Posts Tagged ‘NAR’
How the big guys plan to exploit the little guys and how Real Estate SEO and Real Estate SEM level the playing field.
It’s no secret that the National Association of Realtors is on the side of the big guys. I’m talking about the ERAs, C21s, Prudentials, and Exits of the real estate world. From one point of view, that’s OK. These big firms employ hundreds of thousands of Realtors. That’s a lot of jobs. I’m sure that a lot of our readers work for some of these larger companies and that’s all well and good.
Now, I’m going to draw out exactly how the system that the big guys, supported by the NAR, have put in place, can actually work to the little guy’s advantage, through the use of the internet, SEM, and SEO. It goes like this…
The revenue model at the heart of most the big residential real estate companies is pretty simple.
- They want as many real estate transactions as possible to happen under their brand
- They want to keep as much of the transaction’s value as they possibly can.
Seems pretty obvious. If a trillion dollars in real estate transactions happen in the US in a year, then Coldwell, for example, wants as much market share of that trillion to be under their name. AND they want to keep, that is the corporation wants to keep, as much of that as they can.
Most of the big guys are on a traditional split. The agent negotiates a commission with the seller and the company keeps a percentage of the commission. There are 2 ways for the company to make more money:
- The agent negotiates a bigger commission from the seller. This is all well and good, but most markets are seeing consistent commissions paid by sellers. It’s likely 5 or 6 percent in your market and just about everyone is working for the same percentage – regardless of how long they’ve been a Realtor. So, the corporation has little control over this.
- The corporation takes a bigger percentage of the agent’s commission.
Now, most of these companies start you at a low split. If you’re new to the industry, they may take 60% of your commissions for the house. If you’re doing a lot of sales, that will graduate to 50/50 and on down until you’re keeping 80% or more of your commissions.
Of course, the big companies want to keep as much of the commission as possible, they don’t like 80/20 splits or event 60/40 splits. Their goal is to have as many entry level agents doing deals as possible. The result is that they’ll keep 50 or 60 percent of the commission. In order to make this possible, they need lots of new realtors in the market pretty much all the time.
So, the big companies, in cooperation with the NAR and local real estate boards around the country have kept the barrier to entry into the real estate profession exceptionally low. Lower than almost any profession where someone has as much earning potential as they do in real estate.
This means that just about anyone can come into the industry whenever they want. So long as this is true, there will always be too many real estate agents for very many of them to make a great living. Sure, some of them will make lots of money, but most will not. Most will take on a second job or do real estate on the side or even average less than 1 deal per year. Just take a look at NRT’s stats for deals/agent and you’ll be shocked. (they’re the largest residential brokerage in the country)
Now, here’s how this all plays into the hands of the average realtor. The internet is one giant level playing field. The big guys can try to buy a million clicks or SEO around every term on the planet, but it’s untenable. They’re years behind the local guys and longevity matters in the SEM game.
You can start a real estate website today and so long as it’s built on a good platform and you hire a good SEM/SEO team, you can achieve ranking in just a few months. In some ways, this means that the internet is in the little guy’s favor. The independent real estate company can be ranked right next to the big guys. In lots of markets, the big companies aren’t ranking at all.
As real estate marketing and client acquisition continually goes more online, the big guys will be more and more left out of the picture. With time, it’ll be easier and easier for the independents to challenge the big guys and take market share. We’re already seeing this in lots of markets. Do a Google search with your town or city’s name followed by the words real estate. This will give you some insight into who’s already investing into real estate SEM and real estate SEO.
Agree? Disagree? Thoughts? We’d love to hear from you. Thanks!
Image source: www.nuwireinvestor.com
So, every once in a while, I read an article that makes some great points.
Mike Parker, who I’d never heard of before, wrote an article for Broker/Agent Social network and it touches on a lot of good facts and points. The web address and a link to the article are below.
The article is entitled Traditional Agents Earn $36,700 Annually; Internet Agents Earn $100,000+ Annually. It’s an attention getting name for sure. The article goes on to tell how real estate agents have a lot of trouble existing solely on the money they make from being in the real estate biz. That is, accept for the folks who have embraced the internet.
Now, I don’t agree with everything Mike said. Intelligent and reasonable folks can disagree. That’s fine. But I’m going to highlight some of his points and I also want to look at some of the comments he received.
The best part of the article is that Mike tells us that the average “Internet Agent” makes more than $100,000 per year. Now, I’m not sure that the numbers are quite that high, but let’s assume that the Internet Agent does make a lot more than the average agent. Who is this agent? Well, they get 70% of their leads online. They sell more than one home each month. And lastly – and I don’t really agree with this statement – Mike tells us that they have a positive outlook for the future because, “There are no economic downturns online.” That last quote is not completely true. That said, there’s a reason why we’re seeing Boston Logic’s real estate clients growing in a down market. The reason is online marketing: SEO, SEM, and social media. A general embracing of online strategies to succeed in real estate marketing.
Mike tells us that the AVERAGE Real Estate agent doesn’t get many leads from their website. Well, regular readers of our blog will tell you that we’re not surprised to hear that at all. In one of the comments, a reader says that they have a website and haven’t seen results. Again, no surprise. Mike’s comment in response is really quite spot on. Mike says that it’s likely that the strategy wasn’t implemented properly. Just having a website isn’t nearly enough. Yes, you need to invest in online marketing. Yes, it will cost you money. The Real Estate brokerage business is like any other, you have to invest money to make money.
Next, Mike makes a great point saying that you need professional Real Estate SEO help. He says, “…let someone manage a site built just for you that produces these leads, and that site must employ the best in REAL SEO…” I’m not sure what he means by Real SEO? I’ll assume he means white hat techniques that won’t get you banned from the search engine results pages. Of course, Mike is right on the money. You probably need a professional and you need to have a site that’s build just for you that produces leads. Not some cookie cutter template site. Read our Snake Oil category to learn who not to buy from.
Now, it’s very important that you remember a few things. In order to succeed online – in order to see a return on your investment – you’re going to need a site that gets visitor traffic, you’re going to need a site that generates leads, and you’re going to need to follow up with those leads. I think we’ve posted about a dozen times on just those topics. Here are some recent posts that back up just what the stats from NAR tell us:
Here’s how you can get to Mike’s Article:
Thanks for reading.
In case you were under a rock, the Nation Association of Realtors mid-year convention is happening right now down in DC. I’m not there, for a few reasons which I’ll explain below, but I decided to look into how the convention is helping real estate agents and brokers market their services and listings using SEO, SEM, or really online advertising media at all. Or, to ask a broader question, how important does the NAR think this is?
So, I looked at the schedule for the conference, which spans 5 days. Most events in the calender are 1 – 2 hours long and there are about 50 events each day. So, how many of these events are about SEO? As far as I can tell, none! Now, I didn’t read the description of every event, for example I didn’t read what’s going to be discussed at the South Dakota Customized Hill Briefing, but I think it’s safe to assume that SEO isn’t on the agenda.
Yes ladies and gents, that’s it. Search Engine marketing doesn’t seem to be a priority. It’s not on the agenda. There are a few (5) sessions that seem to have something to do with online marketing. Here’s a snippet from one of the session descriptions:
“Identify which online ads outperformed the competition including: foreclosure ads, luxury home marketing, and landing pages that cause a consumer to give up their contact information. Discover which brokers are getting the best results and see what they changed to drive in more leads.”
Whomever wrote this description isn’t an online marketing professional, or I should say, isn’t a very good one. If you were going to compare online ads, then you should be talking PPC and, if you’re really looking to waste money, PPM, but I don’t think this session will get to that level of education.
I’ve been to enough of these conferences to know. What’s going on is a beginners course, or really, the NAR has invited some members, Realtors just like the rest of the conference attendees, who have taken initiative and started to leverage online marketing, to sit on a panel and talk about their relative succes. No one is going to leave these sessions with anything really actionable. Oh, well maybe if you go to one of the sponsored sessions by a big vendor selling cheap useless solutions, you’ll have an “actionable” ordering form.
Here’s my recommendation: Don’t go to NAR. Spend 5 days of your time and the grand or two of your GCI that the trip is costing you working on your business including your website, your blog, working your network, and signing some listing agreements. It’ll serve you a lot better. In short, don’t waste your time.
Lastly, why aren’t we down at NAR, because the big guys who attend NAR aren’t spending, they’re going bankrupt. The middle market, are spending, and they’re not there. I did hear on NPR that 1000 realtors showed up to hear Alan Greenspan speak yesterday – since he did such a bang up job keeping interest rates low and precipitating the sub prime mortgage crisis. I wonder if anyone threw rotten fruit at him?
Oh and here is my favorite session (Said with my tongue pressed against my cheek): The Power of You: Professional Development Forum - This is a self defense class, taught by an expert, on how to prepare and protect yourself from the hazards of showings, open houses, and unruly mortgage brokers. Good thing that you flew to DC to take a $20 course that they offer at the YMCA.
Thanks for reading.