If real estate brokerages step back and observe, they will see the road to reinvention for their real estate companies.

The real estate brokerage industry has suffered over the past few years due to eroding profit margins, lower sales volume, and real estate prices. Real estate brokers have historically been slow to adapt to change because they have typically been reactive instead of proactive.

Internet Practices. One prime example of this is the industry’s slow adoption to internet practices that have allowed others to chip away at marketshare and/or position themselves between the consumer and the brokerage. Companies like Trulia and Zillow have successfully addressed the demand for relevant and engaging information while too many brokerages still view their websites as static, electronic brochures. Due to lack of funding over the past few years and a histrocially general discomfort with providing “too much information”, many brokerages are still operating Web 1.0 sites without a serious online strategy that includes an integrated approach to their websites, internet marketing, social media, and search engine optimization.

Lack of Accountability. A second factor contributing to the current industry malaise is that its sales people are primarily commission only, independent contractors. Because of this and a general fear by management of upsetting their agents, the industry also suffers from a severe lack of accountability. Real estate agents are not generally held accountable by managers and, similarly, managers are not usually held sufficiently accountable by ownership. When you combine this with the real estate recession of the past few years, these weaknesses have been dramatically exposed. Many brokerages have gone out of business or merged with larger companies who have been able to survive due to better resources and management.

The real estate and general U.S. recession combined with the two factors described above have significantly contributed to an industry where many have gone out of business and left the rest wondering if they are going to make it. It has also forced a lot of introspection in an industry that had been riding a wave of prosperity for many years prior to market conditions turning in 2006 and 2007.

As a result, and as the market bottoms out and starts to stabilize in the coming months, many are beginning to accept the fact that the market will never be quite the same as it was pre-2006 and that they will have to take some significant steps to reinvent themselves and their companies. There are three very important areas brokers are currently analyzing as they move towards making this transformation.

Reinventing themselves. Because the industry is still primarily populated by broker-owners and managers who are in their late-50’s and early-60’s, many have been resistant to these changes because they have ridden out recessions before without having to make many significant structural changes. However, some are beginning to accept the fact that this recession is causing a siesmic shift in the way they will have to behave themselves, the way they will have to interact with agents of the future, and the way they will have to interact with the internet savvy consumer of today.

Online strategy. While the industry has been wracked by a recession, the consumer has continued moving forward and raising the bar as it relates to its use of and expectations of the internet. Real estate consumers, like every other consumer, expects to be engaged online prior to engaging anyone live. As mentioned earlier, the real estate brokerage industry has been slow to adapt a comprehensive strategy that includes upgrading their websites (which many have not done for 12 – 36 months), adopting a social media strategy (which many still don’t accept as critical), and moving away from print and more towards an internet marketing strategy that includes listing syndication, search engine optimization, and internet lead management.

Recruiting the agent of the future. Many brokers are experiencing problems recruiting their lifeblood… real estate agents. Some are facing this because of resistance to change in such a challenging market and/or because they have not been able to prove that they understand what it takes to succeed in a new environment. Once again, brokerages are realizing they have no choice but to reinvent themselves and their companies and seriously address an online strategy that includes appealing to these new types of agents.

If we step back and are honest with ourselves, we know we need to start making structural changes to the way we operate as an industry in these and several other areas. The question is how many brokers and managers have accepted this as reality and are really committed to doing something about it?

About the author
Jose Perez is the President of PCMS Consulting, a full service consulting, sales and management organization which specializes in real estate industry issues.  For more information, please visit www.pcmsconsulting.com/webinars or e-mail jperez@pcmsconsulting.com.  PCMS Consulting is hosting a 6 month coaching series called Camp REinvent. For more information visit www.campreinvent.com.