BrokerageReal Estate

Side’s Hilary Saunders discusses the evolution of brokerage models

The Gathering: Consumers have become more educated about real estate transactions and brokerages are having to adapt their models

Hilary Saunders speaks at The Gathering by HousingWire on Monday, April 22. Photo credit: AJ Canaria

Hilary Saunders, the co-founder and chief broker officer at Side, sees the current challenges facing the real estate industry as yet another opportunity for brokerage models to further evolve.

“I think what we are definitely going to see is a fall-off of the old way of doing things,” Saunders told attendees at HousingWire’s The Gathering.

The way Saunders views it, today’s consumers are more savvy. They want to not only fully understand all aspects of the real estate transaction, but they want an experience that is personalized to meet their needs.

“2006 is when Zillow came out with their Zestimates and with that, they started to very slowly provide to the consumer a more transparent way of understanding the market, and how to see not just the value of their home, but also what their neighborhood was doing and how prices were going up and down,” Saunders said.

Through this, Saunders said, consumers began to realize the importance of staging, photography and online marketing. While she believes this transparency was a good thing for the seller, it harmed the buyer as many agents began to claim that they would represent buyers for free — which has certainly played a role in the commission lawsuits that are currently plaguing the industry.

“We are in the stage now where we are having to play cleanup on a lot of different fronts, and part of that cleanup is actually providing a service to the end consumer by way of brokerage,” Saunders said. “So, what the brokerages have done historically is they’ve made all their money from the 80% of agents who actually don’t transact more than two deals a year, because they pay desk fees, monthly fees, technology fees and legal fees.”

Saunders said brokerages rely on a handful of “anchor agents” who close multiple deals each month to uphold the business side of the brokerage.

This model worked with previous generations of homebuyers who did not have access to the same amount of information about the housing market and real estate professionals.

“There is a very low bar for entry, and one out of two licensees only do one or two deals a year,” Saunders said. “So, that means the vast majority of the population didn’t realize that they are entrusting their largest asset — whether purchase or sale — and the building of generational wealth to agents who actually transact real estate less than they get their oil changed.”

But as consumers have grown savvier and more knowledgeable, they do not want to work with the more casual agents, giving these peole less of an incentive to stay in the real estate business while continuing to pay fees to their brokerage.

“The brokerage models have to adapt,” Saunders said. “This is now a consumer base —specifically Gen X, millennials, Gen Z — that are wanting an experience. And they don’t want just any experience; they want a specifically-catered-to-them experience. They want to know through social media, through online reviews, who the top producers are and what experience they are going to provide them with.”

Although Saunders knows this may be a difficult pill for some firms to swallow, she believes that it is an excellent opportunity for firms to innovate.

“We really have an opportunity to have the cream rise, and they are going to create their own very unique, very tailored, very educated boutique brokerages on the local level,“ Saunders said.

“It is a very exciting time for the best agents to own their market share, to capitalize on it, and the brokerages that actually understand that shift will survive. The ones that will not survive will be the ones who are looking very simply at how much money they can get from each individual agent. So, it is a mind shift.”

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