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There is no doubt about it, as real estate professionals we are experiencing a perfect storm. A collision of a credit crisis, falling housing prices, financial bailouts, and a housing market with no foundational support.

America is literally reinventing itself. Unfortunately, given the magnitude of these events and the policies that must be instituted to reshape them, we are reinventing ourselves re-actively rather than pro-actively.

Future generations will reference the events that have shaped the real estate community during these recent years as the worst in decades. As a result, the business model that is still adopted by today’s real estate brokerage will have to be reinvented as well.

The old real estate brokerage model is still dominant in today’s society. The brokers business model of today is simple:

Step 1: Open an office

Step 2: Design a company brand (logo, slogan, etc)

Step 3: Hire as many agents as possible

Step 4: Have those agents close as many transactions as possible

Step 5: Take a percentage of the commissions

Step 6: Reinvest a portion of profits into promoting the company brand

A 2007 NAR Technology Survey named referrals, repeat business, and the Internet as the top three lead generators. Among the least important were open houses and floor time, two pillars of the “old way.” Traditional brokerages are laboring under increasing expenses that include keeping up with technological advances, maintaining an office, and brand-recognition advertising.

In spite of brokers’ attempts to keep up with technology, well over half of the agents and associate brokers responding to the NAR Survey indicated they wanted their broker to expand the amount of technology offered. Add to this, for all the dollars spent on promoting a brokerage brand, it is usually individual agents who are sought out, not the broker’s brand.

I invite all brokers across the country to break free from this common business model and reinvent yourselves. Here are the items brokers need to address to update their business model:

Item 1: Recognize that clients follow agents, not brands

Item 2: Become an Internet presence

Item 3: Embrace technology

Item 4: A virtual office is not a benefit, it’s a requirement

Item 5: Understand the following logic: The more benefits and training you give agents, the more professional they become, the more professional they become, the better their image is to the general public.

The brokerage model of the future should forget the mentality that a broker is only there to take commissions. The real estate agent of today needs to feel value for the commission you take from their hard earned check. Brokers should exist to harbor and foster the development of a real estate agent. The image of the real estate agent in the eyes of the general public needs to improve, and that starts with the broker.

Given these needed advancements, it is my opinion that many of the independent brokers will conglomerate to franchisors who have the capital and technology in place to foster the development of today’s agents. Brokers will enjoy the same or greater profit margins and be able to provide much more support and technology at a fraction of the cost if they pursue these benefits independently.

Michael Volkin is the president of Area Pro Realty, an innovative real estate franchise. If you’re a real estate broker, please check out our real estate franchise opportunities at http://www.AreaProRealty.com/franchise.

Copyright (c) 2010 Michael Volkin

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