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Five Reasons REALTORS Are Losing Market Share

August 20, 2008

Amongst the growing list of reasons some REALTOR firms are losing market share today, there’s no lack of ‘blaming the consumer’ causes. Brokers and agents who repeatedly target the “market” or the “economy” as the culprits are just substituting politically-correct keywords for “the consumer” as the problem. Buyers won’t come off the sidelines. Sellers are unreasonable and won’t price their homes to market conditions. Lenders won’t offer credit easily. The usual suspects of the downturn are either consumers or third parties working together in a full-blown conspiracy to destroy the real estate industry.

Perhaps we could find a few simpler reasons?

Conspiracy theories aside, most MBA graduates would likely tell you that a malfunctioning market is usually not a consumer-created problem. Consumers are more than willing to tell producers what they want, need, desire. They do it every day, in millions of tiny ways - called “purchases.” What they buy, and more importantly, how they wish to buy, is the ultimate market research for producers to determine what to sell, and how to sell it.

Since REALTORS haven’t stopped selling what they sell - which isn’t houses, but home sale services, then maybe it’s how they are selling it that needs some scrutiny. For starters, let’s put aside the commission conversation. It’s a given that the price of a service can be a critical factor related to the quantity of “sales” achieved by the brokerages. However, until they can create far more economies of scale - and the real estate industry is second in inefficiency only to the health care industry (or the IRS)  - the whole 6-5-4-3-2-1% commission argument is senseless. In fact, the bankruptcy filing of Help-U-Sell this week proves the point that lower commisions, in themselves, won’t create enough market share to keep an ineffectively operated organization around for long.

Without the “commission price is too high” argument, then, what other aspects of how real estate brokers sell should we examine? I suggest five simple ones.

Recent research suggests that there exists a tremendous communications gap between consumers and real estate agents. First, the demographic data indicates that the next generation of real estate purchases is going to come from the Gen X and Gen Y populations. Generation X is entering the “move up” stage, which makes them the next round of sellers and Gen Y - 60 million of them - are still sitting on the sidelines waiting for first-time purchases. When the Gen X/Y mountain hits the market, it’s going to make the Baby Boomer boom look like a molehill.

Connecting and building relationships with these consumers is where the five reasons realtors are losing market share exists. Once again, we need to look at the recent research by the National Association of REALTORS Annual Survey of Members, compared to notes from the Wikipedia entry for Gen Y amongst other sources:

  • 88% of REALTORS own a computer. 97% of Gen Y have computers.
  • 93% of REALTORS have a cell phone. 94% of Gen Y have a cell phone.
  • 23% of REALTORS sent text messages at least once a day. 68% of Gen Y text message daily.
  • 14% of REALTORS have used IM “infrequently.” 76% of Gen Y use IM every day. 15% are logged in 24/7.
  • 1% of REALTORS use podcasts regularly. 49% of Gen Y download podcasts regularly.

When it comes to technology, REALTORS are simply disconnected from the consumer. Too many brokers and agents think their website will continue to be the avenue of future business, when, in fact, it hardly is today in the first place (most brokers report under 3% of business from their website). In the sales business, relationships still matter the most, with the majority of business coming from repeat clients or referral business. Relationships are nurtured by communications. And the communications with the future consumer will be done on a computer through social networks, instant messages and podcasts, and between cell phones.

Some brokers are awakening from their slumber. After a futile attempt in the last two years to “bring back the basics” of real estate salesmanship, they have realized that they can only go “back to the future.” Postcard mailings and phone canvassing has come up with little results; Gen X and Y don’t accept phone calls - not because of the Do Not Call list but simply because they don’t have listed numbers. They have cell phones. Postcard mailings continue to yield negative business results - and they always have, it’s just that there’s no market boomlet to paper-over the inefficiencies. With the usual lateness to the party, REALTORS are getting the hint, as the fall line-up of conventions and industry seminars are already dominated with social-networking-speak and cellular messaging gadgets.

Still, it’s a case of too little too late for too many brokers. Text messaging is five years old. Instant messaging is at least as old (older, but certainly gained its popular usage in the last five years). Podcasts are at least as old as the iPod, which is already in its third or fourth generation of hardware. Two entire generations of consumers - who will now dominate the real estate cycle for the next three decades - has grown up on the “normalcy” of text messaging, social networking and always-online availabliity. Yet REALTOR.COM still struggles to get most of its listing to feature more than one photograph; too many still feature none. Simply forget about video tours: telepathic property alerts is more likely to become the norm before digital camera clips accompany real estate listings.

One thing is for certain. The blame-the-consumer-market-anybody-else strategy isn’t going to work. Most REALTORS are in their mid-fifties, which makes it highly likely that, if they have children, those kids look just like the buyers and sellers in the market. If having a perfect model of “your future customer” right under your nose isn’t enough to get more REALTORS using IM, SMS and podcasts, then it’s likely that the communications problems that accompany parenting a Gen X/Yer is going to extend right into the real estate marketplace of the near future.

** Picture Source: Joel Stein’s column for TIME | “You are Not My Friend“ Illustration by Francisco Caceres for TIME

Written by Matthew Ferrara · Filed Under Featured, Management, N.A.R., Sales, The Market 

Comments

7 Responses to “Five Reasons REALTORS Are Losing Market Share”

  1. Josh Lavik on August 20th, 2008 2:13 pm

    I think it’s worth noting that the effective use my SMS text message function, quick response to email/instant message, and an up-to-date facebook/linkedIn/myspace page are not guarantees for success. Just because your message is heard, doesn’t necessarily mean that your audience is responding in a positive manner. I am a Gen Xer and feel comfortable with technology, but it’s the actual knowledge of the real estate market and process that is more of a challenge. If you talk to an agent that’s been in real estate for 20 years (and they’re successful), then they know their markets better than anyone. They know what sells and where and how to recognize a good value. Technology is important, but it’s not the only piece of the puzzle.

  2. Matthew Ferrara on August 20th, 2008 5:16 pm

    Josh:

    That’s absolutely true: Technology doesn’t replace selling. However, and I think this is the point we’re trying to make: If you’re not using technology to connect with potential customers who can benefit from that knowledge and experience, then you’re equally at a standstill as a REALTOR. Or losing ground.

    Thanks for stopping by! Hope you come back often!
    Matthew

  3. Sharon on August 21st, 2008 2:28 pm

    Matt - You piqued my interest here. I am always interested in a way to capture more leads by the curious passer bys. Is using SMS something an agent can do on their own or do they need to find a company that sends the information out. I guess I am a little tech illiterate about how you can send any type of detailed information to someone via text.

    Sharon

  4. Matthew Ferrara on August 21st, 2008 5:25 pm

    Hi Sharon:

    The easiest way to tap into Gen Y buyers is to get an SMS code for each listing. Check out companies like Cell Signs http://www.cellsigns.com There are a number of companies like them that make it possible to leverage your yard signs for both phone calls from Boomers and SMS inquiries from the Next Generation of Real Estate consumers.

    Best of luck! Thanks for stopping by!
    - Matthew

  5. Rhonda on September 1st, 2008 1:20 pm

    You didn’t mention blogs. I thought they still attracted an audience. Are blogs outdated now also?

    Are there companies that specialized in real estate podcasts? I am not sure how to find a vendor-or how to make one. Would the podcast be featured on my website or or blog also? Are there other places to place a podcast?

  6. Nick on September 30th, 2008 11:09 pm

    Hello Matt - I whole heartedly agree with your end point. BUT…I also think it’s important to note that in order for “Real Estate” to catch up to what Generation X and Y are bringing to the table, Brokers need to be hiring the X’s and the Y’s as sound and professional agents.

    X and Y agents would have NO problems keeping up with needs of X and Y consumers. Quite frankly because they easily understand the overall fact of technology today is mandatory to survive, at least to some degree.

    Unfortunately, the recruitment of young people in this business is dying and right now, it’s simply not happening to any great degree, at least in our neck of the woods. It’s not due to a lack of recruiting attempts, believe me. Over the past 5-6 years I did see quite a few young people enter the business, even a few recently…but sadly, virtually all of them have ended up leaving due to not having the motivation or the ability to generate enough business to help pay the bills.

    We live in a time of expensive EVERYTHING. More so now than ever before people need stability, especially with income. If those X’s and Y’s trying to become a realtor don’t have a stable cash reserve or a spouse who can support them, at least initially, they are usually doomed within 2-3 months as a Realtor. Without a monstrous circle of influence and absolutely phenomenal sales skill they just cannot compete.

    The agents that are surviving, in our market, are mainly the ones that have been at this business for many many years, who I see continue to tap their R&R (repeat and referral) business. They may not be keeping up with the latest technology, but they have the experience and skills that are key to keeping the fear off the table with a old or new client.

    Overall I do agree intensely with your post, but in the same breath I don’t see how the industry as a whole is going to manage to revitalize this career with young tech savvy blood. As you stated, the average age of a realtor is roughly 50+ years old….the key question the entire industry needs to ask is how do we change that?

    If motivated young new people don’t enter this business to affect that statistic of age, we’re looking at a major dying off of not only agents, but entire franchises and companies who sooner or later will have to face the fact that there’s no agents left in their company.

  7. Rick Fisk on October 19th, 2008 6:59 pm

    Don’t forget to mention DriveBuy Technologies for mobile marketing properties. (http://drivebuytech.com).

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