Paradigms are a belief system – the way we view different aspects of the world in which we live and operate. Our paradigms shape the way we do business and make decisions. Paradigms are usually difficult to change, and often times restrict our ability to see coming trends and embrace new market innovations. 2 Paradigms
3 Typical Paradigm Shifts Horse & buggy The Automobile Trains Airplanes Radio Television Paradigm shifts continue today Paper Books Digital Books Videos Online Rentals Real Estate Franchising, 100%, Revenue Sharing
Visionary Courageous Risk-Takers Thick-Skinned Leaders A Bit Crazy? Are You an Agent FOR Change or a Victim OF Change? 4 Traits That Define the Paradigm Shifters
The real estate industry has been evolving for more than four decades, seeking to find a “better way”. But in the past few years the pace has accelerated significantly as the challenges presented by current market conditions expose the shortcomings of the existing business models. 5
The time has come to shift business paradigms and move the industry into its next age - operationally, structurally and professionally. 6
“Real estate has never experienced such a ‘perfect storm’ of events and factors, which have combined to force wrenching, dramatic changes upon a staid industry not accustomed to dealing with such seismic shifts.” - Michael McClure, CEO, Professional One Source: Swanepoel Trends Report 2010 7 The Perfect Storm
Until the 1960’s the real estate industry remained largely unchanged – relatively small brokerages with a few agents focused on a particular segment of a larger market. Then came… 8
The Evolution of the Real Estate Industry The Birth of Franchising – Stage 1 Large, multi-office regional companies became dominant in the 60’s by:
Creating massive advertising campaigns in local media to build brand awareness
Limited to earning commission exclusively from their own production
Their own production is limited to their available time and energy
Continued pressure to perform leads to burnout
Not really ”building a business, just “doing” business – income stops when personal production stops
Offices are closing because agents are leaving for other industries due to a reduction in income
17 Challenges for today and into the future
Challenges for today and into the future For Brokers:
Agent Recruiting – Broker (and manager, if any) are the only ones interested in recruiting
Agent Retention – Agents are continually enticed to join other companies with higher commission splits or lower desk fees creating huge agent turnover
Brokers lose quality agents that open their own brokerage business - thus training their competition
Agents are competing against each other rather than working as a team
Desired company profitability is difficult to achieve
Most industry leaders agree that the current real estate business models are broken and no longer work for either brokers or agents. 19
What are the experts saying? “I don’t think a pure brokerage play as a business strategy is a viable play in this economy or going forward.” — Ron Peltier – President & CEO, HomeServices of America Source: Swanepoel Trends Report 2010 20
What are the experts saying? “In cases where their franchising is faltering, the culprit is most often that the models of the real estate company are not suited for these times.” — Byron Ellington – Chief Products Officer, Keller Williams Realty Source: Swanepoel Trends Report 2010 21
What are the experts saying? “[We are seeing a] decline in the number of ‘big box’ real estate office operations, which simply cannot survive given the high overhead levels typically associated with such large operations.” — Michael McClure – CEO, Professional One Source: Swanepoel Trends Report 2010 22
“Brokers need to change their business model NOW.” — Sherry Chris – Better Homes & Gardens Real Estate Source: Swanepoel Trends Report 2010 23 What are the experts saying?
How have the traditional real estate franchises reacted to the challenges?
Multiple franchise brands under one ownership
The real estate business model continues to evolve – constantly searching for a way to deal with the realities of today’s market and the challenges of tomorrow
Historically independent regional brokers are moving towards franchising
NAR now provides much of what franchisors used to
Other vendors and suppliers have also filled many of the gaps in tools, training and support
Many franchises have cut back on expenditures and staffing, which affects services offered to franchisees
Fewer franchises, fewer agents…and lower profits, if any
Trouble justifying the royalties paid by franchisees and agents
Many franchisees and agents now question the value of the brand name – which most feel is the only real value they’re receiving from their affiliation with the franchise
25 How have the traditional real estate franchises reacted to the challenges?
Are these the solutions - the proper and necessary paradigm shifts that will lead the evolution of the industry into its next age? Is there a business model that will address the challenges? 26
Can any model survive in this economy and marketplace? 27
Traditional models struggle with their “value proposition” – what do I get for what I pay?
100% models struggle with changes in market conditions – cyclical nature of the business
Profit sharing models can only share profit when there is profit
Residual income potential in revenue sharing models must be large enough to be enticing
Regardless of the model, the customer MUST always come first
The “We” model of real estate is structured not only to survivein this economy and marketplace, but to thrive when a lot of the other models are consolidating, losing offices/agents or going out of business. 28
The Future of Real Estate Stage 4 – The “WE” age
The traditional real estate model is broken.
Nextage Realty is built for the future of real estate!
Nextage Realty’s model is leading the evolution of the real estate industry!