journey of discovery secondary research synthesis...

JOURNEY OF DISCOVERY SECONDARY RESEARCHSYNTHESIS REPORT

Version 519 February 2014

Prepared by:CE Holmes Consulting & Solvable

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BCREA Journey of Discovery Secondary Research Report

BCREA launched the Journey of Discovery (JOD) to help our organization and BC’s eleven member boards strategically plan for the next five years. This project seeks to understand where the greatest contributions of products and services could be to increase the innovation of REALTORS® in service of their clients. If organized real estate is to effectively adapt to and proactively initiate change, which we believe is necessary now more than ever, the first stage is to gain a solid understanding of the current state of the industry.

This Report is dedicated to amalgamating the excellent research conducted by member boards and associations across Canada and the U.S. It summarizes existing knowledge rath-er than presenting new findings. While the bulk of the Journey of Discovery will be focused on collecting primary research insights from consumers, REALTORS®, brokers, and experts, our starting point is to understand the knowledge others have collected. This will enable us to leverage these insights in our own work, and, at the same time to recognize gaps in existing knowledge where our research efforts can play a valuable role.

It is worth noting that the JOD has a different and perhaps even narrower focus than the other research materials we reviewed. Our guiding question for the project is:

“What will the practice of the REALTOR® look like in five years?”

And we ask the question specifically considering the role that BCREA should play in enabling those adaptations and innovations in practice over the coming years.

Lastly, this Report is not an attempt at a comprehensive scan, nor is it a trend report. The studies cited in this document are based on original research data. While consulting reports on the current and future states of the industry will play a valuable role as we come to the synthesis stage of our research, our first task is to understand research undertaken to date with consumers, REALTORS® and brokers. This Report seeks to identify where knowledge is consistent, where it conflicts, and where the gaps are as it relates to REALTOR® practice.

PREFACE

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Our Report is based on a broad review of relevant research studies commissioned by or-ganized real estate and academic institutions. These studies encompass regional, national, and North American perspectives that utilized a multitude of research techniques to collect the findings. It is worth noting that there are market distinctions in the U.S. and Canada that may account for conflicts in research where they appear. Generally, we found consistent data coming from U.S. and Canadian REALTORS® and consumers despite these market distinc-tions.

We have incorporated citations throughout this Report, as well as included a list of them at the end of the document. Twenty-three sources provided the bulk of the cited research. 1. REBGV & FVREB Buyers & Sellers Survey (2009)2. NAR Profile of Home Buyers and Sellers (2013)3. NAR Home Buyer and Seller Generational Trends (2013)4. Market Distortions When Agents are Better Informed: the Value of Information in Real

Estate (2005)5. OREA Issues in Real Estate: Research Study In-Depth Report (2013)6. OREA Member Value Study: Secondary Research Review (2011)7. REALTOR® Public Image Research Project (2006)8. BCREA, FVREB, REBGV: Understanding Expectations Final Report (2009)9. Consumer Experience with Real Estate Transactions and Agents - Weaver Marketing Re-

search (2012)10. The Swanepoel Trends Report: Trends Transforming 2013 and Beyond11. REALTOR® Technology Survey (2012)12. OREA College Image and Awareness Research Report (2012)13. K2 Discovery Inc: Creative Research Report, HPI Positioning (2011)14. CREA Futures Project – Expert Interviews, Drivers of Change (2011)15. Simplify: Real Estate Trends in a Time of Uncertainty (NAR 2012)16. Top Producers Embrace Technology: WAV Group MLS Technology Adoption Study

(2012) 17. CREA Delivering Member Value (2014)18. BCREA 3-Year Education Plan Strategic Projects - Design Deliverables December 2011

Report19. Do Real Estate Brokers Add Value When Listing Services are Unbundled? (2008)20. The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadi-

son.com21. Why Redfin, Zillow, and Trulia Haven’t Killed Off Real Estate Brokers – Bloomberg

BusinessWeek22. Are Millennials And Associations The Oil And Water Of Today?23. Engaging Young Generations (2013)

Where confidential source have been used, it was done with said permission from the re-spective parties who own the source. Otherwise, no confidential sources have been know-ingly used in the creation of this Report.

RESEARCH SOURCES

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PAGES 06-13

TABLE OF CONTENTS

UNDERSTANDING CONSUMER BEHAVIOUR & EXPECTATIONS

PAGES 06-07Introduction

PAGES 07-08REALTOR® Frequency

PAGE 08Meeting ‘Soft’ Expectations

PAGES 08-09Delivering Real Value

PAGES 09-10Competencies

PAGES 10-11Satisfaction Measures

PAGE 11Consumer Autonomy

PAGE 12Communication

PAGE 13Disclosure

PAGES 14-17

TECHNOLOGY

PAGE 14Introduction

PAGES 14-15In Practice

PAGES 15-16Social Media

PAGES 16-17MLS & REALTOR.ca/.com

PAGES 17Adoption

PAGES 18-23

BUSINESS MODELS

PAGE 18Introduction

PAGES 18-19Simplification

PAGES 19-20Commissions

PAGE 21In Walks FSBO

PAGES 22-23Demographic Demands

PAGES 24-25

OUR JOURNEY

PAGES 24-25Research Needs

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“It is hard for me to imagine an industry that has experienced more sustained turmoil in the last half dozen years and there appears to be little to suggest it will abate any time soon.” - Dale A. Stinton, CEO, NAR (10)

Few would argue that the real estate industry is immune to changing market dynamics, partic-ularly as they relate to changes in consumer behaviour. On the surface, many factors demon-strate that the real estate industry is healthy. We could look to largely unchanged and positive data points such as consumer satisfaction rates with REALTORS® and the rate of REAL-TOR® use by buyers and sellers. From these, we could conclude that the industry is both prepared for the future, and straight in its path. This is the venerable tower of strength and longevity that we all want the real estate industry to be. However, in assessing the strength of a tower, we must consider the layers of strata that create its foundation. It is the strata that we seek to understand both now and into the near future in planning for a resilient real estate industry.

We see evidence, some of which is outlined in this document, that the strata are weakening. Changing generations are creating new demands and challenges for both brokerages and member associations/boards, as they demand new value to justify membership. New entrants such as online brokerages, listing sites, and technology applications are using behavioural data to create predictive insights for both consumers and REALTORS®. Dissatisfaction with escalating commissions is rising.

Consumers identify honesty and reputation as the two most important factors in choosing a REALTOR®. Yet neither of these actually deliver value to the consumer. The question for organized real estate is – if we are able to become a trusted profession, what comes next? Where and how do we deliver value to the consumer in a such a way that there is no substi-tute? If together we can answer that question, we will have a far stronger tower.

INTRODUCTION

Image credit: “Bingham Canyon Mine” © 2013 Miaomiao Wang, used under a Creative Commons Attribution-NonCommercial-NoDerivs 2.0 Generic

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CONSUMERSUNDERSTANDING CONSUMER BEHAVIOUR & EXPECTATIONS

A primary focus for the Journey of Discovery is understanding the consumer real estate experience, including the expectations of REAL-TORS® and the opportunities to create new value. While we were able to find some valuable data from the consumer perspective, the majority of data collected from organized real estate seems to come from REALTORS®. We foresee a significant opportunity to build on the existing knowledge with additional research that showcases the consumer real estate journey in the actual voice of the consumer. We also think it is important to recognize where there is conflicting knowl-edge, as our research efforts can help reconcile these distinctions.

Agreed KnowledgeThe consumer data reveals greater agreement than dissent among the studies. REALTORS® remain a dominant force in BC, Canadian and U.S. real estate, with the vast majority of consumers still using a REALTOR® to buy and sell. REALTOR® satisfaction levels are gen-erally consistent across sources, spanning the range of ‘somewhat’ to ‘very’ satisfied. Consumers are clear about where REALTORS® can provide value in the process.

Conflicting KnowledgeConflicting knowledge emerged in a number of areas. This could be due to a number of factors including geographic distinctions, change over time, and/or research methodology. Even so, we see it as impor-tant to highlight these areas of conflicting knowledge as we consider where our research can add the value.

1. Differing percentages of sellers using the same REALTOR® again when they buy their next property. REBGV/FVREB finds much high-er rates of using the same agent than was found by NAR. This could have implications for the ability for REALTORS® to continue generat-ing consistent leads due to being so referral dependent. It could also highlight emerging distinctions between selling and buying expecta-tions placed on REALTORS®.

2. Questions around the services consumers most value from their REALTOR®. NAR reports consumer prioritization of receiving assis-tance in finding the right property. Other reports point to this becom-

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ing a much more consumer driven process, and consumers valuing offers and negotiations expertise first and foremost.

3. The importance of local, neighbourhood knowledge. Some studies find this to be a significant value factor for consumers, while others find it relatively unimportant.

4. Variability in REALTORS® discussing the transaction process in detail with clients, specifically related to their relationship with the customer on such things as commissions, protections, and dual agen-cy. This practice issue will be important to answer in our research, as it relates to perceptions of trust and professionalism.

Gaps in KnowledgeThe most significant gaps in knowledge seem to be around under-standing the nuances of the consumer journey from their perspective. The ability to identify opportunities and challenges at various stages of the buying and selling process will help us understand where chang-es in practice might create additional value. It will also highlight where the development of new REALTOR® products and services could serve the consumer in valuable ways.

REALTOR® FrequencyThe vast majority of consumers use a REALTOR® to buy and sell their home. In this sense, the historic rate of REALTOR® use seems consistent if not trending up.

While referrals are still the dominant form of finding a REALTOR®, mainly through a friend or family member, word-of-mouth referrals are declining. While the gap is still large, online search/recommendations in finding a REALTOR® are climbing, and using the same REALTOR® for the follow-up transaction remains a regular practice.

There is conflicting data on the practice of consumers who bought and sold a home using the same REALTOR®. Recent data from NAR shows a minority of sellers using the same agent to buy their home, with the number climbing above 50% the younger the seller. In con-trast REBGV data from 2008 reports that the majority of buyers use the same REALTOR® to sell their home, with some distinctions by geography. However, the most dominant reason for choosing a differ-ent REALTOR® for buying than selling was knowledge of an area. (1)

• Over nine in ten use a REALTOR® per REBGV (1), 88% according to NAR (2)

• >50% found their REALTOR® through a referral in 2008 (1), ~ 42% in 2013 (2)

• Consumers found a REALTOR® online 5-6% of the time in 2008 (1), 12% in 2013

• 8% found their REALTOR® at an open house (1)

• 12% used a REALTOR® they had used previously to buy or sell a home (2)

• 47% of sellers use the same agent that they used to buy their home (3)

• 83% use the same REALTOR® for buying and selling in Greater Vancouver, and 68% in the Fraser Valley (1)

• Professionalism/ethics among REAL-TORS® was the second most frequently response (13%) to the unaided question, ‘What is the one issue that you as a real estate professional or the real estate industry is facing that you would like OREA to ad-dress.’ (5)

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Meeting ‘Soft’ ExpectationsConsumers strongly weight the importance of REALTOR® soft skills, defined by Weaver Marketing Research as personality, attitude, eth-ics, interpersonal and communication skills. (9) Top-of-mind concerns in choosing a REALTOR® are described in various research reports as honesty, integrity, and reputation. (1)(3) A March 2006 Canada-wide quantitative survey by Leger Marketing found consumers rank REALTORS® 18th out of 22 professions in terms of trust. Unfortu-nately, there is strong evidence in more recent studies that the in-dustry continues to be challenged by concerns of REALTOR® hon-esty and integrity, even by REALTORS® themselves. (7) OREA and CREA have initiatives to increase REALTOR® standards of profes-sionalism based on the strong responses from OREA members who ranked ‘public perceptions of REALTOR® value’ the most immediate issues (82%), followed closely by ‘general negative perceptions of REALTORS’® between 73-80%. (5) Knowledge of the local area and market conditions are certainly secondary considerations.

Delivering Real ValueThe research reports are fairly consistent in the services that consum-ers most care about from their REALTOR®. As it turns out in some cases, these services are not the ones REALTORS® expect consum-ers to care about. While buyers think the most important tasks for REALTORS® to perform well relate to the offer, negation, purchasing process, and technical features/faults with a property, REALTORS® identified their main task as searching for the appropriate property. (3)(8) This is not to say that finding the right property to purchase is un-important to consumers, but findings point to this being increasingly the domain of the consumer, rather than the REALTOR®.

For sellers, the value of the REALTOR® can be quite different. While negotiations are still important, sellers are looking for REALTORS® to understand their financial situation and price, and market their prop-erty appropriately.

CompetenciesIn developing the three-year education plan for BCREA, the Educa-tion team led an extensive study to prioritize the support and develop-ment of REALTOR® competency (18). This study resulted in the cre-ation of a three-tier competency system, with a clear understanding of Tier1 competencies, with Tier2 and Tier3 being analyzed as we learn more. BCREA developed a ‘competency wheel’ graphic early in the

• Top two answers by consumers about most important task for REALTORS® are: 83% ‘explain and advise you on conditions and appropriate subjects to include in an of-fer’ and 80% ‘negotiate a reasonable pur-chase price and conditions on your behalf ’ (8)

• Most valuable service provided by REAL-TORS® was ‘placing/negotiating offers’ (28%), followed by ‘helped to determine neighbourhoods and communities best suited to needs’ (23%) (1)

• Buyers say they most want from agents (3) 1) Help finding the right property to purchase (50%) 2) Help in price negotiations (12%) 3) Help negotiating the terms of sale (12%)

• Only 2% of consumers say they want an agent to tell them about neighbourhood (3)

• Top benefits consumers receive (3) 1) Help understanding the process (60%) 2) Pointing out features/faults with a prop-erty (53%)

• The most important REALTOR® tasks, according to sellers, are: understand their financial objectives and timelines (74%), use MLS to market property (74%), negotiate sale (72%), advise on competitive listing price (72%)(8)

• Sellers are twice as likely to trust their REALTORS’® knowledge as they are to trust their own knowledge when setting their expectations for the value of their home (8)

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research process to summarize the competencies. While the diagram only reflects the initial research findings, it is still useful in considering the categories of REALTOR® practice knowledge, skill and attribute areas.

Of significance in the research findings is the overwhelming desire by REALTORS® (approximately 85%) to ‘continually building on my current stage of knowledge and skills.’ Two areas identified as sig-nificant training needs were technology training (~65%) and social media training (~48%).

Image credit: BCREA 3-Year Education Plan Strategic Projects

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Satisfaction MeasuresThe vast majority (90%+) of those who used a REALTOR® were at least ‘somewhat’ satisfied overall with their representative, with those who used the same representative for both buying and selling ex-pressing the highest level of satisfaction. (1) Consumers responded that REALTORS® were delivering on many of the valued tasks de-scribed above, particularly the soft skills.

This is not to say that all the satisfaction measures of the REALTOR® are as rosy. There is a sizable minority of consumers apathetic about using a REALTOR®, with generally similar results between those that have and have not used a REALTOR®. When describing dissatisfac-tion measures, they also tend to correlate with the services described as most important. A December 2005 national poll by Ipsos-Reid found that 36% of B.C. respondents disagreed with the statement “My agent offered the best advice possible to help me, not to simply benefit themselves”. 35% of B.C. respondents agreed with the prop-osition that “The Provincial government and the industry regulating bodies should be cracking down on real estate agents because they are shoddy and take advantage of people.” (7)

Satisfaction directly correlates with expectations. It is worth consider-ing the role of changing expectations, and how that is affecting sat-isfaction measures with REALTORS®. The research revealed three different instances where increased expectations put additional pres-sure on the REALTOR®:1) If the REALTOR® was referred to the consumer by a friend or

family member (8)2) As the consumer searches more online (8)3) Challenging market conditions (8)The referral point (#1) is particularly important, as it remains the domi-nant way consumers find REALTORS®. And, as we will share later in the report, consumer searches have seen exponential growth, thus

• 61% very satisfied overall with the home buy-ing process, 31% somewhat satisfied (3)

• REALTORS® were seen as delivering on ‘provides market knowledge’, ‘ensures things go smoothly’, ‘helps avoid hassle and com-plications’, ‘saves time’ and ‘provides greater buying and selling options’ (6)

• Top reasons cited for satisfaction 1) Listened to me/ not pushy/ very support-ive/ helpful 2) Didn’t waste my time/ showed me suitable properties 3) Good negotiating skills/ got asking/ more than asking price 4) Very professional 5) Hard working 6) Smooth process/ no problems/ did a good job Consumers also listed ‘professional’, ‘hard working’, ‘listened to me’, and ‘supportive’

• One-third of consumers were neutral or perceived no or little value from their REAL-TOR® (6)

• 38% said they ‘might’ use the services of a REALTOR® in the future. For those who had previously used a REALTOR®, the ‘might’ response was 34% (6)

• ‘ Cost/commission’ and ‘post-transaction service’ are areas of dissatisfaction among consumers. Other weaknesses are ‘providing information’, ‘client commitment’. (6)

• Buyers expectations are two times more likely to increase as decrease as they search for prop-erty on the Internet. Sellers are more than seven times more likely (8)

Image credits: ‘Happy’ and ‘Neutral’ designed by Tobias F. Wolf, ‘Sad’ designed by Dys Sahagun from the Noun Project, used under a Creative Commons Attribution-3.0

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leading to even greater expectations of REALTORS® in the future.

Consumer Autonomy“It is believed that access to information has engendered a false sense of power in the end client – particularly those with even a little bit of experience with the process. With knowledge at their fingertips they are more apt to go it alone, and REALTORS® believe that this trend will become more pronounced with time. The biggest fear: How can we convince clients who can list, market, search, show, negotiate and close properties that we are worth our commission?” (13)

While online listing sites have not displaced the REALTOR® in terms of percentage use, they have clearly created a different level of con-sumer autonomy. Across demographics up to age 57 the Internet + MLS have become the dominant source for determining the home consumers buy. (1)(3) Almost 75% of consumers have already picked their neighbourhood, identified the properties they want to see, and sometimes the home they want to buy. And consumers go the next step by driving by a home they are interested in, with 80% of those under 47 years old doing so. Consumers will typically spend two weeks searching online before contacting a REALTOR®, building a historically unprecedented amount of knowledge in the process. (2) Industry consultants found consumers wanting even more online op-tions – 92% want a “home buying system” that can provide them with real time transaction tracking.

• Internet + MLS combined are responsible for 64% of home selection (1)

• 42% of buyers used the Internet to find the home they eventually bought, with that num-ber climbing the younger the buyer. Only 34% of consumers found the home they bought via their agent. (3)

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CommunicationDespite the increasing autonomy of consumers, their expectation of frequent and timely communications is not diminishing. In a recent study, ‘calls personally to inform of activities’ was voted as the most important role of a REALTOR®. (2) The response time by REAL-TORS® seems to vary by whether it is a call vs. email/text. In general, REALTORS® remain more responsive to phone calls. REALTORS® are noting clear distinctions in communications expectations for con-sumers under 30, who demand faster response time. (8) We were unable to find research determining the implications of REALTORS® not meeting consumer communications expectations in terms of re-sponse time or medium.

• Nearly all REALTORS® reported that they respond to client telephone calls within the hour. Typically email response is 4-6 hours. (8)

• Most REALTORS® take calls up to 10 p.m. whereas several said they take calls 24 hours per day seven days a week. (8)

trend trend

Increased Consumer Knowledge

• Consumers will have more market and product knowledge and may question whether they should trust a REALTOR®.

• More informed consumers want more knowledgeable, trustworthy, transparent REALTORS®.

Greater need for communication and transparency

Top Two Consumer Trends and Issues

1 2

Communication is key.

Image credit: BCREA PDP Course: Trends and Issues in Real Estate

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DisclosureIn order to further differentiate the professionalism and protections of the REALTOR® from licensees, consumers need to be informed. Based on the data we reviewed, consumers seem to typically not be aware of various transactional aspects one would think they would learn from their REALTOR®, specifically related to consumer protec-tion, representative disclosure, and commissions and fees for working with a REALTOR®.

Some of the data from both Canada and the U.S. clearly points to REALTOR® practice being at least a partial culprit for this lack of consumer knowledge and understanding.

• Approximately 45% of consumers are not made aware of their protections through a REALTOR® (1)

• 40% have a written arrangement with their REALTOR® (3)

• 15% of sellers did not know commissions and fees could be negotiated with agents, going up to 23% for those 32 and younger.

• Only 29% provide Agent Representation Disclosure at first meeting (3)

• Agents were less likely to introduce commis-sion conversations with younger sellers (3)

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TECHNOLOGYEFFECTS ON REALTOR® PRACTICE & CONSUMERS

Technology in REALTOR® practice and broker value is a contentious topic with opinions ranging widely. Generally, REALTORS® recognize the importance and immediacy of being tech savvy. (5) Adoption rates are pervasive for some technologies such as smartphones. However, generally REALTORS® are laggards; 3x less likely to be early adopt-ers of technology. (17) It is clear from the research that consumers expect REALTORS® to have increasing amounts of knowledge, and the use of technology is an important conduit. One study correlates REALTOR® success directly with levels of technology adoption. (17)

Agreed/Conflicting/Gaps in KnowledgeIn the case of technology in practice, there were few overlapping studies with the exception of utilization levels of REALTORS® on so-cial media, devices such as smartphones and tablets, and operating systems. Also, REALTOR® surveys around satisfaction and needs from the MLS are plentiful and fairly consistent. However, a number of the research studies cited were asking questions that we did not find repeated, and as such, could not identify conflicting results.

It is worth noting that we have not spent a significant amount of time looking at consumer and REALTOR® research discussing the MLS. While the MLS and REALTOR.ca/.com are clearly of utmost signifi-cance to REALTOR® practice and consumer behaviour, changes to the MLS are largely outside of BCREA’s strategic purview.

In PracticeUnsurprisingly, mobile technologies have been embraced by 94% of REALTORS® in practice. Smartphones and tablets are being used for calls, texting, photo sharing, browsing and applications. The chal-lenge many REALTORS® likely face is how demanding this is in prac-tice, with REALTORS® spending a median of 44% of their time cor-responding and doing work for clients on mobile devices. (11)

And, as we established in the Consumer section, clients are expect-ing REALTORS® to know more and know it now, creating a constant pressure to keep up. Some REALTORS® noted the benefits the In-ternet can have as a communication tool servicing their clients and in-

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fluencing expectations, as a marketing tool (listings) and as third-party reinforcement of their recommendations. (8)

In real estate, who you deal with is very important. Social Networks, like Facebook, allow me to see connections across my social graphs: I’m looking at listings and I see, “Oh, here’s a REALTOR®. And, that REALTOR® actually has worked with one of my friends in the past or has worked with a friend of a friend.” – that’s suddenly terribly interesting to me. It’s going to change the way that people find and choose their REALTOR®. Now, in the offline world, better than 50 percent of folks find their REALTOR® through referral or a friend. But that’s all going to move online, completely disrupting a lot of the traditional marketing.” (14)

Of course, not all REALTORS® share that optimism. Some lament how technology is diminishing the value of REALTOR® client relation-ships as “face-to-face interactions are being replaced by texts and faxes and Facebook posts.” (13) And some worry that advances in se-mantic web technology may replace part of the relationship between REALTOR® and consumer, as the Web increasingly connects dispa-rate data points to form informed conclusions.

“Most of what a real estate agent does today is answer questions. But since computing power continues to increase exponentially, it may not be long before intelligent software will be able to answer those questions using sophisticated algorithms and search tools. (15)

Social Media

Image credit: OREA College Image and Awareness Research

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The vast majority of REALTORS® use social media in real estate prac-tice. However, there is a significant distinction between the use of so-cial media by brokers and REALTORS®, with a recent report noting brokers’ declining comfort level with social media. (11) This suggests a broadening and perhaps concerning gap as brokers become increas-ingly disconnected from REALTOR® practices. This gap is especially concerning as agents tend to want their broker to expand the amount of technology offered to them. One visionary broker sees the signifi-cant role in evaluating technology and making choices for the agents: “Agents today don’t know which tools to buy or how to implement them. As a result, they spend too much time learning about technology rather than going out and serving their customers.” (15)

MLS & REALTOR.ca/.comI’m seeing some MLSs cooperate on data standards, and sharing technology more. I’m actually very hopeful we could move from 1,000 systems across North America to maybe a dozen back end computer systems sharing the information. Each regional[sic] or local area could deliver services directly, and brokers and agents would choose the front end they wanted to use, and the back end MLS they wanted to join based on the services and products delivered by that MLS. You will have eliminated all of the duplicative costs we have for doing the same things over and over and over again in different geographic areas.” - Ann Bailey, Real Estate Consultant (14)

Across both Canada and the U.S., there seems to be a general recog-nition that the MLS system has structural challenges. Based on most forecasts, the MLS will likely undergo significant changes over the coming years. Take this statement from Pierre Bergevin, President & CEO, Cushman & Wakefield Canada:We and our competitors spend an awful lot of money gathering information. We’d be way better off if there was a Thompson Reuters that gathered information for us and we could use our brainpower to do analytics on it. That could be a game changer.” (14)

The MLS and specifically REALTOR.ca is top of mind for many RE-ALTORS® and brokers not only because it is a major part of REAL-TOR® process and seller value, but also because of its increased significance in the consumer journey. MLS was REALTORS’® most frequent response (20%) to the unaided question about “What is the one issue that you as a real estate professional or the real estate in-dustry is facing that you would like OREA to address.” (5)

However, while REALTORS® acknowledge and are concerned about MLS structural challenges, it does not seem to carry over when asked about satisfaction levels of the system. REALTORS® strongly believe

• 89% of all REALTORS® use social media, and 80% use it for their real estate business. 77% use Facebook, 73% Linke-dIn, 28% YouTube, 26% Google+, 26% Twitter (11)

• Brokers appear to be less comfortable with so-cial media than in 2011, and are more likely than agents and associate brokers to say they do not use it for their businesses.

• More Brokers of Record ‘never’ use social media sites (39%), while more Broker Man-agers use social media sites ‘several times a day’ (24%) (12)

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in the MLS, to the point that they are more interested in their MLSs expanding the technology services offered than in expanded broker-provided technology. (11)

AdoptionWAV Group led a study specifically addressing the question of wheth-er there was a correlation between being a REALTOR® success and the adoption of technology in practice. They found that agents who close more transactions are also likely to adopt new technologies. Furthermore, agents who close more than 20 transactions annually were using technology at nearly twice the rate of REALTORS® with only a few closes, and eight times the rate of those with no closes. (16)

This correlation between REALTOR® success and technology is important as BCREA considers its role in supporting and develop-ing new technologies. WAV provided the following counter intuitive model for measuring new technology adoption success amongst REALTORS®. Please note that ‘Top Producers’ is the term WAV Group uses to describe the highest performing REALTORS®, finding that the top performing 20% complete 80% of the transactions. (16)

• 86% of ‘Top Producers’ say technology is either very or extremely important in their real estate business. (16)

Image Credit: “Top Producers Embrace Technology” © WAV Group

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BUSINESS MODELSSHIFTING DEMANDS

This section summarizes the effects of changing business models on REALTOR® practice, and the way organized real estate might need to adapt in order to support the REALTOR®. The data presents a vivid picture of challenges to the brokerage model, REALTOR® practice, and the value organized real estate associations and boards create for members. While it is too early in the Journey to make recommenda-tions, we suspect some if not all of the challenges identified in this Re-port will be worthy of consideration by BCREA in strategic planning.

Agreed KnowledgeThere is general agreement across research sources that the industry is in a state of flux, which will continue based on a number of factors including pricing pressure, demographics, process unbundling and the increasing role of consumers in parts of the real estate transac-tion. FSBOs in particular receive considerable attention, yet the data is in agreement that it has yet to have a significant financial impact on the industry.

Conflicting KnowledgeResearch sources have dissenting views on the effects of commis-sions on consumer sentiment and behaviour.

Gaps in KnowledgeWe see two significant gaps in the research worth exploring during the Journey. The first is the effects a growing consumer dissatisfac-tion with commissions could have on actual behavior in engaging RE-ALTORS®. The second is understanding the variability in commission models being used by agents and brokers, specifically the unbundling of services.

Simplification“Consumer product studies show that simplification often results in increased sales. For instance, one supermarket was offering 27 brands of jam. When it reduced the variety to only six brands, the rate of purchase actually tripled.” (15)

The NAR Strategic Issues Work Group created a report last year cit-ing various potential trends in the industry. The concept identified by the Group was that consumers are less likely to act when faced with too many choices, and thus that the consumer real estate journey is

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in need of simplification. As one broker said, “We need to look at how we can simplify our services, so that we can, in turn, can simplify a customer’s life.”

Commissions“Essentially, consumers have a slightly schizophrenic view of REALTORS® - on one hand they consider REALTORS® to be busy, hardworking, knowledgeable about their industry, and good communicators. On the other, they perceive real estate sales as an “easy-money” job, where REALTORS® make significant incomes without having to work very hard. (7)”

A number of research reports identify perceptions around REALTOR® commission being a significant concern for the industry. While one-quarter of buyers believe REALTORS’® interests are aligned with their own because of the commission structure, another quarter think

• 44% do not believe the commission systems affects their REALTOR relationship (8)

stay the sametraditional model no longer cost effective

four primary options for the future of brokerages

from non-traditional business models, particularly in smaller communities– disaggregation of the business.

More Competition

go virtualin the clouds

The brokerage structure is changing, which leads to decreased training of licensees.

Feeling that brokerages are valuing educa-tion less, the result is an increasing number of quickly trained REALTORS® with just-in-time knowledge

Residential and commercial brokerages are consolidating, creating mini brokerages within a brokerage that work together.

the futureReal estate brands are destined to become even more important with the real estate office of the future.

Top Two Roles of the Brokerage Trends and Issues

Brokerage models continue to evolve2 trend

Brokerage models are evolving1 trend


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that the commission system creates a conflict between their interests and the interests of their REALTOR®. (8) Commission dissatisfaction was further evidenced in a national poll where 49% of consumers disagreed, 51% agreed with the statement, “It was worth the commis-sion I paid for the assistance provided by my real estate agent to do my real estate deal.” (7) Contrast this with another study where nearly 90% of sellers believed they received at least ‘somewhat’ good value relative to the fees they paid, with half reporting ‘very’ good value. (1)

In historic terms, it seems that the average REALTOR® commission is rising both in real value as home prices increase, and in percentage terms. Real Trends reports the average commission paid to the buying and selling brokers was 5.4 percent of the price of a home in 2011, up from 5 percent in 2008. (21) A recent article in The Globe and Mail, How Canada’s Housing Downturn Threatens to Shake Up Real Estate Commissions, presents change in commissions in context.

Over the course of the past 12 years, a period in which house prices rose at an astonishing clip, the average resale price of a house in Toronto roughly doubled, while commissions remained around 5 per cent (that commission gets split between the buyer’s agent and the seller’s agent). That means the average total commission rose from about $12,160 in the year 2000 to $24,950 last year. Price increases have been steeper in some other parts of the country. If you take 5 per cent as a basic commission, Calgary saw commissions on an average sale rise to $20,620 from about $8,820 during the same period and Vancouver saw them increase to $36,500 from $14,800.

As a benchmark, median commission rates in other markets are 1-2% (UK), 3-6% (Germany), 4% (Israel), and 1.5-2% (Netherlands). (21)

A few academic studies, which have been picked up by the main-stream media such as Bloomberg News, discuss price distortions be-tween the price agents get for selling their own homes relative to the prices for their customers’ homes. (4) Another study conflicts with the national association data that purport REALTOR® sold homes result in a higher selling price. The study found the use of a REALTOR® typically reduces the sellers’ return by 5.9-7.7% after factoring in the commission. (19)

We suspect these factors will result in challenges to the commission model in coming years. One study cites a 13% drop by sellers 32 and under in the use of all agents’ selling services (67% total), while 23% of these consumers used a limited set of services by request. (3)

• The empirical estimates suggest the distortions are non-trivial: agents sell their own homes for 3.7 percent (roughly $7,700) more than they sell their client’s homes, and leave their houses on the market roughly 10 days (10 percent) longer. (4)

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In Walks FSBO“The absence of an MLS premium [sellers earning more] does not mean REALTORS® do not provide value to the seller, but rather that the price for convenience provided by a REALTOR® seems to be the full REALTOR® commission.” (20)

FSBOs are a topic much discussed by organized real estate and the media. ‘Other business models’ (9%) and FSBOs (7%) were near the top of the unaided responses to “What is the one issue that you as a real estate professional or the real estate industry is facing that you would like OREA to address. (5)

However, the research data we reviewed is largely in agreement that while FSBOs may be rising and could be a significant force in the future, it is still a sliver of the overall market. The share of home sell-ers who sold without the assistance of a real estate agent was 9%, of which 40% knew the buyer, and 61% did not need to sell urgently. (2) FSBO is a non-linear trend, varying by buyer/seller circumstance, house type, market, price, etc.

“We also find that patient sellers are more likely to use FSBO, while patient buyers are more likely to purchase on the MLS, where they face less patient sellers.”

Easier-to-sell homes may be more likely to be listed and sold through FSBO. (20)

This is not to say the industry should turn a blind eye to FSBOs. Sellers who joined a for-sale-by-owner (FSBO) Website got at least as much for their homes as sellers who conducted their real estate business through the use of an agent and the Multiple Listing Service (MLS), although houses sold through the MLS were more likely to sell faster. (20) And the rate of FSBOs may increase as certain MLSs al-low for the provisioning of basic listing services, such as a nominal fee to list, a yard sign, and other services that historically would have only been possible when retaining a REALTOR®. (20)

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Demographic Demands

The preceding chart by OREA highlights the escalating proportion of members over 55 years of age, while those between 40-54 and un-der 40 years of age are historically declining. This chart highlights the new challenges organized real estate and the industry in general will be facing due to changing demographics and associated changes in expectations over the coming years. With 16% of REALTORS® likely or very likely to retire in the next five years (17), and as Baby Boomers leave the workforce more generally, the needs and expectations of Generation Y (ages 18-31) will become more visible. (23) Yet, despite executives saying ‘engagement’ was a top priority, merely 23% of Ca-nadian associations were found to have a next generational strategy. (23)

“Millennials are simply not as interested in joining traditional established member-based organizations. They don’t care about being identified as a member. The value proposition is not clear to them. And they don’t align quid pro quo with the traditional benefits of membership.” (22)

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Image credit: OREA 2012 Member Profile Study

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Research on Millennials cites the self-organizing principles of the gen-eration, and how they use social media to cluster around issues and groups they care about. (22) Relative to previous generations, Millen-nials are thought to be more interested in the network side of member groups, as they trust peers more than others. (23) However, the impli-cations are not just significant for associations and member boards. Some even think this may have profound implications for brokerages, as Millennials are more attracted to a climate of collaborative work rather than individual accomplishment and competition, threatening the historic individualistic business model of brokers. (15)

NAR is already witnessing changes in home ownership as demo-graphics shift. On the one side, homeownership is lengthening. In 2006, homeowners would stay in a property for eight years on aver-age, while by 2011, the expectation had jumped to fifteen years. Also, as the sharing economy takes hold, researchers are beginning to ask whether Millennials will be more attracted to rentals than homeowner-ship. (15) Either of these factors would have a significant effect on the transaction market looking into the near future.

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real estate today

Seen as:• A profession driven by money rather

than by professional standards

• Less self-centric and more consumer driven.

• Many REALTORS® no longer see membership as essential.

• Many Organized Real Estate leaders are now disconnected from members.

• Organized Real Estate will need to adapt to survive with lower membership.

"how the leadership style of the next generation will mix

with the current style?"

"consolidation is needed, as are evolving business models and a different kind of leadership"

"many REALTORS® have different designations today than they

used to. it will be necessary to find a way to merge that valuable

experience into the profession."

"change is required. however, the appetite for different business models is not shared by all."

trends and issues: Organized Real Estate

what people are saying

real estate today
















real estate today
















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OUR JOURNEYRESEARCH NEEDS

We began this Report with a metaphor – the real estate industry is a tower with layers of strata that determine the strength of the tower. This Report revealed that while parts of the strata remain strong, oth-ers parts are weakening, some even some potentially cracking. Un-derstanding how REALTOR® practice must adjust in order to remain relevant and valuable to consumers is imperative in order to strength-en the tower. This strategic question guides the entire Journey of Discovery and will feed directly into the five-year strategic planning process for BCREA.

Based on the content of this Report, we now have a vivid picture of existing knowledge deficits that stand as obstacles in formulating a strategic response. By analyzing twenty-three data sources on the topics of Consumers, Technology and Business Models, we have a good understanding of where the research is strong, and what that research tells us about current practice.• A significant pool of research has been generated on REALTOR®

perceptions and priorities, most of which is in agreement.• We have a general picture of consumer satisfaction levels and the

perceived drivers of REALTOR® value• We know how consumers use REALTORS® in the current transac-

tion model• We have a general understanding of the importance of technology

for both REALTORS® and consumers, while less so for brokers• We have evidence of shifting business models with further evidence

based on demographic factors and changing expectations that these models will continue to evolve

At the same time, we have a solid understanding of the conflicting knowledge and gaps in knowledge. The primary research that will be conducted over the next four-months is shaped entirely around fill-ing in these gaps in knowledge and reconciling conflicted knowledge from this Report. • There is scant research from the consumer perspective that pro-

vides insights into the individual stages of their transaction journey and where REALTOR® practice is working well, and where it is not.

• We do not have a clear picture of how the transaction models might change over the next five years, and how REALTOR® practice will need to adapt in order to provide consistent or enhanced value.

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• We do not yet understand how dissatisfaction with commission models might affect consumer behaviour and REALTOR® practice

• We are unclear on factors driving FSBO behaviour, and therefore what would either result in an escalation or decline of its practice.

• We have a murky picture of a more technology-enabled REALTOR® practice, specifically around the use of data, and what this will mean for the consumer relationship.

• We do not know how lead generation practices will evolve if word-of-mouth referrals continue their rate of decline.

• We have no industry models for understanding how to adapt to the changing demographic demands.

The next stage of the Journey of Discovery will address these insight areas by collecting data from consumers, REALTORS®, brokers and experts. Our findings will be broadly disseminated so that others in organized real estate may benefit from our research in the same way we benefited from theirs.

To follow the next stages of the Journey, please visit the Journey of Discovery website, and participate in our Facebook campaign, Extraordinary Moments in the Consumer Real Estate Experience.

journey of discovery secondary research synthesis...

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