Turning Your Real Estate Brokerage Into A Tech Company
Setting the Scene
The Real Estate industry continues to change as technology plays a more important role in defining its future. Brokerages that invest in technology and provide competitive options for their agents will have greater chances of success in this Darwinian environment. At Homebloq, we have an obvious vested interest in pushing this agenda, so I’ve summarized research from the NAR Real Estate in a Digital Age 2017 Report, which points to the underlying importance and recognition of the need for technology. Adding to this is the supreme valuation of Compass — an estimated $2B — which is heavily supported by its (self-claimed) sophisticated and revolutionary end-to-end platform. While the jury is likely still out on whether or not the company’s tech justifies its valuation, it points to the value-add of technology and tools for the next wave within the industry.
So the question becomes, how best can brokerages, especially boutiques without the ability to develop tools cost-effectively in-house, get tech savvy and compete with the Compass’s of the world?How can managing brokers ensure investments in technology garner an adequate ROI?
A Path Forward
For lack of better options, we’ll frame the ideal solution for brokerages around what Compass is offering:
Consumer Friendly Website
Collaborative Search Portal with Saved Searches and In-App Messaging
A Brokerage-Branded Mobile App
Backend Tools and Predictive Analytics
None of these tools alone are unique, but tying them together under one roof (and brand) is incredibly valuable. Having an in-house development team is the dream of any brokerage, but managing brokers don’t have to hire a CTO in order to provide a complete product platform to their agents, and more importantly, their clients.
How can brokers allocate precious capital when making technology investment decisions? We believe in investing in tools that provide the best client experience, and we’ll cover in more detail below what exactly those tools look like, but first let’s survey the playing field to better understand how much and where your competitors are investing in technology.
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The Story is in the Data
The below data is derived from the above mentioned NAR report and the Real Estate Trends Report published by Properties Online, Inc.
While Real Estate Agents continue to be a critical part of the home buying process, their role has changed as home buyers are continuing to conduct their own searches, placing importance on tools that allow clients to control their search parameters, especially via mobile.
According to NAR, only 17% of all buyers (regardless of age) contacted an agent as the first step in the process but more than 9 in 10 used an agent throughout the process. Nearly 60% of Millennials and half of Gen X’ers found their home via mobile device, whereas only 14% of all buyers found an agent with a mobile device.
Therefore there exist opportunities for agents to leverage mobile tools for lead generation opportunities. Mobile tools can be put into the hands of prospects earlier in the process as the length of the home search on average is now 10 weeks, up from 7 weeks 15 years prior. While it may not sound critical, the ability to get prospects on a closed network and away from Zillow, where they’re constantly advertised to via the Premier Program (which ironically nearly every agent uses), is often the difference between a lost lead and a commission check.
Just throwing technology at the problem isn’t a solution: Home buyers still need help finding the right home (read: advisement and guidance), and doing things that the machines can’t do well yet such as negotiating complex terms, handling emotions, and rendering an opinion on neighborhoods. Furthermore, clients don’t just look for tech-savviness when deciding between agents. Honesty and integrity was deemed ‘very important’ by those surveyed, followed closely by responsiveness (93%) and knowledge of the purchase process and real estate market (93% and 92%, respectively).
Regarding responsiveness, which technology can resolve, 93% responded that this was very important, and as the report notes, 88% of buyers expected a response from their agent within 1 hour, and only 30% of agents meet that expectation. The client experience matters. As you know.
Opportunities for Improvement Exist
Nearly every real estate firms operates a website, which generally contain property listings, agent and staff profiles, and offer additional items such as mortgage calculators, and guides on neighborhoods and the buying or selling process. Not unsurprising, 88% of residential firms encourage their agents to use MLS-provided software, namely search. Considering 79% of brokerages in the US are single-office, with three or fewer licenses and MLS-provided tools are offered at no additional cost to dues, it’s doesn’t take top notch investigative blogging to understand why.
A problem with these tools is the MLS-search is rarely client-driven, which results in client abandonment and reversion to consumer-friendly search tools offered by Zillow, Redfin, and the like. In an era of mobile-first, MLS tools often lag others in mobile-friendliness as well, spinning the death spiral of client leakage faster.
Not surprisingly, 48% of all firms cited keeping up with technology as one of the biggest challenges over the next two years. An indirect challenge to this is the inability for many brokerages to make the ‘build’ or ‘buy’ choice: few can build in-house, and the alternative is piecing together multiple apps at different price points. Adding to this is the pressure of making that choice now, as 45% of those surveyed said they would like to see the amount of technology offered by their brokerage expand, featuring, among others:
Easy to Use Technology
Cutting Edge Technology
A Better CRM Database
Choosing the Right Investment
For those that do prioritize investing in client-facing technology, it often boils down to mobile vs web. While not necessarily mutually exclusive, according to the NAR survey, 49% said they receive 0 inquiries from their website, with a median value of 1 inquiry per year. Additionally, 48% said that no business comes through their website. No matter where your firm sits on this spectrum, investing in your website is likely to offer an uninspiring, and importantly, uncompetitive return. This is not to say that a great website isn’t critical, your website should be mobile responsive and clean, and for many these are low-hanging fruit fixes, but in terms of longer-term planning and capital spend, it’s unlikely to become a strong revenue driver.
At this point, the path begins to present itself, and it looks very much like this:
Investment in technology is critical for relevance and client satisfaction
Investments are just that: cash outlays for premium products that cost more than free but deliver superior experiences for agents and clients
Investments in agent websites are likely to be subpar relative to mobile solutions
Importantly, and not directly addressed, is the ability to establish your firm’s brand across it’s technology. Developing in-house does just that, but selecting, for example, mobile solutions that are white-labeled and integrate with your brand, marketing materials, and budget are optimal solutions. Client habits are hard to change, and often times offering tools that are not branded to your firm are non-starters with clients who have familiarity with Zillow, for example. Similarly, MLS-offered tools that primarily benefit the agent in the relationship should be considered for replacement with collaborative tools.
What About the Rest of the Stuff?
Most successful brokerages have in place lead generation (or top-of-the-funnel) marketing channels, and significant investment in those channels is likely to result in marginal benefits. Most business is generated by repeat clients and referrals, and tracing that back to it’s roots is an exceptional client experience.
In the world of CRM’s, few differentiate among features and lead quality, so cost and ease-of-use are primary decision factors. For many teams, spreadsheets and calendar reminders are plenty, and for big spenders, out of the box solutions such as BoomTown can pretty much do it all, at quite an investment. Managing brokers have to ask themselves, “What ultimately benefits our clients?” Is it a high-powered CRM that keeps agents on top of tasks or can you get by with the bare essentials?
Not to be forgotten, because Compass won’t let us, is the power of AI and advanced analytics. Using algorithms to predict how the market will receive a listing, generating marketing ROI estimates, and deploying chatbots to auto-respond to clients are new, awesome technology that can certainly be worth exploring for those that have the fundamental technology in place.
To Wrap It All Up
Tools and technology specifics aside, there are three things brokerages should focus on when considering technology to support growth:
Branding — Technology needs to put the broker first, not themselves. This means tools that white-label and ensure the client-broker relationship is prioritized offer the best solutions.
Mobile — Mobile adoption rates speak for themselves: Brokerages that don’t offer a compelling mobile solution will be behind the eight-ball of those that do.
Platform — Collaboration leads to increased responsiveness which leads to a better experience which leads to repeats and referrals. Platforms that benefit both the agent and the client are superior to those that do not.