Traditional Real Estate Brokerages vs. Online : Online is winning

Jonathan,

My accounting background makes me always think profit margin, the bricks and mortar business model or Zip Realty - the way real estate is done today has changed for sure, but who is really raking in the coin?

I keep a small but nice office, but the most visitors I have daily is on my website!

Thanks for the interesting data.

Kent Davis

Hi Jonathan - I didn't mean to suggest that it's not possible to convert on-line leads (let's call them people) into sales. My fellow bloggers here at Neighborhoodsundressed.com have met clients on-line and completed transactions with them. This was due to the nature of blogging rather than volume website prospecting.

What's so interesting to me is how few agents I know are blogging. Most spend their days complaining that a) no-one is "turning themselves in" on their webistes or, b) their web generated leads end up being busy work with no business potential. In short, it all seems like so much high-volume farming with little result. When I suggest they blog, they don't want to put in the extra effort to actually demonstrate expertise/personality/etc. via a blog.

In today's marketplace we are seeing, first hand, how so many business models are breaking down because of the internet (the Newspaper business is a perfect example). Our industry is in the midst of such a paradigm shift. As I mentioned above, I can't see how classic brokerages can survive. I am a bit skeptical;however, that our business can or should be strictly on-line. I think it will ultimately be a hybridridized animal. We're not there yet.

I always think of that line in that song "It's the end of the world as we know it" when I think of real estate brokerages.

We listened to our agents and we changed with the times now offering a simple 100% comm. Older model brokerages are still the first choice for some people, but others are really doing well with the new models, ie 100% comm., online only models, and the like.

I can really see the change happening even quicker, it's about offering what's needed and constantly evolving. Today every commission check counts and the ones getting the higher hits are the ones with the slits more favorable to the agents.

Interesting stats though... thanks for the post!

Sadly, I do not know of any agent in my office, let alone my previous office, that actively utilizes what the internet has to offer. Some have blogs on Active Rain but there are either no posts at all or just listings posted.

Most of our buyer leads come in through email or website submissions (not the company website, but our own website).

Jonathan,

I work for a traditional "bricks and mortar" company.  Tops in the market and great agents.  They are finally getting the idea that they have to bring their website to the top of the search engines and they are working on doing so.  Our regional MLS is doing the same thing with leads sent back to listing brokers.  Eventually they will get to the top on the web and then they will have an unbeatable combination because they will have the online leads plus great experienced agents to handle them.  I think it will be easier for a traditional company to make sales out of online leads (once they get to their sites to the right point) than it will be for online companies with lots of leads but no experienced agents on the ground.

I will have to come by to read all of the comments but I wanted to weigh in since I am a RE/MAX agent.  While RE/MAX does get leads out to agents on a fair and consistent basis and has a great back-end, I think the decline may have occured when they started to require information from the visitors to better scrub the leads.  I think asking for so much information so soon is a turn-off to those searching online.  Plus, I believe more and more home searching is coming to our blogs...I have quite a few clients how use my IDX to search for homes.

Jon- I read most of the comments here, and all of the ones from you, Bob, and the Refin guy.....my gut is telling me someone is trying to sell someone something :)  Does all this have anything to do with AR's lead generation tool?  Just curious......

Love, love, love this post!  Excellent example of bringing a visual to what is happening in the industry.  The more you can give a consumer online, the longer they'll stay and more likely there are to pick up the phone. 

James Lupori wrote:  "I have met very few (I can count them on one hand) who have actually consummated a transaction by converting an on-line lead. Period."

My agents and I have closed over 2,000 online leads since 1996 and I closed my first in 1995.

Hey Jonathan,

On your next graph, I suggest you include Lenn!  :)

All this is traffic.  I would like to see actual sales.  That is what I care about.  Zip Realty has had many complaints about their service in my local market.  I want sales, and not just traffic.  That is all zip and redfin have is online.

Hey, I'll have what Lenn is having!!!!

In all seriousness, this is a timely and important conversation. Lenn, I imagine your company has been successful with the on-line leads because you adopted the technology early and you've got longevity with the model. I have no doubt that on-line real esate is in every successful agent's future. But, as in any business endeavor, it takes a clear vision and skill to make a strategy work.

I find it interesting that you think RE/MAX needs to "get off its duff" when they use a multi-faceted approach to gaining mind share and market share.  Online may be a major player, but so are other avenues of advertising for getting people to consider your firm.  RE/MAX has over 50% market brand name recognition and is the largest single brokerage in the world. Taking one piece out of an overall strategy and then attempting to blast a firm for not being #1 in a category each time is like taking a specific sentence out of a whole interview and interpreting what it means without context.

It might be interesting that they have lots of online hits but that doesn't always translate to sales.  And, believe me, many of us are more than working hard in a number of venues to make ourselves known to the public and to keep our client base up to speed on what we do, online and otherwise.

Jonathan,

The big shops are so big that to make meaningful changes will take a long time. In the meantime the boutique operations navigate nimbly toward the top and increased market share.

Debe,

I agree 100% that the internet is definitely the way to go these days!  I've been preaching about it myself too !  Well if you snooze you lose!

Thanks

Tom Davis.

I came back - love the conversation going on - and agreed Lenn needs to be on the next chart LOL. I for one feel changes in the air. We'll see what happens to the large B&M brokerages. Adaptation  - maybe? ~Rita

We have a mixed feeling about this. While online traffic is great, conversion is still key and the big brokerages are still winning that battle as a whole. But they are doing this more through their referral networks. If you check your local mls you will probably see that many of those top online companies are not actually doing as well as the traditonal modeled agencies. There's no doubt however, that an office is no longer a necessity and is currently causing many problems for the big guns because of the overhead of maintaining such an office. 2009 is not going to be the start of the 100% online model. While each year real estate inches closer, it has done so at a snails pace. This can be easily affirmed when taking a look at STATE statistics such as PA recently put out. 

Try to remember what the point of the post was showcasing while at the same time looking at actual local data to affirm the reality of things in each market as it will vary. There's definetely going to be a larger conversion rate in markets such as California where word got out years ago. 

It's definetely not a bad tme to be an independent real estate brokerage :)

It seems that the opportunity for "the agent" is to recognize the difference between site traffic and site satisfaction. I do my best to gauge the interest a visitor would have in visiting a real estate site in my small and specific market. I don't try to be a one size fits all, I try to be a my size fits you. It is still a numbers game, but I look at the visits and the statistics that accompany them as reviews and constantly do my best to tweak and tune. My results have been very good in a down market and my longterm strategy is to develop a service that works in a down market and to enjoy it in an up market.