In May 2015, the National Association of Realtors (NAR) released the information from a study they conducted about the near-term challenges of the real estate industry. This information affects real estate agents, mortgage brokers, and other professionals in the real estate field. The NAR has over one million members, which makes it the country’s largest trade association. Members are both residential and commercial Realtors that work as brokers, salespeople, property managers, appraisers, counselors, and more. Their goal is to monitor the real estate industry and distribute information to help Realtors across the country to preserve the free-enterprise system.
The author of the NAR’s study was Stefan Swanepoel, who drafted his piece by researching over 200 reports, surveys, focus group reports, journals and a variety of other academic sources. One of the surveys used to gather information comes from over 8,000 Realtors. Swanepoel also conducted interviews with 70 CEOs and executives from different brokerage companies and franchisers. The author makes it clear in his findings that these findings are not meant to be predictions of a failing industry, but to bring awareness to Realtors about real issues.
The report is about 50 different potential dangers that are ranked by probability, timing and impact. In this type of ranging, the “critical” range is between 81 and 100, with a 100 percent probability. Low danger levels are considered between the 0 to 20 range, which means the probability is at the maximum, but the timing won’t be for 10 years or more. The target people that these issues would affect the most include agents, brokers, the National Association of Realtors, state and local real estate associations, as well as the Multiple Listing Services (MLS).
Below is a summary of some of the most impactful findings:
Masses of Marginal Agents Destroy Reputation (PTI=100)
The biggest danger for the real estate industry according to Swanepoel’s findings is the large gap of knowledge and competency among agents. What he means is that there isn’t much education or standards involved in becoming a real estate agent, and many people get their license because of the potential earnings.
Commissions Spiral Downward (PTI=87.5)
Consumers have recently been trying to have agents lower their commission rates, which means there is a chance of agents making much less money.
Agent Teams Threaten the Survival of Brokerages (PTI=70)
When teams of agents are created within brokerage, they’re able to function independently to create their own brands, which means they’ll no longer need brokerages.
IRS Forces Exodus of Independent Contractors (PTI=63)
The conflict of labor laws and being an independent contractor has been causing issues with the IRS and National Labor Relations Board.
The Decline in the Relevancy of Agents (PTI=60)
Agents are not as important to the consumers as they once were.
The Agent-centric Era Ends (PTI=52.5)
Top producers were once the most important part of real estate groups, but this has noticeably been changing, which can cause economic issues.
The Housing Finance System Fails (PTI=48)
Due to the recession and people still rebuilding credit that was ruined, it is more difficult for home buyers to be approved by lenders.
The Commoditization of Real Estate (PTI=42)
The market dynamics of neighborhoods are changing because single family homes are becoming more like the multifamily market.
Commissions Concentrate into Fewer Hands (PTI=40)
There are less agents who actually control the profit from closed transactions.
The Agent is removed from the transaction. (PTI=31.5)
It’s possible for a tech company to eliminate the need for agents with the use of new technologies.
