Did you know, as a nation we annually blow through $100 billion dollars a year on commissions to real estate agents? Holy crap that is a lot of money! How do business analysts and academics justify this $100B billion dollars a year? Well, they don’t.
But, analysts are pointing out through statistics and quantitative measures that by 2025 the national real estate commission number will be cut in half. How they arrived at this figure is beyond me, but even I can see this means a $50 billion dollar swing in our economy within 6 years. Doesn’t that seem significant to anyone? Want more stats? Today, the National Association of Realtors, NAR, boasts 1.3 million members. Workforce analysts will tell you, to sell roughly 6 million homes every year, the United States would need only about 200,000 agents. A figure many are predicting to happen within ten years.
A loss of one million agents and the re-allocation of $50 billion dollars are certainly dramatic statements. How closely these statements resemble reality, only time will tell. But, for agents outside of the franchise environment, the time for developing a long term strategy is now! Franchise agents are forever lulled into their Partner’s false messaging, giving all independent agents a huge head start. Simply put, independent agents don’t have to lug around the boat anchor that has become the franchise tag.
While change is certain, how we get there is not. This uncertainty ensures the process won’t be pretty. From an agent’s perspective, look for the next 18 months to be rather messy. The evolution has begun.
This spring, Redfin launched a huge media campaign touting their 1.5% Listing Fee. The ads mislead consumers to think that represents the total cost. They will learn about paying the buyer’s agent later. But, it’s important to realize, Redfin is spending tens of millions of dollars so everyone else in the industry can make less. As a result, local Independent agents are being told to match the 1.5% listing offer. Thanks Redfin!
In handicapping the United States real estate market, analysts will tell you to look at Europe and Australia. The U.S. market is the outlier here. Look for us to become more like the rest of the world. A world where Buyers agents are rare. Online portals are king. Total commissions top out between 3%-4%. And, Dual Agency is common.
Study Europe. Not only for what works, but why it works. Learn the steps they took to get to where they are. Try to anticipate how their business models could be implemented here? What would be the roadblocks?
If you believe residential real estate is in for serious change over the next 5 years, then you already know the leaders of the today, are NOT the leaders of tomorrow. Who fills the void? The market is wide open. It’s truly a unique period in time. Real estate is perhaps the last major industry that has yet to realize the benefits of technology in large part because NAR has literally spent everyone’s lifetime fighting change and technology.
Sadly, NAR controls agents outside of Atlanta. But never forget, NAR is a failure in Atlanta; a market where agents are allowed to choose. Atlanta has far more non-realtors than it does the big “R” trademarked type. This means Atlanta will experience the oncoming realty transition far differently than any other market in the United States. We can be the national incubator. Atlanta agents can be more likely to set trends and shape discussion than say agents in, Iowa or Idaho. No offense to those States. It’s not that our agents are any better, they’re just free. Free from NAR the BS they have, and continue to, inflict on this industry.
So where do we go from here? With so much oncoming change, if you have NOT established yourself over the next five years, you probably never will. So, if you are interested in being a part of the new real estate world, the next couple of years are critical. And, despite what many think, people don’t generally start at the top. So, if you want to be a leader in 5 years, start charting a path NOW that will get you there.