Spoiler alert: The Greatest Threat to The Real Estate Industry Is Not Uber.
The biggest threat to the real estate industry is that everyone says that they do the same things. Salespeople all say: highest price, quickest sale, best conditions, great experience. Property Managers say: best practice, best communication, best tenants, highest rent, best terms. We all buy the same products from the same suppliers, like realestate.com.au, domain.com.au, our signboard companies and News Ltd.
If perception is reality – it is easy to see why most people think “real estate agents are all the same”.
Indulge me a narrative…
I’ve just moved houses and when choosing an electricity provider, essentially, all of the companies were the same – there was one local distributor (no options for wind, solar etc) and all of the different companies were essentially just retailing that same energy supply and promising that when I plugged in the kettle, there would be electricity to make tea.
I chose my electricity provider based on price, because they all looked the same and told me they did the same thing. It isn’t available, but what if there was electricity that came through the lines quicker and my iPhone took half the time to charge. I would pay more for that – but in my recent move, there wasn’t any difference in the value of the electricity coming through my new home – so I chose on price.
I’d be tempted to look at these new tesla battery things that decrease the cost of my electricity but I’m a bit skeptical of any ‘disruption’ to my kettle and iPhone charging requirements. All electricity is the same – that is why we call it a commodity, because there is no way to charge a premium for ‘different’ or ‘better’ electricity.
Commoditisation occurs in a market (for a good or service) when we lose differentiation across the supply base. Where all electricity comes down the same lines from the same local distributor – electricity is a commodity. If all real estate agents sound the same and do the same thing – real estate becomes a commodity and we can only compete on price.
Commoditisation is the greatest threat to the Real Estate Industry…
Commoditisation is the biggest threat to the real estate industry because, like beige paint, we are losing our ability to be either highly skilled or simply average agents in the marketplace because there is no way to differentiate, or even substantiate, the quality of agents.
Many agents make claims of ‘quality’ based on number of sales per year – but some markets have higher % of turnover transactions compared to others that are tightly held. These are actually claims of quantity, not quality – and unless you are reporting actual market share, they are statistically meaningless.
Many agents make claims of ‘quality’ based on gross commission fees earned per year – but given that the vast majority work on a percentage of the sale price as commission, the ‘quality’ is market-driven based on the prices of the properties in a particular market. It is also a measure of quantity rather than quality – and it isn’t a tasteful or customer-centric approach to potential clients.
The symptoms of commoditisation are already there…
We see good, quality agents lose listing opportunities to amateurs based on price comparisons. We see good agents, professional agents, drop their commissions to 2%, 1.5% to compete with amateur agents. We lose property management opportunities to operators to 5%, even 2% fee models because, art of the pitch aside, commoditised services – that appear to be the same – can only compete on price.
This all begs the question: How do other professional industries differentiate between quality and quantity?
Think about tax time. The shopping centre booths are able to complete and lodge your income tax return, however, it is the Certified Practicing Accountant who I am prepared to pay to plan and execute a tax-minimisation strategy that will ultimately save me money.
Similarly, I am sure that a new medical Registrar would have the basic knowledge and training required to anaesthetise a patient and perform an emergency operation, however, it is the fully qualified and registered surgeon that I would feel comfortable putting me under for any type of cutting.
This mark of quality has been missing from the Real Estate Industry…
Formal education and qualifications provide real estate agents with an opportunity to differentiate themselves to present a credible message of quality to the marketplace and gain a competitive advantage over other agents.
We have the solution to this threat.
If you are a fully licenced real estate agent, you have an accredited claim to the skills and knowledge you possess as a superior, advanced agent who can achieve more for the clients you represent.
At LinkLearn we have created educational pathways which allow even fully licensed students to acquire new levels of formal professional qualifications to use in their personal branding and to demonstrate that message of quality and superior service.
Our 21st century education solutions allow agents to embark on a flexible, self-paced learning journey that is integrated with the activities and achievements of their work.
The educational pathway includes a Diploma in Property Services (Agency Management); a Diploma of Business and beyond that we can now map to undergraduate and postgraduate degrees, for example a Bachelor of Arts (Real Estate Sales), or an MBA, even up to a doctorate level. No matter how talented at the pitch your competitor may be, with formal qualifications you set the bar and compete for listings with a structural advantage that carries a lot of weight.
The broad, beige brush of commoditisation is the biggest issue facing the real estate industry and is what underlies every next-uber-of-real-estate attempt to undermine the professional services that real estate agents offer. The best defense for any agent is an offence that includes a formal qualification which recognises and demonstrate the value you can provide to your potential clients.