The ‘New Norm’ For Real Estate Professionals
For my first 30 years as a real estate educator, attorney, and author, I taught Real Estate Principles and Practices to students in a pre-license school in Hawaii. I was amazed that all that was required to obtain a state salesperson license was successful completion of a 40-hour course and passing the state license examination. Although it was often a struggle to make enough money to cover all the initial expenses, for many it was a quick way to generate their first of many sales by simply procuring a buyer for a MLS listed property. There was no requirement to negotiate a buyer representation agreement (BRA) with the buyer; heck, in the early days, all cooperating agents represented the seller/listing broker as subagents. There was no need to negotiate cooperative compensation, as the MLS set forth offers of compensation in an amount agreed to by the seller and listing agent.
Simply have the buyer make an offer to buy, the seller accepts, open escrow, and disburse funds to the listing broker and the buyer broker (often 50% of the listing broker commission). Thanks to what some called the “MLS Crutch”, it was so easy to compensate the buyer agent the same amount regardless of the level of service provided by a rookie graduate or a seasoned professional designated as an ABR.
The competition has always been fierce among seller agents to create listing presentations in order to secure the sacred listing. However, there was little competition among those wanting to represent buyers, other than the inevitable procuring cause disputes between brokers who provided specific services to the unrepresented buyer.
Turning the page
- Now, let’s turn the page to the new ballgame after August 17, 2024 when the MLS was forced to make certain “Practice Changes” – for a webinar covering the Practice Changes see a panel discussion by Saul Klein, Tristan Ahumada, and John Reilly
- 13 Practice Changes — https://www.youtube.com/watch?v=NcOB8S4_TlY&list=PLWscjoa0nkNsrCTfy1hV8bgCHxBynff8l&index=1
Among the critical steps in Practice Changes that require fundamental changes in traditional practice (“Paradigm Shifts”) are:
- No Offers of Compensation in the MLS (No MLS Crutch) (End of procuring cause cases)
- Required written agreement to tour a property (need not be a buyer agency agreement)
- Negotiation between seller and listing broker; between buyer and buyer agent; between seller and buyer at purchase offer stage
- Required Written Buyer Representation Agreement that negotiates method of compensation (flat fee, hourly, traditional, performance-based) See https://parisparadigm.com/
- Buyer brokers compete fiercely to secure the buyer listing, to the same degree as seller brokers compete to secure the property listing.
Buyer brokers will have to develop new skill sets to demonstrate their value to buyers that highlight their experiences
Here are some suggestions on value propositions from several industry thought leaders as published on The Data Advocate:
- From Tristan Ahumada – “As 2024 rolls on, the real estate world is seeing some big changes, especially in how we handle transactions and compensation. To help you stay ahead and provide even better service to your clients, we’ve put together a simple graphic that you can use and adjust to fit your needs.” See graphic at https://thedataadvocate.com/wp-content/uploads/2024/08/New-White-Background.pdf and article on The New Landscape at https://thedataadvocate.com/the-new-landscape-of-real-estate/
- According to noted visionary Saul Klein, “today’s consumers are increasingly informed, demanding, and time-constrained. They seek speed, convenience, choice, value-added services, quality, exceptional service, discounts, and access to information. Real estate professionals who can effectively address these “driving forces” are well-positioned to succeed.” See https://thedataadvocate.com/a-menu-driven-approach-to-real-estate-a-blueprint-for-success/
- According to recognized marketing genius Brian Boero, “in the past, we’ve missed the opportunity to ‘tell our value to the transaction story.’ Although it is imperative that we communicate our activities around the services of buying and marketing properties, but what the customer really doesn’t have is a clear sense of what the agent really did, let alone how they were paid.” See https://thedataadvocate.com/the-wake-up-call-with-brian-boero/
- From Joe Schneider EVP of Consulting at Modern.tech, “Without having to subject everyone to a mind-numbing recap of the result of the industry lawsuits (you should know this by now), I’ll sum it up: buyers will now be choosing agents based on two factors – what they can afford, and how much value a buyer’s agent can add relative to their competitors. This tip-of-the-spear for real estate transactions has been redefined, and as a result, the relationship dynamics in any real estate transaction have also shifted. The bottom line: buyer’s agents need to demonstrate value to consumers. This presents an opportunity for PropTech companies uniquely positioned to enhance, display, augment, or otherwise increase the value that the buyer’s agent offers to the consumer. See https://www.modern.tech/insights/proptech-in-the-post-settlement-world
- And for those concerned about the threat of AI driving them out of the business, here’s a positive message from Tristan Ahumada: “In a world where technology handles the routine, the agents who focus on relationships will become even more indispensable, offering the emotional intelligence and trust that technology cannot replicate.” See https://thedataadvocate.com/the-future-of-real-estate-agents-by-tristan-ahumada/
We welcome your thoughts on sharpening your Value Proposition and highlighting your Experience– add to the Reply section below.
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