.

What are the consequences when an agent who is conducting business in San Francisco is being supervised by a Broker who is located in San Diego? Actually, a recent DRE audit of Real Estate eBroker Inc, the leader in online brokerages, found that their system of supervising and supporting their agents’ activities was much better than those found at most of the traditional “Brick and Mortar” companies. This is possible because these companies dedicate all their efforts to supporting their agents and by combining resources, collected from many (not a few) agents, they can hire/use better real estate specialists for their business. Regular Brokers make most of their money from their own personal clients so therefore do not hold monitoring their agents’ activities as a priority.

The real estate world is ever changing, but the new trend of emerging online Brokerages may be the first positive change that agents have seen in the last several years. The Internet has changed all aspects of our lives and now it is making a huge change to the real estate business as well.

So, to come back to where we started, the decrease in the number of real estate agents and brokers is predicted to continue and only those who accept and adapt to the new market requirements will survive and succeed.

Here is a list of some of California’s most active online real estate brokerages so that you may find more information on their business models:

  • Real Estate eBroker

  • Evergreen Realty

  • Realty Benefit

  • Shore Capital

Beth is a Real Estate Professional with over 10 years experience.

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