The real estate industry has long experienced disruptors such as non-traditional business models, new commission splits, technology, disappearing brick and mortar, etc., but no one foresaw the biggest disruptor as a microscopic infectious disease. That’s the reality today as the Coronavirus disease 2019 (COVID-19) has swept the nation, taking lives, disrupting families and crippling industries, especially real estate.
To gauge the impact of the crisis on real estate brokers, a survey was conducted in late March to gauge how brokers are coping in their markets and what they see ahead. Many brokers are currently experiencing challenges; however, there are signs of optimism industry-wide as business leaders begin to consider opportunities beyond the crisis.
Most brokers who participated in the survey are reporting current hardships. The most immediate is the struggle to keep their company’s deals on track with 82.6% reporting lost transactions due to the current conditions. How much have they lost? 28.9% have lost less than 10% of their transactions while 39.1% have lost 10-24%.
What is the perception of the impact on brokerages? There is a wide variation in the viewpoints between how brokers view the current situation and their perception of how their own agents view things. When asked about “current concern/anxiety” brokers answered for themselves and they assessed the anxiety of their agents:
Clearly, agents have a much higher degree of concern than the brokers. Some have suggested there is a correlation between agents’ anxiety and their length of time in the industry. In the survey, only 15.9% of the brokers reported that 50% or more of their agents had experienced the crash in 2008-2012. As brokers commented:
–“I’ve been through the ups and downs but most of my agents have not. I’m having to communicate with my agents on a daily basis to reassure them that the sun will come up tomorrow.”
–“I’ve been through worse and did fine afterward, I’m more concerned about keeping the agents on track”
What are the primary concerns of brokers? Not surprisingly it’s the uncertainty of today’s world. In fact, the “current uncertainty” was the number one concern of brokers according to 18.8% of the responses, and here are the rest:
It is the unknown, simply not knowing what the future will hold that concerns most brokers. In the words of one broker who said of their agents, “They look to me with puppy dog eyes wanting answers and it hurts there’s not much I can tell them except to try to reassure them that it will pass.“
Other comments included:
–“I think everyone in my office is feeling the financial pinch and would love to see things get back to some sort of normalcy. We are all wondering what that will even look like.”
–“The crisis is much bigger than real estate but it will impact across-the-board qualifying for mortgages, available inventory and more.”
In a follow up questions, brokers were asked about their #2 concern and the “local real estate market” jumped to the top of the list which included:
Almost all brokers expressed concerns for their agents’ well-being and the pressing health risks affecting all. Health issues are understandably a concern, but most brokers and agents recognize that the medical crisis will pass in time. Many brokers express concern for their agents beyond the initial social distancing “phase” and into the recovery period.
Observed one broker, “we want everyone to be healthy, but I’m also concerned about the market reactions locally and even on a broader scale. I think the industry will be hit hard and it will take some time to recover. Probably will see a shakeout of brokerages and agents in the market.”
How will the crisis impact brokerage operations? Most respondents (78.2%) anticipate operational changes within their companies with staff reduction heading the list at 26%. Next, were reductions in marketing as well as office consolidation. On a personal note, 8.6% of the surveyed brokers responded that they would be increasing their own personal production.
While increased use of technology is an option for many, 59.4% stated they would not be increasing their use of tech. Said one broker, “many of our agents don’t take advantage of the technology that we already offer. Instead of adding even more technology, we will focus on training and support to help them use the resources that they already have.”
Others listed increasing 3D virtual tours, increasing eSignatures, virtual closings, automated social media and marketing, CRMs, increased video usage, etc. “We already use most of the technologies that are being recommended like Zoom for virtual meetings, 360 Videos of listings, video updates for agents instead of emails, a robust CRM to make sure agents and clients stay in communication with each other”explained a broker. Another said, “we opened our doors as a mobile-first brokerage, so we haven’t seen much of an impact. Our agents can completely interact with our office from a smartphone, a computer, or in person, whichever they like. Having said that, we are always open to looking at new ways we can grow our business using the latest available technology.”
One question in particular stood out in the survey for drawing the most comments: “How do you see the impact of non-traditional models (iBuyer, 100% models, reduced fees, flat fee, agents on salary, virtual brokerages, etc.) in the near future?“ The responses were:
There were dozens of comments which varied widely including:
–“Some of the non-traditional models depend on volume which will be significantly impacted. Some of those brokers will look at other options.”
–“We are 100% (Agent-Centric) so when times get tough, we grow like crazy. When traditional agents feel the pinch of traditional splits, they will at least check us out.”
–“Many of the traditional and non-traditional companies have blended their models and technologies as well as fees and commission models. I think the lines will be more blurred between competing brokerage models.”
–“iBuyers have already backed out of the market at least for now. I also think many of the high commission/100% models will find their part-time agents leaving the industry and moving back home into mom and dad’s basement.”
–“The 100% models, that are completely virtual will be able to stay in business but will probably lose some agents because this is a time when value added services like agent support, leads, marketing, etc are needed and many don’t really provide them.”
The overall state of the economy was one of the top concerns according to responding brokers. Even with the newly signed stimulus package respondents see challenges ahead. 24.5% described themselves as either unoptimistic or very unoptimistic. However, by comparison, 60.70% of brokers described themselves as slightly optimistic or greater.
One broker summed the situation as, “it’s the chicken or the egg because of the virus, it’s a serious health issue for many of us but also for what’s it’s doing to our economy and industry.” Others expressed concerns about the ability of consumers to qualify for loans given the number of unemployment filings. Said one, “my concerns are investors not lending; raising interest rates; and how long it will take to recover to begin lending at lower rates. Higher interest rates and job security are killing our deals right now.”
In the short term, brokers are carefully watching their pipeline of pending business. With transactions falling out, it is increasingly difficult to maintain deals in progress. As the virus restrictions and the impact on the economy drags on and local markets continue to slow, the pipelines could get weaker. When asked about the “strength of their current pipeline” responses varied:
Stated one broker, “my pipeline is shaky with deals that fall out due to nervous buyers and I’ve lost several because the borrowers lost their jobs.”
With weaker pipelines, the question becomes how financially capable are brokerages to ride it out through a slowdown. When asked “how financially prepared they were for an extended slowdown”, respondents said:
Many comments from participating brokers addressed the preparation many brokers have already made for a real estate slow down such as, “I learned my lesson ten years ago when I barely stayed afloat. Over the past few years I’ve built up my cash reserves to be able to weather whatever storm gets thrown our way.”
One of the most encouraging points to come from the Broker survey is the strong belief that there is opportunity that will arise from the crisis. 79.7% of the surveyed brokers stated they see opportunity in their market. Said one broker, “there are opportunities. Those of us who can survive the current economic crisis will be positioned to increase our market share as many will leave our industry. Staying in touch with past clients and being a leader in our market to help the vulnerable continues to cement our brand as a local firm who cares about our neighbors. That is just who we are.”
Showing further signs of optimism, 57.9% said they “have already developed a strategy for acting upon opportunities ahead.” Some of their thinking and planning includes:
–“This is my cue to focus on being able to provide greater service to all beyond simply showings and offers”
–“We’re looking at opportunities now. There are some good brokers around me that could make sense to combine forces”
–“I have several offices that we will combine. I am preparing to provide more virtual services which require less expensive office space and admin assistance.
–“We are making plans to emerge from this crisis better prepared to provide more value to the agents and the community”
–I acquired a large office of agents following the last crisis that worked out well for everyone. I have started conversations with a couple good firms who are financially in trouble but would be a good mutual fit. It would add good agents and management.”
The many comments in the recent broker survey reinforce a sense of industry optimism that shines through the current crisis. The world is not going to end, we will all get through this. The strong will focus not so much on today’s pain but instead will be looking for the opportunities ahead. One anonymous real estate broker summed up the industry nicely by saying, “I am very optimistic about the future of our industry. This crisis has forced us to take a hard look at how we conduct business, we’re learning how to solve problems fast and we’re quickly adapting to change.”