When Your Competition Has Lower Overhead Than You Do

Are you making much money even if you close a dozen transactions this year? Or, if you’re a broker, your sales associates close a lot of transactions? The answer depends on your overhead. If you’re not paying for office space, you have a much better chance of clearing a profit than if you are.

VRE stillThe issue of office space won’t matter much if you’re hanging your license with another broker and letting that brokerage manage this cost while you split your commissions with the company. But if you’re the owner of the brokerage, how much more money can you keep if you’re not spending on office space?

The question will take on increasing urgency in the years ahead because more of your competition have no office costs to manage. According to NAR research, between five and 10 percent of your competition today can be defined as virtual brokerages, meaning the agents work out of their home or remotely so brokers don’t have to absorb office costs. That percentage is expected to jump to 50 percent in coming years. That’s when your cost structure becomes particularly important, because you’ll be competing with brokers whose costs are structurally lower than yours by significant amounts.

The issue is touched on in the latest Voice for Real Estate news video from NAR. In the video, the person who heads NAR’s survey operation talks about what the association found when it asked brokers about their business models.

The video also looks at NAR’s Call for Action on flood insurance. For many real estate professionals, flood insurance is someone else’s problem because they don’t have to worry about floods. But far more areas are in designated flood zones than you might expect. The number will change as new flood maps are drawn, but right now about 22,000 communities throughout the country—in every state, in fact—are in flood zones. That means lenders can’t close loans unless the buyer has flood insurance. And that’s where the federal flood insurance program comes in. The number will vary based on area, but in many markets, there are essentially no private insurers, and those that are in the market are expensive. As a result, federal insurance is the main source of coverage. If that goes away, thousands of transactions each day won’t be able to close.

How close are we to losing that insurance? About five weeks. The National Flood Insurance Program has to be reauthorized by the last day of September.

The good news is, the House has a widely supported bill that’s been reported out of the House Financial Services Committee. It awaits consideration on the House floor. NAR supports the bill and is encouraging its members to take a few minutes to send a letter to their member of Congress. The letter’s already written. It’s just a matter of going to RealtorActionCenter.com and clicking a few buttons.

The video also looks at the potential impact big technology companies could have in real estate in the years ahead. When we think of tech companies in real estate, we might think of realtor.com or other listing portals like that, but now really big companies are ready to make money in real estate. Amazon and Facebook are two of them. The way they want to make money differs from the way listing portals do, but their presence will be felt. The question is, does organized real estate cooperate with them or try to compete with them?

No answer will be straight forward, but it’s the kind of thing NAR’s leadership is grappling with. NAR President-elect Elizabeth Mendenhall and NAR CEO Bob Goldberg talk about the challenges and opportunity these new players in real estate pose to the industry.

The video also looks at a scam that’s hitting real estate, although it might be subsiding by now. Under this scam, the perpetrator poses as NAR and sends a text saying you owe a fine for an ethics violation or you just won a prize and you need to pay some taxes on it.

If you read the texts carefully you can’t help but see they’re frauds. They’re riddled with errors and say things that no professional organization would say. But sometimes you’re in  hurry and you just skim the text or you go to delete it and you accidentally hit reply, potentially giving them information you didn’t mean to.

This scam will likely disappear soon, if it hasn’t already, but you can be sure more scams are in your future. They’ve simply become a fixture of digital communications. You just need to be  aware of them, and while these latest text scams are riddled with errors, the next ones might not be. They might look quite real. All you can do is get in the habit of taking a second look at communications you didn’t expect to receive and do some checking before you act on them. That’s the case whether the communication comes as a text or an email.

Watch and share the video.

 

 

 

 

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