As I recently posted on social media, about 6:15pm, Friday, May 17th, I had just arrived home from Denver. The week before, I was in San Diego. Of the last 10 business days at the time, I had been on the road for 7 of them, attending two different, multi-day, C-level conferences put together by some of the most brilliant minds in our industry.
By the end of those 7 days, I had traveled 6,292 miles. Had listened to more than 100 hours of presentations. Participated in countless, intimate conversations in hallways and quiet places with industry execs who run massive organizations spanning multiple countries. Over 50 pages of notes taken. It was indeed quite the experience.
Why all the effort? So that we can gather accurate information to help Benchmark develop a strategy to fully embrace the rapid changes that are happening in our industry.
Our industry is approaching a point of inflection in multiple areas – almost the perfect storm is gathering on the horizon.
On one side we have the rise of new business models driven by technology and billions in external investment. Combined with that, we have the huge increase of the iBuyer concept, which will be a LOT more impactful than most agents and brokers want to believe. Many people, a whole lot smarter than me, are betting on 20-25% of the market gravitating toward the model.
Let’s be honest. Our industry is engaged in probably the messiest economic transaction process that exists in our country today. Think about it. You have the listing, the showings, the contract negotiations, the inspections, the insurance, the mortgage, the contract falling through and the process starting all over again. Nationwide, from list date to close date, the transaction sequence averages 42 days in length. With lots of pain in between.
Contrast that with a process where a consumer can go online, enter some data, obtain an offer in 24-48 hours, and then close when they want. No showings, no life disruption, with generous amounts of certainty thrown in. When a fair comparison of repairs, closing costs and carrying costs are made between traditional sales and iBuyer sales, the true difference is only $7000-$10,000. For a person who craves certainty, convenience, and less life-disruption, that really isn’t much of a discount – especially considering that it’s all paper money to them. Numbers vary by market and product of course, but these are the averages and for a specific market-set, this will take market share.
In addition to the new models, we have a virtual tsunami of legal actions heading toward this industry. We all know about the class action suit in Chicago launched against NAR and 4 national real estate firms. Undoubtedly, it faces struggle to be successful, but not before causing HUGE distraction and potential damage to the current structure of buyer agent compensation. Let’s face it – buyer agency works differently in the rest of the world; how long can we be exempt?
Changes are coming to that process, for sure, but did you know about the lawsuit in California: Dynamex Operations West, Inc. v. Superior Court of Los Angeles? This one went all the way to the California Supreme Court and their ruling establishes a narrow and specific test for a worker to classified as a 1099 employee and not a W-2 employee. Most certainly, sharp attorneys across the country are lining up to test the 1099 process in other states, using this case as precedence. That IS a problem for brokerage operators in California, and it is GOING to be a problem for brokerage operators in other states.
Combine all that with the rapidly growing shift in consumer behavior in every economic transaction. A desire for instantaneous results with on-demand everything. An entire mindset shift of “press button, get magic” because our society has been successfully Amazon-ized, by, well, Amazon. You, yourself have probably participated this behavior within the past 24 hours.
How will brokers deal with all this? The meetings mentioned at the beginning of this note were all about preparation and prediction. A perfect storm is brewing, and the universal message from the brilliant minds I encountered was: PREPARE. Some companies will deal with the changes better than others, some models are more resilient than others, but in the end, there WILL be fewer agents and fewer brokerages. The math leads to no other possible outcome.
Benchmark’s model is one of cost control and autonomy for the agent. Because of that, it is the most durable in such a volatile environment. And why is that important? Because our primary mission is to improve lives…of our team members…of our clients. Always has been, always will be about service to others. That focus is what will endure the coming changes in our industry.
By Phillip Cantrell
CEO Benchmark Realty LLC