I have worked directly in the real estate vertical for nearly a decade, however, real estate was not my first industry. I spent years in the fast-paced world of video game development before transitioning to a real estate software sales role in 2015. 

One thing that was immediately evident to me when I first started to get a feel for real estate is that our industry is extremely resistant to change. When you resist change, you open your business up to stagnation. 

American author William Burroughs famously wrote: "When you stop growing, you start dying." I have always felt this resonates with me, particularly from a business perspective. The objective of any business is growth, expansion, and prosperity. Running a business is extremely difficult, particularly in an economy that seems less stable day by day. I believe people by nature resist change, however, the companies that thrive the most are those willing to take risks and gamble on themselves in times of uncertainty. 

When budgets get strained and it's time to make cuts in your organization, the last things you should consider cutting are the tools and staff that grow your market share. Time and time again I have watched business owners decide that the first area to look at when it comes to reducing budgets is cutting growth channels like digital marketing or tools that empower sales professionals to sell more effectively. They do this rather than make decisions like cutting unnecessary office staff, reducing office locations seeing very little traffic, or cutting things like unneeded office parties or events. 

When a business decides to stop marketing itself and growing, a competitor will be willing to bet on themselves, pour gasoline on the fire, and grow, while they take a step back. I recently had the pleasure of watching industry analyst Mike DelPrete deliver a speech on stage at the Inman Connect conference in Las Vegas. DelPrete's speech, titled "Probably," is free to watch online on his YouTube Channel. There is a poignant moment on stage where behind Mike on a massive screen, he pulls up a slide that simply says: "Standing Still is not an option."

The reason for this is clear. The majority of real estate brokerages in the United States are what we call "traditional brokerages." If you analyze NAR's data, alongside what Mike DelPrete shares in this speech, you will find that the brokerages in this country struggling to survive are traditional brokerages. They are bleeding agent count, with over 10% of top-producing agents leaving their brokerage each year. And these brokerages are bleeding in revenue, seeing declining margins as agent turnover and commissions continue to shrink. Most importantly, the cost of the transaction to the brokerage can be in the realm of $6,800+ OpEx per transaction. 

So what have the true "industry disruptors" managed to do? The fastest-growing brokerage in the nation has been EXP Realty. Within just 15 years, the biggest and most established "traditional" brokerages in our space, such as Anywhere (formerly known as REALOGY), RE/MAX, and HomeServices of America, have been displaced and overtaken by a newcomer. How did EXP accomplish this? They were willing to forgo the status quo and truly think outside the box in a way that would resonate with the REALTORS® who had grown tired of doing business the same way. 

The model makes a ton of sense once you truly understand it. Real estate agents by nature are sales professionals. They want to be their own boss, run their own business, and build relationships. These are people who are quite frankly, motivated by money and growth. The #1 way to attract sales people? Give them more money than the competition can. How can a real estate brokerage afford to give agents larger commissions? By reducing brokerage expenses, they can give the agent more money when the transaction is completed. How can you get more transactions as a brokerage? Attract more REALTORS®. 

The flywheel is simple. Reduce expenses (less office space, less staff, creative online marketing versus legacy print) -> Attract agents with better commission rates -> With more agents come more listings -> The agent keeps more of the transaction and shares this with their peers -> Agent count grows -> listings grow -> repeat. 

Mike DelPrete shares that the 2023 OpEx per transaction for EXP was $959. The cost for Anywhere: $6,898. When one brokerage is spending less than 7x per transaction, it becomes clear how they're able to pay the agent more. In Q1 2023 EXP reported they paid over 91% of all revenue directly to their agents. Anywhere in contrast paid just 80% of their revenue to their agents. Despite this, Anywhere still reported a 2023 net loss of almost $100 million while EXP's net loss for the year was just $9 million. 

The purpose of illustrating all of this isn't to paint a doom and gloom picture of traditional brokerages. In fact, I believe these are the brokerages that have the biggest opportunity to make a change and become the next shiny object in the mind of an agent. If the new shiny object (EXP, United Real Estate, Fathom) was able to get agents' attention and drive them to switch brokerages over the last decade — and we know that 10% are going to switch brokerages every year — then the problem that needs to be solved is how to get agents to move back to traditional brokerages. 

Traditional brokerages can only solve that problem by getting untraditional. Albert Einstein once said, "Insanity is doing the same thing over and over and expecting different results." The age of 60/40 splits is likely gone. The new Buyer Agency Compensation regulations will change the way REALTORS® do business as well. We can't stop change from happening, but we can adapt, recognize when the tides are turning, and get ahead of our competition. 

My challenge to traditional brokerages is not repeating the same mistakes so many other brokerages have over the last 30 years. Get uncomfortable. Adjust your budgets for growth, not to maintain the status quo. The status quo is only going to lead you in one direction and it's not growth. The real estate brokerage has unfortunately been experiencing a "death by thousand cuts" effect and it's time to see our industry take gambles on switching up the value proposition to consumers. It's clear based on the public sentiment of the Buyer Agency Compensation trials that the general American public doesn't think too highly of REALTORS®. I believe that's something we can change.

Two companies spring to mind when I think of positive customer service. Chick-fil-A and Walt Disney. Both organizations exploded in popularity largely because of the fanatical attention they deliver to ensuring each customer (or guest) has a positive experience with their staff. How often do you hear stories of someone walking out of a Chick-fil-A unhappy with the service they received? Or a family returning from a Disney World vacation saying the staff at the parks made their trip unmemorable? 

The best possible way to change the American perception of agents is to make them truly understand the value you bring to them. We must justify our commission and be true sales professionals for our clients, not just order-takers. It is incredibly frustrating to see the apathy so many real estate professionals have when it comes to their clients and their business as a whole. The most surprising data to see in Mike DelPrete's Inman speech were the following two data points.

• 47% of leads submitted to agents from their website are never responded to.
• 42% of agents do not collect contact information from open house visitors.

Think about the home seller who is going to be paying a five-figure commission to their real estate agent. They're paying someone to get the maximum value for their property while selling the home as quickly as possible. Yet the very same person responsible for doing these two tasks is flat out ignoring requests on the home coming from the web and not bothering to get the contact information of people at an open house. If this is the level of service the traditional agents are giving to the American public it's no wonder they don't want to pay as high of commission to the agents who represent them.

I'll conclude with this. Staying the course and being stagnant will not lead to the growth of your business. Cutting expenses that directly lead to the growth of your business will only begin the death spiral. Industry disruptors have figured out a model that reduces expenses and is attractive to agents, causing them to flee traditional brokerages. The best way for traditional brokerages to break this mold is to focus on delivering absolutely exceptional service to all of their customers, and ensuring the agents they recruit are just as fanatical about customer service. Don't settle for being traditional. Think of creative ways to get "untraditional" to attract agents back to your business away from the modern industry "disruptors."