Since starting my weekly newsletter, The Dose, I've been writing these Friday Flash articles a lot less frequently, maybe only about once a month.
But the internal dialogue that fueled my writing has not abated, so I thought I'd share with you all some half-(or is it fully?) finished thoughts that have been swirling around in my head lately.
…
Brokerages are getting cheaper and smaller. It's been that way for the last 15 years. We all know that. But the recession has accelerated it. Agents are jumping ship for cheaper options, and brokers are scaling back.
Earlier this week, The Dose imagined the broker of the future as little more than an AI with specific state-certified legal status for agents: a deal doctor in the cloud, an assistant in your pocket, a marketing engine running in the background.
You can already see that this isn't a crazy idea, as Real is building on what eXp started: sprawling yet lean brokerages serving thousands of agents. The trajectory is clear, and it would be a mistake to think it won't continue.
…
Yes, behind that big trend, there is a counter trend. I know, I know. As Side CEO Guy Gal says, “Boutique is the future.” Yes, being small is great and allows you to design customer experiences that are very difficult to design at larger intermediaries.
But Side itself is what I call an “invisible middleman” – a legal middleman that supports hundreds of DBAs. They are the operations and technology teams behind hundreds of small brands that are known to the public as middlemen.
So what is a brokerage anyway? Our labels don't really work anymore. This week, eXp acquired The Bean Group, an independent New England brokerage that did $1.5 billion in trading volume last year. Here's CEO Michael Bean's statement from the press release:
“Joining eXp Realty allows us to have the best of both worlds – maintaining our boutique culture, brand and traditions while adding eXp Realty's unmatched scale and resources.”
Who are the brokers? What are brokers?
…
Four million existing homes are expected to sell in the U.S. this year, or 8 million, only about 20% off the long-term average.
The only reason this is a “problem” for the real estate industry is because somehow there are 1.5 million real estate agents chasing these deals.
Sometimes I think it's not only foolish and self-inflicted, but wrong that the industry accepts this as reality.
…
If we were living in a fantasy world where I was the CEO of Anywhere and I actually had the brains and guts to do such a job, I would start a consumer business targeted at young buyers called BuyWise, and it would look something like this:
Pay us $5,000 up front to represent you as the buyer, so you're in title and not wasting our time. If you have a co-broker, we'll refund you 50% of your commission at closing. If you don't have a co-broker, we keep your full commission. We don't care what the outcome is with your buyer's commission.
You can find and view homes yourself, because there are apps for that, and there are open houses, and we don't have to worry about you being scooped up by another agent because you're already paying us.
We advise on pricing, write offers, review disclosures and negotiate with real estate agents – the core of a real estate agent’s value proposition.
We claim ownership and possibly mortgages because we like making money.
We're going to start a digital marketing campaign in a few markets and outsource it to an agency that we partner with, and we're going to give them the full $5,000 for the pilot period, because we don't want to get into any political issues.
What we need to do is test new things quickly.
Then I get fired as CEO and buy a frozen yogurt franchise or whatever. Who knows.
…
I read this week that the average customer retention rate for mortgage companies is 20%. That's awful. If lenders would stop losing 80% of their customers, I think the mortgage industry wouldn't be so boom-bust.
What's strange is I can't tell you how many times I've heard the words “customer for life” or “portfolio retention” from mortgage executives. In fact, 1000WATT has been working on some initiatives in this direction. People understand there is a problem, but they can't solve it.
Legal and regulatory issues are a big burden for mortgage companies, and that's part of the problem. But my observation is that most mortgage companies are out-and-out sales organizations. They don't have the customer experience DNA necessary to address the customer loyalty issue. Rocket is trying hard right now and is doing a lot of smart things, and new companies like Tomo are approaching things with a customer-first approach. Maybe Zillow will get this right. But a whopping 20%. Wow. What an opportunity.
…
Of course, we also have a retention rate of about 20% for real estate brokers and agents, which is the highest retention rate in the history of the business.
If real estate agents hadn't lost 80% of their customers, Zillow wouldn't exist.
And if those 10% of agents, who make up 80% of the business, were good at customer retention, there wouldn’t be 1.5 million real estate agents in existence today.
Enjoy your weekend.