Industry Consolidation is Bound to Happen...

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Real Estate Agent TX #0540728

Clearly the Internet phenomenon coupled with electronic signature and e-mail has lowered the labor and delivery costs of representing clients. It is most obvious competition for new listings is resulting in lower fees. Most new Agents are trained to focus on listing homes to gain first-hand experience and develop inventory to attract buyers. An inability of new Agents to capture this side of the business is a barrier to entry and benefits experienced Agents, teams, and established firms greatly.

It is no doubt that MLS Associations, MLS providers, third-party’s such as Zillow, realtor.com, Truila etc. are dependent on new Agents to maintain their current presence and fuel growth. I think of this as the gold rush effect – Merchants selling shovels and pans to Gold-miners made a lot more money in the California Gold Rush than did the Gold-miners. My view is large national real estate firms such as Realogy, third parties, Realtor.com, Zillow, Trulia, local MLS Associations are to highly dependent upon selling shovels and pans to new Agents and the business model has yet to prove it supports the revenue base they have captured and certainly will not ever support the revenue levels public companies predict they can capture. Look at the Realogy IPO, The two main revenue streams are almost identical, commissions and desk fees. This boldly confirms we are in an industry that places too much focus on promoting and exploiting the least experienced Agents. It is no wonder consumers are fed up with poor service, sub-par data quality, and high fees.

I believe we are truly at an inflection point. Consolidation is bound to happen at many different levels, local associations, third-parties, and agents. All driven by falling delivery costs and falling revenues granted by technology. Why should our industry be any different than any other impacted by the internet?

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