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Challenges Loom for Real Estate Industry, Report Finds

By Sam Silverstein and Erica Christoffer

The real estate sector faces a host of challenges that will require professionals in all facets of the industry to become more adaptable and agile in the coming years in order to remain relevant and competitive, according to a newly released report commissioned by the National Association of REALTORS®.

Concern about the erosion of the importance consumers place on real estate professionals in structuring and managing transactions in an era of fast-moving technology DANGER Reportis among the top issues cited in the study, which is based on data from a national survey of approximately 7,800 REALTORS® and interviews with 74 high-level executives and other real estate industry leaders. The report also takes other real estate-related studies, reports, articles and surveys into account.

Another challenge for the industry is the arrival of companies that previously did not participate in real estate, which could disrupt established business models, according to the study, known as the D.A.N.G.E.R. Report (“Definitive Analysis of Negative Game Changers Emerging in Real Estate”). Concerns about uneven professional standards and the burdens posed by government regulations also are on people’s minds, the report says.

The report was conducted by industry analyst Stefan Swanepoel, head of the Swanepoel T3 Group, a research and consulting firm, at the direction of NAR’s Strategic Thinking Advisory Committee. It is divided into five sections that detail challenges facing agents, brokers, NAR, state and local REALTOR® associations, and Multiple Listing Services.

Stefan Swanepoel speaks about the D.A.N.G.E.R. Report at the REALTORS® Legislative Meetings and Trade Expo in Washington, D.C.

“Don’t think that people don’t want to play in your sandbox. They do,” says Swanepoel, who spoke during last week’s REALTORS® Legislative Meetings and Trade Expo in Washington, D.C. “Some will play nice and some will not play nice.”

New technology is another force buffeting real estate. Brokers could find themselves overwhelmed by the cost of building the technological solutions they need to thrive, while agents worry that technology could marginalize the value they bring to buyers and sellers, according to the study. “There are a lot of products that are now being created very fast,” Swanepoel says,

The arrival of newcomers looking to introduce consolidation and new business models to real estate is another issue the industry faces, he adds.

Meanwhile, real estate firms and associations face headwinds in attracting young people to their ranks, Swanepoel says. “Real estate sales [isn’t] a first-choice career” for high school students, he says, adding, “We need to find more people who can make a longer commitment to our space.”

The D.A.N.G.E.R. Report offers no solutions to the challenges it identifies, but instead formulates a starting point for industry-wide conversations and paths for finding solutions, Swanapoel says. “It’s a summary of all the black swans that could be in the future.”

Michael Oppler, senior vice president at Prominent Properties Sotheby’s International Realty and one of the 20 at-large members of the Strategic Thinking Advisory Committee, called the report a peer-to-peer dialog tool. “When you look at this report, you can have a much more open and honest conversation in your office,” he says.

Information about the D.A.N.G.E.R. Report and its findings is available at REALTOR.org/dangerreport. In addition, the entire 164-page report is available at no cost from the REALTOR® Store.

Sam Silverstein

Sam Silverstein is a writer-producer for the National Association of REALTORS®. He is based in Washington can be reached at ssilverstein@realtors.org.

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Comments
  1. These challenges were there in the past and will be there in the future too. But I’m pretty confident the new generation will surely find a solution to overcome these.

  2. I know it was a smart thing for NAR to commission this report, but to publish it without responses or a roadmap seems like a scare tactic. You mention the lack of new blood several times. This won’t help.

  3. I started on 1983 and I’ve been hearing about boogie man stories for 32 years. NOTHING will ever completely replace the human element. We are in the people business first, then real estate comes next. Having said that, we are in a cyclical and constantly changing business and we cannot bury our head in the and either, we must continue to evaluate and reevaluate our model and adjust to changes. That’s my humble opinion!

  4. The only constant in life is change. I don’t believe our industry is experiencing any more change than life in general. Any change that improves professionalism and marginalizes the half-hearted is a positive as far as I am concerned. We need to be nimble enough to use the technology but also to help and support the consumers who don’t (and there are still many). Personally, after more than a few decades in this business I embrace the opportunity to continue to learn and be relevant.

  5. The industry is begging for problems with the grossly unfair percentage commission system. Exit and Keller Williams are making it worse with their recruiting gimmicks. How long do you think the public will tolerate this insult? So many industries have adapted to change and ours is trying to hold on to a system that offers no value to consumers. Please, no negative comments unless you can show what one of your sellers gets on a house $200,000 more than another.

  6. The DANGER Report was written so as to provide information and research to the entire industry so that we can enable as many leaders as possible to find the solutions for their own companies and/or constituents. It is not NAR’s role to dictate what companies should do… that said, a discussion, a summit, scenario planning, a roadmap, etc. are all natural progressions of this discovery process and I am delighted that people like you are already thinking that way. I look forward to continuing the discussions with everyone.

  7. Celine Teeson

    I have been involved as a REALTOR – still Serving on the State, Local & NAR levels & attending NAR conventions & mid- year meetings for 32 years. Remember when Bill Chi was NAR Pres. – the convention was in Hawaii on Wakkii Beach. He told us then – I think it was 1988-? “The Lion is coming over the mountain- if we don’t embrace technology – it will gobble up our industry”!! He was so right!! NAR has kept the REALTOR in the center of the transaction – they have embraced technology & have spent a lot of time & money to keep NAR as an valuable source for all REALTORS. Yes, our profession is constantly changing – stay involved & you will always be ahead of the curve!! Volunteer – it is priceless to your success!

  8. Tim Jensen

    Once again the NAR presents the obvious as a new threat while, once again, offering no solutions at all. This problem is repetetive over generations and will not diminish because NAR spotlites it.
    Just another example of how NAR threatens and intimidates while never offering practical solutions.

  9. Alexandra Toledo

    The biggest problem in my business here in Sacramento, California is lack of affordable housing and decent loans. We can have all the fancy technology, but if only 3 in 10 people can afford to purchase a home, it won’t result in many deals, much money or longevity in this career. The public needs to be able to buy homes for us to make money! As it is now, most of the few who can qualify for mortgage financing are short on cash and need to use the FHA loan. With all the fees the government has placed on these loans, it’s quite challenging to recommend them to buyers, who are my primary clientele. The loans are simply too expensive. A significant amount of the buyer’s money goes into fees over the lifetime of the loan and not into the principal. This isn’t fair lending. My business tanked when REO to Rental happened two years ago. Inventory shrank considerably and prices essentially doubled on entry level homes within a year. I went from having lots of business to barely any at this time. Most of the buyers that come along these days can not qualify or afford a home. In my opinion Fannie Mae is responsible for this happening by initiating bulk REO sales to hedge funds in 2012. REO to rental can only be profitable if inventory and affordability are low, and loans are difficult to obtain forcing rents to shoot up, which makes the REO to rental shareholders lots of money. I see very little activity on NAR’s part to change any of this. NAR should be working on the following happening: More government financing being made available to small and midsize builders to spur the construction of new homes at the local level. Most homes being built are by corporations whose shares are traded on Wall Street and a significant portion of these homes start at $400k! Most people can not afford these expensive homes. Smaller builders would build more affordable housing at the local level (increasing inventory and affordability) because they are not catering to shareholders. Mortgage lending also needs to change significantly. Loans for first time home buyers need to not have so many fees making it more difficult to pay off. We need a mortgage lending market that provides fair loans to creditworthy buyers, not only to people with large cash down payments. In my humble opinion, the rules of the game need to change at the top with FHA and Fannie Mae, and NAR needs to have a conversation with the public about it. Focus needs to move away from large corporations making money in real estate to the middle to lower middle class being able to buy a home. If this were to actually happen, real estate would again be lucrative and attract competent and talented individuals, and the DANGER Report wouldn’t be necessary!

  10. Challenges always come with the opportunity to improve the long established way of working. SO if new companies will start participating they will come up with new innovative ideas that will boost the realtors market profit.

  11. Alexandra Toledo

    I completely agree. At this time practically every mortgage lender working within the FHA price point wants to sell those loans into the secondary market, and that market at this point is wholly owned by FanniMae and FreddieMac. They are setting the rules for who gets a loan at the entry level. There’s the subprime mortgage market, but we all know how it can go awry. Is it possible for private capital to assist the middle to lower middle class in purchasing homes without the government paying for the risk and without the loans being predatory? I don’t think that it is, but maybe there’s an entrepreneur out there developing a way to cash into making the dream happen for so many families and in the process making it possible for Realtors to have a vibrant business! I’m all for it.

  12. There are so many kind of challenges or factors in the real estate trends which are impacting business. The main cause in the field is many people are not qualifying for loans. the another factor is low property appraisals, another one is the regulatory environment which means the laws, rules, and regulations put into place by any federal, state, or other government entities and civilian organizations to control the behavior and actions of business activities.

  13. As a 32 year Real Estate Professional who has been licensed in 3 states, currently California, and been in management as well as sales I find this commissioned study a slap in the face by the industry. Over the years I have been involved in Area Board of Realtor Committees and constantly tried to improve the quality of REALTORS and their services. Unfortunately I have watched NAR , State Associations and Boards refuse to get actively involved in issues and performance requirements. The hands off response has always been we can’t get involved in these things as they are to controversial. ( No Problem Collecting Dues Though) As the years have gone on, there has been an unwillingness to protect the MLS and listing contracts as proprietory contractual information to everone except ARCO gas stations which could change tomorrow. The answer has been we MUST (?) provide this to the public. Now that has totally backfired and the industry has NO CONTROL over our business but to do studies such as this. Where have they been before this…The Horses are out of the Barn and we are looked at like Gypsy con artists. Maybe it is time to refund the membership fees back to everyone .

  14. Carmen Arif

    I totally agree with David Strauss. Back in the early 90′s realtor.com was insulting and derogatory towards agents. And if we didn’t get on the band wagon with the internet and buying their advertising and leads it was because we were old school and lazy. I remember reading the insulting articles and deciding at that time that I would have nothing to do with them. Flash forward 20+ years and we are now irrelevant ALMOST. FROM THE VERY BEGINNING NAR AND THE BIG BROKERAGES SOLD US OUT. The MLS which is proprietary is being taken by our broker who owns the leads and fed into the system that we pay for and then SOLD for a profit (profit THE BIG BROKERAGES and realtor.com, Zillow, trulia, list hub) through syndication AND SOLD BACK TO US AS LEADS. Talk about being hoodwinked!!! We are either as a group akin to sheep or just plain unthinking. It is costly to be a realtor, we pay dues, fees, MLS fees, SUPRA key fees, monthly, quarterly, yearly. CE requirements. Licensing fees to the state. Etc. And our listings and their info and inquiries are being sold back TO US AS LEADS. FROM day ONE the MLS needed to stay proprietary and in control of each individual broker. When I ask millennials what they need a realtor for they tell me to “open doors” to see inside and make sure all the contract paperwork is together. As the consumer sees it that’s not worth 3% or whatever percentage is charged. Listing agents definitely are the most irrelevant. All that is needed is a website where you can input as a homeowner the dimensions of your rooms and upload a few pics directly to a national database of for sale by owners that in turn syndicates that. Presto!!! Listing agent eliminated. If they receive an offer an would like an agent to write and counter it they can charge 100, 50, 25 or whatever dollars per counter or an hourly rate. As far as door openers go, they need to re-key the house with a SUPRA lock that snaps their pic and a phone app that identifies them and sends a beam to the supra. Instant keys. A camera records their movements inside the house. If they want to make an offer they can contact a realtor and for a flat fee or an hourly rate write up the offer. If they range babysitting and hand holding that’s also an hourly wage. Y’all get the picture :-) everyone in power SOLD US OUT!!!! The only way to solve it is all 1,000,000 + realtors go on strike and refuse to do any business until they give the power back TO US! :-)

  15. Another challenge is to deal with the growing intervention of technology into Real Estate. The adaptation has to come slowly to be absorbed.

  16. There is no stopping the advancing technologies. Those who embrace it, and take the time to understand how beneficial these techs can be for branding oneself, will stay ahead of the curve will (or at least understand it, then outsource it, inexpensive in the greater scheme of things). Certainly growing pains for us over 40, but by using tech to help branding *yourself* to stay front of mind is critical in the coming years. Even according to the CEO of the largest marketing company in the world, WPP, social media outlets such as FB have changed into great branding opportunities rather than just saying hi. I may be out of line here, but I for one can say nobody has chosen me because of the company I was associated with. They had used me because who I have branded *myself* to be and then gone above and beyond. There are so many better ways to increase lead generation than having to pay for them, Realtors just need to educate themselves with new possibilities that can serve them and keep it simple.

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