The Traditional Real Estate Office – The Times They Are a-Changin’

The Traditional Real Estate Office - Dinosaur from a Bygone Era or morphing into_____?

T-Rex is still alive and kicking -- okay...not the real one. Albeit many forces came to bear to bring the dinosaur to extinction, so too will the economic forces of the changing ways of real estate also come to "eventually" make the current, traditional real estate office unrecognizable in the future.

Just as the Internet in the past ten years has almost exclusively and completely changed how buyers search for homes (amongst a great many other things), so too must the traditional real estate office in 2009, though it has yet to evolve. For better or worse: The Times They are a-changin' - Bob Dylan.

In the past five years, I have only met one client at my former real estate office. In fact, Re/Max (I used to be affiliated with a local Re/Max franchise - and I think Re/Max is an incredible success story in American real estate so I speak from experience), was a major force in revolutionizing how real estate agents chose to take charge of their careers on many different levels. One major option the company provides is the option to either have a private office at the local franchise, a semi-private office, or a home office, depending on the needs and technical capabilities of the individual agent.

In today's market, agents simply need four basic pieces of technology to conduct business (all of which can easily sit on top of a small desk):

Computer
Multi-purpose machine: (printer, fax, scanner, copier)
Phone
Internet connection

Ponder this: If this is all an agent needs to conduct their work, what purpose does a traditional brick-and-mortar office serve?

I have many friends and colleagues who need and/or desire a tangible office - from either an administrative, technical or even social aspect. That's great for them, and I'm certainly not knocking this, as this is the predominant business model in existence today.

I have worked in the past for very small brokerages to several of the largest real estate companies in the country (and world), I have seen firsthand what goes on in a traditional, brick-and-mortar real estate office. Here are the typical functions:

Weekly sales meetings for the agents with the local office manager
A huge white board where agents write new listings and sales
Forms - A place where agents can pickup new forms as needed
Advertising Coordinator Support Person - This person processes all the advertising requests with the various media (local newspaper primarily) for the agents
Sales Coordinator Support Person - This person is responsible for processing the paperwork when a purchase agreement ("a new deal") has been reached
Mortgage/Title/Escrow Coordinator Support Person - This person is responsible for phone calls and sending/receiving information with the various title, escrow and mortgage companies in support of the purchase agreement
In-house Mortgage Specialist(eg. Loan Officer) - If a real estate company also provides mortgages, this person receives leads from the agents in the office and supports the office agents
Front Desk Phone Support Person - This person answers the main phone when it rings, transfers calls to agents voice mail, schedules showing requests by other agents (if not outsourced to a 3^rd party showing service), etc.
Manager Support - Agents can have one-on-one conversations with their branch manager to discuss all things real estate.
Floor Duty Agent - This is where an agent is the second person at the front desk answering phone calls so if a prospective buyer or seller calls about something, and they do not have an agent they are working with, this floor duty agent hopes to turn this "prospect" into a new client
Have 3^rd party vendors (builders, home inspectors, etc.) in to provide lunch and give talks

Ever wonder why real estate costs so much? Re-read the above bullet points again then add to it the real estate company's "back-office" support staff: legal, accounting, administration, management, officers, relocation, information technology, loan department, title department, escrow department, etc.

You are probably scratching your head thinking: geez...I just want to buy or sell a home. Do I really need this entire, huge, infrastructure to sell my home? The short answer is: for an individual home seller, the answer is no, all of this is not needed. For a large business, this kind of infrastructure is a part of the history of Corporate America and allows the support structure in place to process a large number of real estate transactions.

All that said, some of the most productive agents in the world (yes, world, not just the U.S.), hardly ever set foot in a real estate office, and if they do, it's from a convenience standpoint, not an absolute necessity that the traditional, brick-and-mortar building exist in order to conduct real estate.

Some agents prefer to schedule showings with buyer's agents themselves as they prefer to be in personal contact with the seller. This is sound business, as there are always particulars to discuss with a home seller. I've had many sellers tell me that they want to speak with me, when it's time to schedule an appointment, not an office support person, or some 3^rd party company (mostly in Texas or California) when processing showing requests.

The residential real estate field is both a "high-tech" and "high-touch" endeavor. Working with home sellers to help them maximize their financial bottom line requires a lot of experience, skill, professionalism, and capabilities that the individual agent brings. While the real estate company is the support structure behind the agent, it is the individual agent that actually helps the home seller become successful. It is the individual agent who negotiates a purchase agreement on the seller's behalf. It is the skill of the individual agent who handles everything of critical importance. Sure, you can farm out administrative tasks to lower-level people, should an agent decide that is how they want to conduct business, and sometimes, it works quite well.

When an agent is meeting with a home seller for a "listing presentation" to discuss how the agent is going to sell their home, where do you think this meeting is held? It is always held in the seller's home. If an agent needs the seller to sign paperwork, most agents who strive for exceptional customer service, go to their seller's home to make it convenient for them.

When an agent works with a buyer of today, most buyers have either already determined what homes they want to see (by searching the Internet) or their agent has setup a website for them to select properties. Most buyers and their agents meet at the first home on tour for a given day and the buyer follows the agent around, as many buyers lead very busy lives and want to make maximum efficiency of their time. When it comes time to write a purchase agreement, most often its either done in the buyer's current residence or a local coffee shop.

Where does all this leave the traditional, brick-and-mortar real estate office in the future?

My personal opinion is the traditional brick-and-mortar real estate office will morph into a slight pittance of its current self over time. I don't think it will ever completely disappear, but the form, structure, nature, functions, people, etc., will be forced to change dramatically due to the following reasons:

High Costs. It costs a whole lot of money to keep a real estate storefront open with lots of people inside. Commissions continue to come down, new realty company business models emerge on a regular basis, competition is only getting fiercer and rapid change is inevitable. This is why companies merge (in any field), to try and create "efficiencies of scale", among other reasons.
Competition. Many new real estate brokerages are emerging (including my own company that my wife and I co-own) and provide options to not only lower our fees as we don't have a massive overhead structure to support, we can also be more innovative and responsive to the marketplace as we don't have these huge legacy constraints tying us down.
Technology. The Internet has truly leveled the playing field. It doesn't matter whose website a buyer searches to find homes. In fact, while our company has a great website search tool and consumers can search by map and seven ways to Sunday, we truly don't care if they use our website, our competitors' websites, Zillow, Trulia or Realtor.com. Clients establish relationships with an agent they know (or get to know) and eventually trust, it's that simple. I have worked with clients from all over the world an country via e-mail, setting up custom websites, scanning PDFs, etc., so a small town local office just isn't that important (if at all) to the average buyer or seller of today.
Economic Business Cycles. Face it, in February 2009, one would have to be living under a huge rock in the outback of Australia to not recognize the extreme stress that the global economy, our local economy here in Greater Cleveland Ohio, and many businesses and individuals face today. Because real estate sales are down, agents and companies are making less money. In bear market like today, it's very difficult to make a profit when one has huge overhead costs. In a robust market, it's much easier. You are seeing massive consolidation today in the real estate industry in an attempt to cope and stem the tide of much lower revenues.

For those that think this is wishful thinking by a small entrepreneur, ponder this:

Google has a larger market capitalization than General Motors (even when the auto industry was not in supposed trouble two years ago when the economy was stronger).

When is the last time you walked into a Google storefront? What search engine do you use?

The Times They are a-changin'-Bob Dylan

Content copyrighted by Chris Olsen and protected by CopyScape.

Photo courtesy of: Visit Real Estate Clipart for great real estate graphics!

Date: 2009-03-23 20:08:24
Views: 240

Comments

Sheila

You are so right. I work for a 100% company that is mainly set up for the agents to work from home. Everything is done online from transactions, flyers etc. My company even schedules our closings online and sends the info to the title company and our check is waiting for us at closing. Floor time will be a thing of the past. Some companies send the calls to the listing agents, therefore prospecting for floor time is limited for agents trying to get business. I guess agents who have assistants need office space but nowadays all that can be done via smartphone or assistants can work from home. Really just need a small space to meet clients if need be. The franchise companies that handle alot of relo probably still need traditional office space. I think that is why agents go to the big name franchises--to get relo. But, agents give up alot of money to relo. I personally do not understand why agents at the franchises don't understand the concept of the 100% companies where you actually keep so much of your commission!! Websites are a dime a dozen since everyone has one, not sure how much business everyone gets from a website. With more agents on Twitter and Facebook, not sure what the chances are that a buyer will find you over someone else. People would have to spend lots of time on the computer to find an agent on Twitter and Facebook. Virtual offices will be the way of the future for real estate. Agents will just have to embrace it. The younger generation already does. Training could be done on a cost basis, which is still cheaper in the long run. Title companies, mortgage companies and others offer free or minimal cost for training.

Chris

Hi Sheila -- Thanks for your comments. While it's true that websites are a dime a dozen, it's what you do with your website, functionality wise and also how you integrate it into your entire service offering. I obtain 20-40% of my business each year from my websites as I have learned how to get on page one of Google, amongst other ways. A multi-faceted approach and knowing how to exploite a technology (both for consumers use) as well as our own business needs are key. I too worked for a 100% company, but the 100% truly isn't 100% because of the hefty monthly desk fee (1K or more), transaction fees, copier fees, franchise annual renewal fees, and even many of the 100% companies that I am aware of aren't even 100% anymore. It's all overhead. The real question is: What does this overhead do for a prospective buyer or seller and can it be quantified so a true apples-to-apples comparison can be made by a consumer?