Gone are the days of single-product real estate companies. The company that offers only sales support and consulting for consumers is a company that will have a difficult time competing in the future real estate industry, according to a study from Clareity Consulting in Scottsdale, Ariz.
"With margins becoming tighter in the real estate brokerage community, the revenue and consequent profitability derived from the brokerage fee alone will be insufficient to remain in business," states Clareity's report titled "Broker's Survival Guide: Building Ancillary Relationships."
Clareity provides a wide variety of services to multiple listing services, real estate associations, brokers, franchises, and software and service companies that serve the residential real estate market. The company has been in business since 1996, when MLS-executive Gregg Larson co-founded the company after working with some of the country's largest MLS providers.
The Broker's Survival Guide, one of several reports the group has written in the last 12 months, says volumes about the evolution of the American real estate brokerage firm. "Brokers' overarching strategy must include driving revenue from the attendant ancillary business, inclusive of: mortgage, title, home protection, etc.," the report says. "Creating partnerships, joint ventures, and/or marketing agreements with select service providers, supported by the resources of the brokerage company, will prove to be evermore imperative to retain profitability margins, business growth, and even survival."
Fortunately for real estate companies, the harried pace of life makes the above services shift desirable to consumers. The National Association of Realtors released a study years ago that stated a majority of consumers would actually pay more for services provided by one source because of the convenience it provides.
In support of its supposition, Clareity quoted a recent poll, conducted by Harris Interactive, that asked the question: "If a company offered to set up a simplified, one stop shopping process for you in which they provided all required services, how strongly would you consider this process?"
The majority surveyed said they would strongly or somewhat consider a one-stop shopping company:
* 47 percent would consider strongly
* 36 percent would consider somewhat
Only a mere 3 percent said they would not consider at all.
Broker Survival quotes Steve Murray, co-editor of industry newsletter RealTrends as saying, "Without ancillary businesses like mortgage and title, many big companies would shut their doors." According to Mr. Murray's group, "The majority of the time, when an agent makes a recommendation on which vendor to use, the consumer will follow that recommendation."
The one-stop shopping concept isn't limited to real estate, of course, just take a look at the local grocery store. All in one stop, you will find groceries, of course, but also photography, pharmaceutical and now banking services.
Online, the concept is even used in greater regularity -- large retailers join forces to sell services and/or products created by other companies. For instance, Swedish furniture manufacturer Ikea makes affordable furniture -- not kitchen appliances. On their website, you can not only purchase and order installation of their kitchen cabinets, you can also purchase kitchen appliances from another company -- all delivered by yet a third company.
Travel sites regularly tout airline, train, cruise line, auto and hotel accommodations in the same location, sitting in the same chair, clicking on the same mouse. For the busy consumer, seeking a good deal and saving of time, the era of one-stop shopping in real estate is also making it easier for the consumer to get through the transaction.
Not only are you now able to get a house through your local Realtor -- but also access to mortgage, title insurance, home warranties and a plethora of other services that the consumer used to have to shop several companies to acquire. While it's a selected few who offer these services, it appears that in the near future only the ones who do will actually be in business.
Mr. Carr has covered real estate since 1989. He is the author of "Real Estate Investing Made Simple." Got a personal real estate issue? Questions can be posted at Anthony's blog.