The COVID-19 pandemic has forced many brokers to face financial and operational challenges.
When cases of the respiratory disease first began to appear in communities across the country, and non-essential businesses closed, the real estate industry took a significant hit. National home sales fell 56.8% on a month-over-month basis in April 2020.
As home buyers and sellers paused much of their activity, salespeople and brokers were left scrambling.
What will happen to the markets? How do we stay safe? How do we stay connected to clients and our agents? What are the financial implications?
Elton Ash, former broker owner and current Regional Executive Vice President of RE/MAX Western Canada, discussed this topic while speaking on a panel during the inaugural CREA Broker Summit last fall. He said many of the issues facing brokers today are the same as before the pandemic, albeit heightened due to the uncertainty.
“When we look at the challenges and the things that keep broker owners awake at night it really hasn’t changed after all these years and that’s: profitability, profitability, profitability,” he said.
“As broker owners you think about that and it all boils down to business planning and working with the business environment that’s going on at the time within the real estate industry—everything a business person goes through no matter what the industry is. Then that ultimately gets boiled down to recruiting and retention and, ultimately, meeting the home consumers’ needs.”
Pandemic or not, recruiting and retention should always be top of mind, agreed fellow panellist Phil Soper, President, Royal LePage and Bridgemarq Real Estate Services.
“I’d say the No. 1 issue everybody wakes up in the morning thinking about, and if they’re not, they know they should be, is attracting people who will add more value to their firms than they consume,” said Soper. “Secondly, retaining those people. You bring in good people, but if they’re going out the back door as fast as they’re coming in the front, you’re not getting ahead.”
Brokers must perform a delicate balancing act to remain profitable and at the same time, appealing to agents. This can mean dealing with tricky issues like commission compression, says Don Kottick, President and CEO of Sotheby’s International Realty Canada and a Director-as-Large with CREA.
“One of the things in terms of broker profitability is commission compression. It’s something we’ve been watching evolve over the last few years with agents taking a greater share of the pie and then having an expectation of greater services,” he said.
How do broker owners adapt?
Virtual brokerage models have been an emerging trend in recent years, but now as real estate professionals face stay at home orders and other restrictions to slow the spread of COVID-19, those in traditional models are playing catch up. But do brokers abandon tradition for virtual altogether?
“Once the economic climates shift, it’s going to be very interesting to see if some of these models are going to be sustainable. It’ll be interesting to see if some of these models based on the virtual concept are really going to be able to keep and attract agents. The jury’s still out in terms of how these companies are going to fair,” says Kottick.
While technology has always been a challenge in the real estate industry, there has been a renewed focus as REALTORS® adhere to COVID-19 guidelines.
“COVID has taught us, and taught every business and company in this country, that employees and independent contractors can work remotely,” said Ash.
“The traditional brokerage operation has been brick and mortar based, but as we look at the digital tools there and the success that COVID has caused within the industry, there was a pivot that all REALTORS® and brokerages have really accomplished,” said Ash, noting real estate is usually a slow adapter to technology trends.
Therefore brokerage operations will need to find a balance between tradition and technology.
Where will the industry be in the next two or three years?
The focus on safety and wellness will be a lasting legacy of the COVID-19 pandemic, Soper says.
“I believe companies and practitioners will differentiate themselves by the degree of safety and security they provide their salespeople and how they train or create a culture to provide that for their clients,” he said.
Soper also believes diversity will be top of mind.
“We’re getting much better as an industry in creating diversity in our salesforce and we know that salespeople have to reflect clients, broadly speaking, to be successful,” says Soper. “We’re much, much further behind in creating leadership, management that reflects our salesforce and therefore reflects the growing diversity of our consumer clients.”
What’s next for brokerages in a world shaped by COVID-19?
As a business that thrives on social interaction, REALTORS® build intimate relationships with their clients as they learn more about their needs, family dynamic and goals. Typically, this is done face-to-face but REALTORS® have had to get creative in the last year to ensure they’re still able to build these relationships virtually.
There’s also a need to maintain relationships between agents and broker owners.
“We’ve got some real challenges these days, in terms of maintaining that connection, that human contact with our agents as they become more independent and as they work more from home. I listen to broker owners and even heads of associations, who worry because they are not getting their people together, that the ties that bind are stretching and people will feel more comfortable in the future operating their own little tiny one person brokerage, for example and not be a part of their firm,” said Soper.
In the meantime, brokers must do their best to run virtual meetings and events, but he says you shouldn’t abandon face-to-face altogether if it is possible to do so safely.
One positive outcome from moving meetings to a virtual environment, is “the entire global network is actually closer than it’s ever been,” says Kottick, adding there’s no special formula or secret ingredient that will help brokers successfully endure the COVID-19 pandemic.
“Focus on your culture and make sure you’ve got a great management team in place and a very streamlined, well-rounded organization in place that is there to support growth and there to handle things in the event they slow down.”