No future for franchise brokerage?

By JEFF BERGSTROM

The business relationship between real estate brokers and their agents hasn’t changed much in the past three decades. But think how much every other aspect of the real estate industry has changed. Does that mean the 1973 broker-agent business model is still viable? No. It does mean those who benefit from that business model are the ones who are least likely to promote its change.

In the age before the Internet — before the computer for that matter — the broker-agent business model made sense. The broker was the critical source of all information. The broker acted as the business hub for hundreds of agents. Today, information comes at us from every imaginable angle. There is no single source of information. Today, everything is online and instantly available.

Remember when the personal computer cost $5,000? That was about 20 years ago. The broker provided banks of computers to be shared among agents. Does anyone refer to “computer time” anymore? Back then, the idea of personal copiers and facsimile machines was crazy talk. If you wanted to copy and fax a contract, agents had to go into the broker’s office. Obviously, things have changed. Today, there isn’t a technology that a broker could offer an agent that isn’t readily available from other sources.

“Going into the office” is another concept, at least in real estate terms, that is rapidly becoming an artifact of the past. If you don’t go into the office for information or technology, what do you go into the office for? There was a time, before Starbucks, when agents met with their clients at the office. Today, the only way a client will visit an office is if it happens to be on the way to where they are going. It used to be that agents would use the office to meet with other agents and discuss any number of issues. Today, that is done online.

So if the value-added benefits of broker affiliation have been minimized through information-sharing and technology, is the broker-agent business model still valid?

The “brand” is the one hammer the franchise broker still yields. But, given a decade of lax requirements, no regulation and broker greed, hasn’t that differentiation been diluted as well?

Brokers like to talk about being selective in their agent hiring, but the fact is many are not. And while the industry likes to self-promote its brands, the reality is fewer and fewer people really care about the “name” on the yard sign. This fact was confirmed recently in a “Consumer Reports” study of the real estate industry (see Inman News). The study concluded negligible differences in customer satisfaction and customer retention among a variety of brokerages.

That study also confirms the axiom that real estate is local and it is personal. Given that, doesn’t the “agent” have the more critical role in the broker-agent business model?

As the industry downturn begins to heal, I believe every methodology of real estate should be questioned and potentially changed to better reflect the current marketplace. Many things the brokers brought to the table have been made obsolete or replaced.

And what new technology or invention do you see that would make the broker a critical component again? Now is the time for the agent-first business model. And what if I’m wrong? As long as you are willing to pay the fee, you can always return to the way it has been.

Jeff Bergstrom is owner-broker for Wynd Realty, a brokerage company based in Alpharetta, Ga.