New Age Real Estate

Boy, things sure are different from the last time I wrote up a purchase agreement!  That was almost 30 years ago.  Lenders were killing us with staggering interest rates (rather than foreclosures) but the business itself was fairly straightforward.  A buyer wanted to buy and a seller wanted to sell and most negotiations took place between those two parties via their agents.

Fall-out rates were in the 15% range.  Can you imagine that?  85% of your ratified contracts making it to closing?  Sounds heavenly.

Today, a single complete transaction package is about the size of the old MLS book I used to carry around and there are often lenders, investors, asset managers and more who have a stake in the deal.  In a word, real estate transactions have become very COMPLEX.  And from what I hear, for every six contracts written, just 3 – 4 will close.

I am generally in awe at the job most (good) Realtors do today.  As Donna Summer might chortle, ‘They work hard for the money.’  There are hundreds of details that need handling, dozens of potholes and roadblocks along the way and a multitude of deal killing explosions to navigate.  Picture:  O. J. Simpson running through an airport as he did in those old Hertz commercials, except now the concourse is a mine field!

Add to this the fact that prices and, therefore, percentage based real estate commission have fallen by nearly 50% in most markets and it’s suddenly common to hear brokers and agents say, ‘Well, I think I made about $10 an hour on that deal.’    It’s mathematical:  Falling prices + increased complexity = more hours + less money.

What’s wrong with this picture is that the business has moved on to a new age, but the way we do it is stuck in the last decade.  Today,  you probably can’t afford to do real estate in the intimate, hand-holding way we did it in the 80’s and 90’s.  Doing it all by yourself will wear you out and greatly limit the number of deals you can put together.

The solution seems to be to get help:  an assistant, an admin or someone to take some of the numbing complexity off your shoulders.    But how do you do that when you’re working harder than you’ve ever worked for much less money?

I know brokers who have assistants working on a per-closed-transaction basis, where the assistant receives $X or X% of every closed deal.  In theory, it’s a great way to work because the expectation is that the assistant will free the broker to do MORE, and as the broker does MORE, the assistant makes MORE.

I know brokers who have pressed their high school and college aged children, nieces and nephews into service, helping them evaluate and then install time saving, efficiency producing technology.

I know one broker who hired a new Mom and semi-retired real estate agent who wants the flexibility of working from home – in a way that allows her to keep her new daughter with her – to do all of his BPOs.  The broker can focus on taking listings and doing deals.

The important thing is this:  so many have gone back to being Phase I brokers, working alone, doing it all.  That has been an excellent response to the tightening of the market the last few years.  However, there is a downside:  as activity picks up, your ability to do more transactions is greatly diminished.  If you are maxed out today – and just getting by – how will you do more if you don’t find a way to transition to Phase II (which means getting help)?

This year, in late November – Early December we will begin our annual business planning process, but this year it will be a little different.  It’s going to all about getting to the next level, all about going from Phase I to Phase II, from Phase II to Phase III. To get your brain started around this challenge, check out John Powell’s presentation from last year’s rally swing: