Is the gap between top performing and average estate agents increasing?
Are we entering a time where property portals prefer to work with top producing agents by providing them with more and exclusive opportunities to increase their market share?
Property portals make their money by selling leads to estate agents. Brokers employ agents and provide them with certain operational services that requires a desk fee or part of their commission. Online advertising spend is rising. As an example, the very top agents now spend more than $60,000 per year on advertising with US portal Zillow (which is more than your typical RE/MAX desk fee). Some suggests that big portals like these, are starting to delivery more value to agents than most brokerages do, and that they have the opportunity to commoditize the brokerage to agents. There is furthermore the opportunity for portals to close the loop, from the point when the home search is done to when the transaction is closed.
Based on the above, it makes sense for property portals to rather work with a smaller portion of top performing agents who:
- See the return on their marketing investment and are willing to push even more money in to increase their share.
- Provide great service to buyers and sellers, thus simplifying and speeding up the sales process, adding credibility for the portal. Promoting top agents is in the best interest of the portal.
- Reduce the admin and support overhead dealing with a smaller group of agents.
In 2015, Zillow bought real estate transaction platform Dotloop and recently started testing an instant home sale feature which naturally did upset a few agents. The instant home sale feature provides opportunity for Zillow Premier Agents to provide sellers with CMA’s (at a fee). More control for Zillow over the home sales process and more opportunity for top paying agents to attract sellers by paying for position.
Although Zillow is used as an example, I see similiar trends with portals worldwide:
- Basic online subscription fees are significantly pushed up every year, making it expensive for new or low sales brokers to operate. This is the result of portals trying to get a monopoly in the market with huge advertising spend that they need to recover for investors.
- Additional marketing opportunities, including featured properties, profiles or other packages are made available that provides more exposure for agents willing to spend.
- Portals are willing to run at a loss for years, in order to capture market share and operate a monopoly. Once this is done, they can command higher than normal subscription fees.
There is certainly no more space for part-time agents in an industry that is becoming increasingly competitive. New online real estate models are tried that challenges traditional models. The problem is, that there is only x number of properties agents can sell every year, everyone is competing for a relatively fixed number of sales.
The rise of super agents and teams
Looking into the future we can possibly see the following:
- The rise of the ‘super agent’ or small ‘super team’ who are willing to spend more on online advertising to grow and keep their market share. These highly productive teams or agents are focused on spending their money where they get the best ROI. They are fanatical about customer service and have long term strategies that results in a snowball effect for repeat business and referrals.
- Agents that are set in their ways and are reluctant to adapt to change (including the adoption of new technologies and further training) will put themselves under pressure and be slowly forced out of the market. There is certainly no more space for ‘part time’ agents.
- More, highly qualified, post graduates (including corporate go-getters) entering the real estate sector.
- The rise of fixed and low commission online and hybrid agencies that challenges the traditional high commission structures through their highly optimized workflow processes.
- Introduction of completely new real estate models like OpenDoor, Knock and Offerpad that promises instant home sales. These are backed by large investors looking to disrupt the market.
Looking at South Africa, new estate agents entering the market has it particularly tough, as they need to operate as intern agents and can only expect their 1st paycheck 6–12 months down the line. Those that pull through to year 2, do however have the opportunity to make a big success, and don’t have to stand back for any established agent. After all, every agent is his own brand. Home buyers do after all find their homes online, irrespective of brand. They require someone they can trust to guide them through the challenging buying process.
We live in exciting times where the status quo is continuously being challenged. If you are part of one of the biggest real estate companies today, there is no guarantee that that company will even be here in a few years time. Who would have thought that Tesla would be the most valuable car company in the US today or that AirBNB can have such an impact on the hospitality and now real estate industries?
Welcome to the rise of the Super Agent.