THE DELEON INSIGHT
FLAWS IN THE REAL ESTATE INDUSTRY By Michael Repka
Recently, I attended the country’s preeminent real estate convention, Inman Connect in New York City, where I had the opportunity to watch presentations by a variety of different luminaries in the real estate industry. The presenters were universally well spoken, dynamic, and interesting. Although I learned much over my four days in New York, many speakers reinforced my belief that the real estate industry is still fundamentally flawed in a few key ways.
firms are, by and large, infused with venture-capital money and not profitable; at least, not yet.
Old vs. New Speaker after speaker seemed to fall into one of two camps: “Traditional” or “Disruptor.”
Overlapping Industries The real estate industry is actually two very different, albeit confusingly linked, industries that overlap despite having disparate goals and objectives. These distinct industries are: (1) brokerages; and (2) selling homes.
First, there were speakers from the traditional (or “old-guard”) real estate brokerages that generally follow the same commission-based, independentcontractor model employed by companies such as Coldwell Banker, Compass, Intero, and many more. Many of these brokerages have agents who have been in the industry for 10, 20, or more years. These speakers focused on the fact that traditional brokerages are generally profitable, proven, and non-threatening. On the other hand, there were speakers from new firms pejoratively labeled as “disruptors.” For the most part, these businesses were founded by very intelligent people from a variety of industries, but with very few coming from within the real estate industry. Traditional agents in attendance, and many of the speakers, quickly pointed out that these
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When I spoke with my fellow attendees, most seemed to believe that the two concepts are mutually exclusive. Few considered the possibility that a company with a lot of experience in “traditional” real estate could also be innovative, agile and client-focused— all while remaining profitable and independently owned.
The Brokerage Industry Traditional brokerages offer recognizable branding, conference rooms, and limited management and training to independent-contractor agents. As a practical matter, these brokerages face a significant amount of liability from any incorrect advice proffered by its affiliated agents, so they generally discourage or prohibit any sort of legal, tax, or other professional advice irrespective of the clients’ needs. Furthermore, because agents are free to move from brokerage to brokerage in search of more favorable commission splits, the brokerages are reluctant to invest in substantive training for these agents, especially costly outside training, such as Harvard’s Program on Negotiation.
