Who will be Eaten Next?

This will be an empirical industry writing. It will stem from personal experience and observation. Will this pass the muster of fully verifiable news or academic sourcing standards? It most certainly will not. Those who are seasoned members of the industry, however, will know what I say to be true.

I write in this way and try to bring light to the negative aspects of the real estate industry not because I have shame of disdain for the practice, just the opposite. It is because I do not believe there will be any actionable basis for change without a constant emphasis on those things requiring the same. We need only to look at the DOJ inquiry into the practices of NAR and what will likely be big changes in the industry in the years to come as a sign of internal rot. Despite industry challenges, rather than attempting to provide a direct path to real consumer value, the race has become a mergers & acquisitions exercise by many large brands. The war flag is simple, if you can’t provide actionable value, buy market share.

What I see

Over the past few years, anyone who is paying attention has heard announcements of large-corporate-franchise-X gobbling up boutique-brokerage-Y. There are an endless series of “defection” stories of this real estate team or that real estate agent leaving one company and joining another. Long standing family organizations are fleeing the market and buckling under what seems like crippling competition to manage ever shrinking margins and new entrants to the industry are growing by the day. Is this a sign of the times to come or something more?

Internally, within our organization over the past several years, I have waxed-philosophical about the direction of the industry and what I define to be the race to the bottom, the abandonment of consumer service orientation in favor of an endless chasing of real estate agents by brokerages. Seemingly, every major franchise will hire anyone with a license regardless of professional background or general qualification. This, I believe, is the basis for most major challenges within the industry today.

According to the Congressional Research Service, the economic impact of the housing industry accounts for over 15% of U.S. GDP. This order of magnitude effect of real estate on the overall economy is tremendous, and the industry, one would think, would be held in the highest of business regards. If that were the case, why is there so much public criticism about real estate agents and why is the federal government poking around? I would contend that everyone knows what we all know within the industry. The performance of the bad apples, or lack thereof, attracts the most public attention. Afterall, the old news industry catch phrase “if it bleeds it leads” still holds true.  

What I have experienced

In early 2021, I was personally approached by what I will call a less-than-professional “business development executive” for a subsidiary brand to a very large publicly traded brokerage conglomerate. His objective? To buy our firm. Not only did this “business development executive” walk into our offices and proceed to command such an arrogance as he wandered freely about, when ultimately pressed to demonstrate any knowledge of our organization and how we are positioned as the anthesis to such a franchise, a smug retort was delivered about this organization being willing to pay "above-market" revenue multiples and that my consideration need only to focus on that fact. What this individual did not seem to understand is a principled position and an unwillingness of the members of our organization to sell out. He also did not seem to realize that we are performing just fine without the gracious offer he claimed his firm was willing to provide. Sadly, this arrogance, from what I am told by similarly positioned organizations within our market, is not uncommon and is only growing.

What I believe

It is no secret that the practice of real estate can grind someone down to the bone. Every day, real estate practitioners are put in emotionally, professionally, and personally challenging positions as they strive to best serve their client base. With Wall Street firms taking a growing and active position to absorb real estate brands, the classless pursuit of business unit growth is no surprise. What I believe, however, is now is the time for the cream to rise to the surface. In my almost 20 years in the industry, I have never seen it as competitive as it is now, I have never seen this many people try and jump into the business, and I have never seen such a cannibalistic approach to growth.

If there has ever been a time for the principled practitioner who is eminently concerned with the care and service they provide to their clientele to champion traditional industry values, now is that time. There is a vacuum in market value and the consumer can feel it. Noise about low budget this and disruptor that, coupled with swelling negative press as the federal government continues its industry inquiries only signals that a return to values-based business as opposed to singular share-seeking growth is what not only the market wants, but what it needs.     

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