“Interest rates will continue to rise” – Various economic pundit
“Prices will continue to rise” – Various economic and real estate pundits
“Large brokerage will swallow up smaller brokerages until they are all assimilated” – various real estate pundits
“Newer business practices will come and go, but tradition will stay” – Various pundits
“Consumers really need professional guidance” – Various pundits
“We will always have a residential real estate industry” – Various real estate agents and brokers
“Pay no attention to the man behind the curtain” – Wizard of Oz
We have each heard many of these predictions over the past year or two, haven’t we? In fact, we have probably heard their exact opposite as well. We hear that prices will rise then we hear that prices will drop. We hear that interest rates will soar then we hear that they will shrivel. And the beat goes on. . .
How about this prediction: “The real estate business model is about to undergo some serious changes.” I can’t speak for the industry, but I doubt that there will be many who will disagree that change is the order of the day. Many things are changing. Some changes last, and some fade away quickly. Will this prediction come true, and will the change be lasting? Who knows? I sure don’t.
What I do know for sure is that there will be and there has been some movement afoot in the area of compensation for several years. Some of the movement is in the form of discount brokerage; a practice where the brokerage prices their services well below the competition in a modern-day version of price wars. Another movement is in the al la carte service area, under which clients are offered a menu of services from which they can make selections – ostensibly in order to save on commissions.
But we have viewed these changes in the light of what we want to see, not necessarily in the light of reality. I have had many discussions with industry professionals who are certain that these changes will just fade away with market shifts. They might tell me that discount houses all but disappear in a tight market. They also are sure that new business models such as the online “shared activities” models in which the consumer does some of the work for a rebate on the commission are having some tough times today. Well, sure they are. We all are!
What if we took a different approach to this discussion. What if we viewed these changes as being integrated into business models instead of as replacing business models? What would our feeling be then? For example, we often speak of menu-based pricing as an alternative to our traditional full service contingent percentage of sales price model. If we take a slightly different view – where the menu-price becomes an optional addition to tour business offering, then things take on a whole new light, don’t they? I am going to guess (at the risk of being branded a pundit) that this is what we are likely to see in the next year or two. We will see more and more that brokerages will allow for and possibly even promote different business arrangements for their clients to choose from. After all, we all like to have clients, right? And I am going out on a limb here to say that consumers actually want to participate in their real estate business dealings. If this is so, then it follows that some consumers will actually require alternative business models for their transactions. And, by the way, it is their choice, not ours. Sure, we can choose not to participate, but that leaves more business for me and others who practice Client-choice real estate.
Am I becoming a pundit? I hope not. Maybe I am just becoming a swag (sophisticated wild-a** guesser)
Jack Harper is a longtime REALTOR and author who is an avid proponent of the consulting model in today's real estate market. He believes in providing fair and professional service and being paid a fair and reasonable fee for those services every time he is engaged by a client, whether there is a sale involved or not. He advocates allowing the consumer to have full choice in terms of the services and is an evangelist for the consulting model.