At REAL Trends Gathering of Eagles, brokers, CEOs and leaders sat down together to mull over the potential challenges the industry faces and how CEOs of the biggest companies in real estate are facing them head-on.
Know Your Story
John Peyton, President and CEO of Realogy Franchise Group, comes from the hotel industry, where you can control the brand and story with scripts, training, uniforms, etc. Not so much in real estate. And when it comes to working with franchisees and their agents, he says, “Focus on two or three, story components that agents can grab onto instead of handing them a giant company manual of values.”
Peyton also described a recruiting campaign they launched to their franchisees, but only about 100 out of the 1,000 that registered for the campaign actually yielded some recruits. They tried to figure out what was happening and learned that over half of franchisees they talked to couldn’t effectively describe their value proposition to agents. Realogy Franchise wants to help their affiliates recruit, “Because big is better in this space.” While the classic value proposition involves marketing and branding, Peyton describes today’s value proposition to focus more on tools, data, technology, and analytics.
Building A Recommendation Engine
Big data is something Peyton admits Realogy hasn’t mastered yet, and he sees it as a challenge for the industry as a whole. “The data hype came about ten years before we really knew how to harvest it.” Now, they’re looking to predictive analytics and machine learning to provide the kind of “Recommended for You” service that is bringing so much success to Amazon and Netflix. Right now, 30 percent of Amazon’s revenue is generated by its recommendation engine, and more than 70 percent of the shows people watch on Netflix is the result of their recommendation algorithm. Peyton hopes to apply this technology to help predict which homeowners are likely to sell, where likely buyers for a property will be located, and even when agents are likely to switch brokerages.
Only a 15-minute break separated Peyton’s warm and fuzzy outlook with Rob Hahn’s apocalyptic prediction for the future. ”The truth is you’re all dying on your deathbeds,” said Hahn.
He then asked three questions to the room full of brokers: “Are commission splits getting lower or higher? Are brokers getting easier or harder? Is it getting easier or more difficult to manage your agents?” He says, “Higher, Harder, Worse.”
Pimpin’ Ain’t Easy
Hahn goes on to explain that the traditional real estate broker is no longer in the real estate industry. Instead, they’re in the recruitment industry. “And why is it so difficult to recruit? Because there’s little differentiation between brands,” said Hahn. There are three main offerings from a brokerage to an agent: technology, leads, and training. Does the brokerage do this better than any other vendors and service providers that specialize in technology, leads or training? Which of the three things can agents purchase themselves, independent of the brokerage? All of them. “What is it that brokerages do?” asked Hahn. “You recruit talent, you retain talent, and you take a piece of the action. A business model shared with only one other industry in North America: a pimp. Except pimps keep more of the money.”
Hahn’s suggested solution to this doomsday: For brokerages to operate like a professional services firm—think law firm—where you eliminate the independent contractor, make your top producers equitable partners and everyone else is an employee associate.
Answering the Diversity Question
Steve Murray asked a very important question: “’Is hiring minorities in leadership a top priority?” ERA CEO Simon Chen; RE/MAX CEO Adam Contos and Coldwell Banker CEO Charlie Young all said yes. But unfortunately, they each struggled to elaborate. Their answers went a little something like this, “Our CFO is a woman” and “Well, I’m a minority, so, there’s that” and “We definitely foster diversity.” This question could have been a nice opportunity for them to talk about their diversity initiatives and inspire leaders in the room to develop similar programs.
In his closing remarks, Steve Murray said it takes three things to be a successful brokerage:
- Recruit talent – Know your value proposition and get to know what your agents think about you.
- Develop talent—Brokerages across the country spend billions of dollars on agent training and hardly any on developing and training leadership roles.
- Spend less—Brokers talk about profitability, but they focus on market share when they should be focusing on spend.
Overall, the three-day conference had speakers and content that reflected two extremes: the doom and gloom fear of what’s to come and the more inspiring, ‘we got this because we’re still in the business of human connection and nothing will take that away,’ attitude. My takeaway is that both are important, but real estate is not all technology or all people; it’s the mix of the two that guides the way toward the future.
Nuggets of Wisdom
- Coach Tom Ferry of Tom Ferry International, encouraged every brokerage to start their own coaching business and is providing all attendees with guidelines on how to do it.
- Ben Caballero was announced as the top agent by the Guinness Book of World Records, the first agent ever to be recognized in this way. On average, Ben sells an astounding 70 homes a week!
- Larry Kendall of Ninja Selling suggested Robin Sharma’s 90/90/1 Rule. For 90 days, spend 90 minutes each day away from technology to focus on the No. 1 opportunity that day. The best suggestion: develop tight bubbles of total focus. Turn off and be unreachable each day for a certain amount of time so you can focus on your personal and professional priorities distraction free.
- Another Kendall nugget: For 15 minutes each morning, do these 5 daily routines. Write down what you’re grateful for, write two personal notes, show up and stay on agenda, focus on your hot list (90 days to buy) and focus on your warm list.
- Pam O’Connor, retired CEO of Leading Real Estate Companies of the World says,“Stop worrying about what you don’t know. Don’t worry about new models. Real estate is a resilient business. Fear is a good thing because it keeps us on our toes and able to adapt.”
- Wendy Forsythe, COO of HomeSmartInternational says, “We will see continued pressure from the consumer. This is the Kodak moment in our business. You must have that flexibility in your business model to compete. Look at your key performance indicators each month to get an overview of the health of your company.”
- According to John Davis, CEO of Keller Williams, “Culture is changing because of efficiencies. Although still important, it’s no longer instinct and gut. Now, because of the data we have access to, we can connect the dots. We can retool and move faster, take more territory and be strategic in planning. We will see downward pressure, something or someone will come in and change the game. We must elevate our people to understand that, so when it does happen we’ll be in good shape to fend off that competition.”
- If Sherry Chris, CEO of Better Homes and Gardens Real Estate, could change one thing about real estate, she says she would, “Build a more collaborative industry. I would raise the bar of entry so that people would worry about whether they would qualify to become a real estate professional. We must respect one another.”
Author Bio: Caroline Pinal, co-founder, @givebackhomes
Born and raised in the Mojave Desert, Caroline studied Journalism at Cal State Long Beach, worked at Fox News and The Walt Disney Company. The path was paved early on for Caroline as she always felt the desire to give back and apply her experiences in story-telling and creativity towards something bigger.