It’s a Time of Change in the Real Estate Industry
With mergers and acquisitions being announced seemingly every week, companies are getting very focused on their value proposition and what they provide. Many real estate technology companies begin by solving the problems of individual agents, who are on the frontlines of real estate. It’s also easier to identify what the immediate needs of an agent might be because interactions between agents and consumers are the core of the real estate business.
As companies and their offerings evolve, they tend to be able to offer value to both the individual users and the organization as a whole. In the case of real estate, this involves creating a model that suits the needs not just of agents but of their brokerages as well.
Consider data platform Real Scout.
“We chose to focus primarily on brokerage relationships because our success is predicated on a large network of engaged agent users. The fastest path we identified toward widespread usage involves partnerships with medium- and large-size independent brokerages.”
– Andrew Flachner, president and co-founder Real Scout
There are some great reasons for vendors to want to embrace brokerages, including:
Structural Churn—Individual agents continually go in and out of the industry. In fact, 87 percent of real estate agents fail within five years of entering the industry, according to the National Association of Realtors. While brokerages are built to be recruiting machines, the customer acquisition costs (for a software company) of bringing on an agent or small team, only to have them leave the industry a year or two later, can negatively affect your unit economics.
It’s well-established that enterprise businesses are much more valuable than businesses targeting SMBs—and proven by where SaaS investors are putting their money. Annual contracts give businesses time to focus on developing products as well as obtaining new customers.
Economies of Scale—Partnering with a brokerage lets you work with their team in order to make a greater impact on a larger group of agents then you would be able to achieve one on one. The network effects of working within a brokerage can be sizable—larger data pool, agents referring the product to each other, and sharing best practices internally.
HomeSpotter found that direct-to-broker made the most sense because of the issue of bringing in listing data from the MLS. “In our initial go to market on our app platform we explored both a direct-to-agent and a broker sale approach,” said Aaron Kardell, founder and CEO of HomeSpotter. “Given our dependence on listing data from MLSs, we found it most fruitful to focus first on larger deals to more immediately offset the cost of doing MLS integrations.”
Affiliations—Brokerages that are part of the same franchise (say, Sotheby’s International Realty) or share a similar industry affiliation (e.g., Leading Real Estate Companies of the World) can be huge reference customers, as they are not competitive.
One of the funny things we’ve noticed is, when asking the standard Net Promoter Score Question, “How likely are you to recommend Contactually to someone else?” we get a lot of low scores from people who, on further research, love our product, but don’t want to share “their secret.” That’s why having individual customers in brokerages is critical. Brokerages will look to their top producers to understand what works for their agents.
“Spacio started as a single-agent solution and we ran it that way for about four months before we got the first brokerage inquiry to see if we offered it on the enterprise level. We also knew that if we got one brokerage on board then it would be much easier to position ourselves with others in the market, so we took the first opportunity we had and the rest was history.”
-Melissa Kwan, co-founder and CEO of Spacio.
There are also are significant challenges for vendors that switch from single users to serving brokerages. Regardless of who is paying the bill, what still matters most are the people who will ultimately use it—the agent or team. They (and their relationship with the consumer) remain paramount. For a product team, this requires delicately balancing functionality for agents and teams with a roadmap that applies to brokers (e.g., single sign-on, reporting, administration). Some key issues that companies face as they make this change include:
Understanding a Complex Sales Cycle—Enterprise sales can move a lot more slowly because the process often involves multiple decision makers. “Selling to companies means needing to learn how to speak their language and understand their priorities, and being able to work through long sales cycles,” added Kwan.
Becoming Part of a Tech Stack—When working with brokerages, interoperability becomes even more important. An agent may be using off-the-shelf systems that already have an integration (e.g., Contactually working with Spacio) or is possible with Zapier. But a brokerage will come with its own set of integration needs, and your team may find itself coordinating with an internal or third-party team to help integrate systems within the brokerage.
Investing In Training—Training individual agents is very different from training a brokerage where hundreds of users need to be onboarded at once. At Contactually, we made significant investment in our training team, deploying trainers in the field as needed. Other vendors, such as Buyside have had a similar journey. “It’s not enough to just deliver a product,” said Charles J. Williams IV, CEO of Buyside. “We need to support the rollout and training, help them demonstrate ongoing value to their agents, enable their staff recruit and retain top talent, and empower senior leadership make more informed business decisions.”
Handling Privacy Concerns—Agents are protective of their data—because their book of business remains their most important asset. And privacy is already paramount to the agent so agents may be paranoid about what a brokerage-sponsored solution means for their data. That makes it critical to keep user privacy in mind, which means having an uncomfortable but necessary conversation among different parties with their own priorities, which makes transparency among all parties key. Agents need to know their contacts will remain their own.
Addressing Two Audiences—When vendors work with a brokerage rather than individuals, they have two audiences, the broker administrators and leadership as well as the agents. As we evolved our product, we learned that we need to develop brokerage tools that provide insights into how agents are using Contactually. “For success, it takes strong initiative and training right from the beginning,” said Geoffrey Bray, broker/owner of Engel & Völkers Minneapolis, noting that “we are now at about an 87 percent adoption rate—an astounding number.”
For brokerages, having their agents using the same programs helps standardize training and support. Brokerages want reliable vendors that deliver consistently for their agents and have programs that can be easily integrated into their existing tech ecosystem. Vendors who provide brokerage-level services are best-equipped to provide this level of service.
Author Bio: Zvi Band is CEO/Co-founder of Contactually, a leading CRM that empowers professionals in real estate, consulting, and other professional industries to build authentic relationships.