The 2021 RealTrends brokerage rankings saw more low-cost, fee-based and flat-fee models than ever. What does this prove? That segmentation of the agent population is growing.
In the 2014 book Gamechangers: The Unfounded Fears and Future Prosperity of the Residential Real Estate Industry, Steve Murray (along with Lon Welch and Lorne Wallace) discussed the idea of agent segmentation in the industry. The idea is that agents will become either facilitators (perform a low-value role as processors of transactions) or counselors (create additional value through knowledge, experience and superior market insight.) Also, fewer agents will do the majority of the business. We’re seeing that in the brokerage industry too.
“There’s no question that the trend we spotted here is coming to pass,” says Steve Murray, senior advisor to RealTrends and a long-time industry expert. “Teams have grown both in their numbers and their size. Brokerage firms in the middle of the market are disappearing while low-cost brokerage models are increasing in size and numbers, high-end firms appear to be holding their own – the undifferentiated middle is under enormous stress.”
We’ve certainly seen that from a brokerage perspective in the 2020 RealTrends 500 rankings, where eight of the top 25 brokerage firms in the country are considered low-cost, fee-based or flat-fee model firms. That’s more than ever before in the rankings and double the number from three years ago.
Rising real estate firms
Low-cost, flat-fee or fee-based firms like JP and Associates, Fathom Realty, My Home Group, United Real Estate, Equity Real Estate, Silvercreek Realty Group and Samson Properties all had big years and will continue to chip away at the incumbents’ market share.
Transactional platforms are making it easier for facilitators to operate while also enabling far higher productivity among top producing agents and teams. So, both ends of the spectrum have benefitted from these increasingly sophisticated systems.
“There’s a whole mix of factors that cause a broker to want to recruit an agent or an agent to choose to go with a brokerage company,” says Murray. But these newly aggressive, well-capitalized, low-cost brokerage companies have a huge audience, both from high-producing agents who think they’ve got their business built and want the low-cost option, as well as lower producers who want a place to hang their license.”
The evolution of brokerage
“What we’re seeing now is that brokerage companies are evolving. High-tech, high-marketing, high-touch, high-value brokerage companies are counselors,” says Murray. “They build strong relationships with their agents and management teams and they provide a lot of support services.” Some of them are even low-cost brokerages, as that model evolves to offer more services to agents.
Certainly, Samson Properties is one of those. “We went to a 100% transaction model in 2011. We were an 80/20 company forever. We were able to make the change because we started our own title company in 2009, which we own 100%,” says CEO Donny Samson. “The whole idea is that we’re 100% with a transaction fee, and we really want to take care of [our agents]. If we take care of then, give them tons of great incentives to help them grow, tools to help them become better, beautiful offices to meet clients in and grow, then hopefully they’ll use our title company. We can’t make them, we can’t pay them, but we think if we take great care of people, then they’ll want to do back-flips and run over next door to use our title company.”
What lesson can be learned from this? If brokers are looking at agents as their clients, you have to realize that there are some who don’t want to pay more to a brokerage for more services and greater value. They just want a broker who covers legal and regulatory requirements so they can transact business. In addition, brokers are finding ways to change agents less and give them more services – mainly through core services.
We’ll keep a watch on this trend as we move forward.