Real Estate & Product Management
In the wake of the landmark NAR settlement, the real estate industry is on the cusp of significant change, with profound implications for brokers and their services. In this first of several to-follow articles, I’d like to examine its direct effects on brokers and try to unravel how these shifts can be interpreted and leveraged from a product management discipline viewpoint. The reason is that as I view TikTok, Facebook, CNN, and other news outlets, I can’t help but notice a focus on lawyers, realtors, brokers, fiances, loan officers, etc. Still, no one seems to be talking about the customer and what they have to say. Good Product Management discipline focuses on the customer. This discussion seeks to illuminate a path forward for real estate professionals in a market transformed by regulatory upheaval to applying product management principles. It offers insights into how they can evolve their business models to thrive in a changing environment.
This started a long time ago.
A few years back, my wife and I started selling our home; it was not our first rodeo, but the landscape had drastically shifted since our last ride, so we dialed up our trusted realtor, only to find the real estate world had transformed in the decade between. The shift to a digital-first process was stark; contracts were signed with a click, and our home’s snapshots were whisked away through the ether of Google Docs. A clause in our contract that caught my eye promised a commission refund if I brought the home’s buyer to my selling agent—a concept that was new to me and would come up later.
The timing was precarious. The peak of 2020/2021 teased us into believing in a swift sale, a belief soon dashed by the market’s unseen descent. Oblivious and hopeful, we plunged into building our next home, even as our current one clung to us. Amidst packing boxes and paint swatches, the buzz around iBuyers like Offerpad and Opendoor reached me. Initially just background noise, their promise of simplicity became alluring as more traditional avenues faltered.
Our planned open house—a ghost town—jolted me into action. With our realtor’s uncertain nod, I ventured into the iBuyer realm, finding a streamlined process that seemed too good to be true. They liaised with our realtor, weaving through the sale with such ease that it left me pondering the nuances of the seller’s commission clause I mentioned earlier. This encounter with an iBuyer wasn’t just a transaction but the smoothest passage through real estate sales I’d ever navigated.
That was then, this is now.
This segue brings me to the crux of the NAR settlement’s impact on real estate brokers. The settlement, a monumental shift in the industry’s tectonics, mirrors the evolution my wife and I witnessed firsthand. It highlights a critical juncture for brokers, now navigating a landscape where traditional models meet the digital wave head-on. The rise of digital platforms, the questioning of commission structures by sellers (the reason for the lawsuit) and buyers (soon to come), and the entry of alternative selling avenues challenge the status quo, urging brokers towards adaptability and innovation.
The most significant impacts of the NAR settlement on brokers, then, are multifaceted. It heralds a reevaluation of commission norms, encourages transaction transparency, and perhaps paves the way for more direct buyer-seller interactions. Brokers are nudged to redefine their value proposition, harnessing technology not as a foe but as a formidable ally in delivering nuanced, client-centric services, the hallmark of product managers and our discipline. This transition, while daunting, is ripe with opportunity—for those willing to pivot, the future of real estate is a frontier of uncharted potential.
Lawyers, Financers, and Brokers, Oh my!
As product managers, there are a vast array of inputs to our products and services; market forces, seller and buyer personas, and our customers’ journey are a few we consider to secure our products and services in the marketplace. Hence, as we delve into these impacts, we must understand the implications of each and the prospect each presents.
First, let’s focus on the brokers. These impacts can be grouped broadly into three categories, and their relative impact on brokers is as follows:
1. Market Structure and Compensation
2. Industry Dynamics and Competition
3. Legal and Operational Adjustments
Brokers do quite a bit, and I’m not an expert in real estate or licensed, so I’m not going to define what brokers do in great detail. Instead, I want to consider the impact above in the context of the product management discipline. I will apply Pragmatics’ concept of product development drivers to this analysis. If you’re not familiar with Pragmatic Institute, check them out.
- Urgency
- Willingness to pay
- Pervasiveness
1. Market Structure and Compensation
The upcoming shift from mandatory commission sharing has sparked a need for rapid adaptation among real estate brokers. Applying product management (PM) disciplines can offer invaluable strategies for brokers looking to navigate these changes effectively. Let’s explore how PM principles can guide brokers in revitalizing their services and offerings to clients in response to market forces.
Understanding the Urgency
Removing fixed commission splits is not merely a procedural update; it’s a pivotal change affecting the fabric of the brokerage business model. The settlement necessitates a swift response from brokers, calling for a strategic overhaul that aligns with the reality of the new market. Here, the PM discipline emphasizes the importance of quick, informed decision-making, pushing brokers to assess their current offerings and adapt promptly to maintain competitiveness and financial health.
Typically, urgency is gauged by buyer demand, but in the context of the NAR settlement, the focus shifts toward how brokers perceive and react to market instability.
The settlement introduces uncertainty that may lead sellers to adopt a wait-and-see approach. This hesitation could increase market inventory, potentially leading to a price dip and thus resulting in sellers losing money selling their homes.
Solution:
Urgency for Brokers: The immediate task for brokers is to grasp the implications of the settlement on sellers’ timing and decisions. An uneasy market could prompt sellers to delay listing their homes, affecting inventory and pricing dynamics.
Communicating with Clients: It’s paramount for brokers to communicate confidently with potential clients about their ability to sell homes efficiently despite market fluctuations. This involves a transparent and realistic discussion about market conditions and how the broker’s strategies align with these conditions.
Adapting Sales Models: Brokers must adjust their sales models to remain agile. This could mean revising commission structures, enhancing marketing strategies, or leveraging technology to match buyers with sellers better. Adapting sales models to align with current market conditions demonstrates flexibility and client-centricity, essential in a fluctuating market.
There’s a lot to unpack here; this is why Product Managers and product management is awesome! I thought I could do all three sections in this blog, but it’s getting long; I’ll post the next section on Willingness to Pay soon. I’m sure there will not be a solution by then.
Conclusion:
The real estate industry is navigating through a transformative phase marked by the NAR settlement, pushing brokers toward rapid adaptation and innovation. Embracing product management principles, brokers are urged to refine their strategies, integrating flexible pricing and advanced technology to align with the evolving expectations of sellers and buyers. This period of change challenges traditional business models and opens avenues for enhanced service delivery, underlining the importance of agility and strategic communication in securing a competitive edge. As brokers adapt to these shifts, the future of real estate looks towards a more dynamic, client-centered approach.