This past week, I had a meeting with a very interesting start-up company located in Atlanta. They are called JonnyOnIt.
They are essentially aligning a consumer home services app with the real estate brokerage industry in an effort to fully automate and update the traditional “board with the 3X5 cards in the back room” of suggested home services providers. They are broker-centric and they are in the late stages of proving out their model now. See the email attached below.
Have a need for homes services? They’re "on it" and the broker brings the app to the consumer.
As we met, we discussed the dynamics of the traditional real estate transaction and the focus of the brokerage industry, particularly of the agents in the industry. It was a very interesting exchange and at the conclusion I had this thought about the future of the distribution of home services.
Fact. It has been extremely frustrating for the brokers in the industry to get their agents to do anything more than to list and sell properties.
That should be no surprise, that is what agents do, because that is what they have been trained to do and that is what they get paid to do. They mine their sphere of influence to simply get listings and to make sales. Adoption and use of other related services such as broker owned mortgage services, title services, escrow services by the agents has been an uphill battle for brokers forever. Not to mention home services.
Do you remember the days of Bob Pittman as the short-lived CEO of Century21? He made a big bet that the agents would be able to sell everything including the home - and he lost. Big time. When will we realize that agents are taxed enough when they are asked to list and sell properties. Let alone to sell other things related to these transactions.
I learned this truth a long time ago. "When the horse dies, get off." Expecting agents to sell anything more than real estate is one of this industry's dead horses.
So then I thought, what if we agreed with the agents that this was OK? That this was their role. Agents exist to generate sellers and buyers - and the brokers essentially do everything else. Then what could happen?
I see unlimited opportunity in this model for the broker. The broker is the "better business partner" with a bigger vision of the potential of the transaction, and the broker could do some amazing things. The end result? The agents served to bring in the listings and the sales and the brokerage was responsible for the distribution and sale of everything else related to the transaction?
The question is this one. Are you ready to acknowledge the historical resistance of the agent to sell added services and to step up to fill this historical sales gap as a broker?
If so, here’s the first step. Take control.
You need to secure agreement with the agents that you intend to serve their customers with other services. They get the majority of the commission (done) and you get the added revenue (potential). Have no fear, this is done now in the new homes business, the relocation business and in the REO business. Each of those business segments define the specific role of the agent to listing or selling properties. And in turn, they then provide all kinds of added services related to the transaction and even after the sale. The list of services is endless, and the greatest revenue potential all centered around a real estate transaction is realized by the relocation company, the home builder or the asset manager.
So what do you think? Are you up to the challenge? Are you ready to define your new role with your agents? If you’re not up for the challenge, then there is a company who is.
They are called Compass.
This my friends is EXACTLY what Compass is planning to do now. First they needed to aggregate those that generated transactions, and now it’s all about mining those transactions for the true revenue beyond the elusive commissions. They will essentially align with their agents to haver them focus on the real estate transaction and then to take over the distribution of all related services to the consumer. It is that plain and it is that simple. They intend to unlock the revenue of all of these services around hundreds of thousands of transactions. Compass could care less about the commissions or the commission splits, they are after the capture of the distributed services related to homeownership.
If you ever wondered why Compass bought the CRM software company called Contactually, you should wonder no more. In order to make tis happen, they needed to know the consumers in the agent’s sphere in order to be able to distribute such services. Compass may not know a lot about real estate brokerage, and they do not, but that was never, ever their game. It was the revenue being left on the table now by the agents related to the sale of home services.
And this my friends will be the basis for their anticipated IPO that will result in a market cap of several billion $$. My guess is that it will be a $3 billion IPO result. If they have figured this out and make this happen, then why can't you?
So the final question for you today is what are you going to do about that now? Are you going to continue to sit behind the agent and not go after this revenue being left on the table by your agents? I hope not. And so do the shareholders in your company, especially if "those shareholders are you."