Tech will put downward pressure on commissions, an Inman Connect panel said
NEW YORK — “I would say that we’re foolish to think that commissions are not going to be reduced in the future,” said Ben Kinney, who owns several Keller Williams Realty brokerages. But that “doesn’t mean that our annual incomes wouldn’t stay the same.”
His comment captured a loose consensus reached by a recent Inman Connect panel: Technology will put downward pressure on commission rates, but agents who adapt will gain enough marketshare to offset any decrease.
“The bad agents sucked during the best years, and they still suck now,” said Kinney.
Perhaps technology, he added, will finally weed out the amateurs.
The president of Real Trends, a widely-cited source of real estate data, recently predicted that the average commission rate — pegged at 5.26 percent in 2015 — will drop below 5 percent within the next few years, Kenneth Harney reported.
Property-exchange platforms like Opendoor, for-sale-by-owner (FSBO) services, low-fee brokerages and automation (think chatbots) may take their toll on commissions, but agents who use these five tactics will have the best shot at continuing to thrive, according to the panel.
1. Articulate value proposition
As alternatives to traditional real estate brokerage take hold, it will be more important than ever for agents to convincingly explain why they’re worth the money.
Agents should emphasize their superior ability to value homes, facilitate a transaction, manage risk and help clients achieve their goals, panelists said.
“At the end of the day this is still a relationship business and people still want to trust who they’re working with,” said Keir Weimer, an agent team leader at Select Sotheby’s International Realty, an upstate New York brokerage.
2. Poke holes in alternative service models
Get a firm grasp on alternative service models, so you can explain to consumers why they should choose you over slick upstarts, panelists said.
For example, if a prospective client mentions they’re considering using a company like Opendoor — which allows homeowners to sell in as little as three days — make sure they understand how much equity that might mean giving up, said Bernice Ross, CEO of RealEstateCoach.com.
Also highlight the potentially heightened liability and risks that consumers can take on if they try to use non-brokerage services to buy or sell, panelists said.
3. Know your millennials
Millennials are more likely to try to negotiate their agent’s commission, said Marnie Blanco, vice president of industry relations at dotloop, citing a recent Zillow Group survey.
They’re also the largest source of housing demand and keen on trying new things, so in the interest of mounting the best defense of your commission, it may be worth trying to understand how they think.
4. Use the best technology
This can help agents both justify their rates and increase their efficiency.
Ross sees particularly great potential in chatbots, technology that can qualify and service leads on behalf of agents.
“They’re going to replace your website and your apps: that’s how profound this disruption is,” she said.
Industry technology is a double-edged sword: It will increase efficiency for agents but at the cost of eventually putting downward pressure on commissions.
The agents who consistently adopt the newest technology first may be able to maintain or even improve profit margins despite commission compression.
“[E]ven if they lower your rate, you’re still going to make more,” Ross said of these first adopters.
5. Take cues from tech companies, not just other agents
Five or 10 years ago, agents looking to grow their business would take cues from local top producers, according to Lee Arnold, broker-owner of Benchmark Property Management.
But agents could benefit equally from borrowing services and branding tactics from successful tech companies, he said.
What do consumers like about companies like Zillow, Facebook, Airbnb, Opendoor and Uber? Why do their services and their messaging resonate with consumers?
Agents who think through these questions may be able to offer the best of both worlds, blending the insider knowledge and problem-solving skills of an agent with the convenience and feel of a tech company.
This article was originally posted/written by Inman.