The day-after: Why real estate brokerages under siege should redouble focus on agents

July 1, 2024

Mickey ALAM KHAN is a luxury marketer, real estate brokerage advisor and former head of a leading luxury real estate network

By Mickey Alam Khan

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The day-after: Why real estate brokerages under siege should redouble focus on agents

How disruption can be turned into a plus for luxury real estate

The real estate industry has been in knots over consumer and regulatory challenges to buyer-side agent commissions. As the dust largely settles with legal accommodation and compromises, it’s time that real estate brokerages pay attention to their first customer: the agent.

From where I sit – as a luxury marketer, real estate brokerage advisor and former head of a leading luxury real estate network – brokerages face a triple threat: a growing consumer trust deficit in the value that agents bring, severe cutbacks on training and professional development, and a continuing environment of low housing inventory and high interest rates.

Not surprisingly, brokerages are likely to face a new reality in 2025: the strong possibility of a major exodus of talented agents not only to agile, more caring competitors, but also to other industries which value and reward savvy salespeople.

Agent loyalty is under threat
An army marches on its stomach, as is famously known. Cutting costs through scale-backs of agent upskilling and consumer marketing will rebound to the brokerage’s regret. You’re offering less and expecting more.

Luxury agent loyalty is up for grabs if real estate brokerages don’t course correct.

Some would argue that the real estate industry retrenchment is justified. The macro-environment of high mortgage rates, bidding wars and low property inventory was already a threat before the buyer commission lawsuits.

Add to that the requirement that buyers now have to sign a contract with agents to see properties.

As noted trainer Michael LaFido said recently on a Luxury Roundtable webinar, for home-buyers to restrict themselves to one agent, they have to really “like, trust and value” that professional.

I’d like to step back and remind the real estate industry, particularly those brokerages operating in the luxury segment, to view the business-model shift as a disruption, and not a threat.

That’s right: disruption, and not a threat.

A disruption requires creative thinking to overcome challenges and work in a new way. A threat has a sense of alarm that is negative to progress – it brings out the reaction, and not the response.

Take heart from other sectors that have had their own business models challenged over the decades.

Real estate brokerages can learn from other industries
Amazon.com’s arrival threatened the bricks-and-mortar retail industry with quick and free shipping under its Prime loyalty program, widest assortment of merchandise, convenient one-click shopping and, initially, no sales tax where the online retailer had no physical offices and warehouses.

While there were casualties among independent and weaker chains, the smarter, more resilient retailers adapted. They matched product assortment, convenient shopping options such as buying online for pick-up in-store or delivery to homes, competitive pricing and upping the bricks-and-mortar customer experience. Walmart is still the world’s No. 1 retailer, although Amazon is a nip behind.

In hospitality, Airbnb disrupted the industry and the short-term rentals business. Consumers now had an alternative to cookie-cutter experiences in hotels with more control over their temporary accommodations in new locations.

When regulation and lobbying didn’t work, hotel and resort chains upped the ante with improved booking options online, better guest experiences on-property to create more positive memories, and the rollout of more branded residences and sea and air travel brands. Marriott International is still the world’s No. 1 hotel and resorts company with strong competition.

In automotive, Tesla disrupted the industry with its sleek designs, direct-to-consumer buying and electric motors. It is the world’s most valuable automaker. The competition responded, albeit a bit slowly, and introduced electric motors across all brands. It took Tesla to nudge them into the arguably more sustainable option of electric motors, but they adapted. Even Rolls-Royce Motor Cars is on its way to complete electrification.

Rolls-Royce Spectre is the automaker's first fully electric car. Image: Rolls-Royce Motor Cars

Ad agencies in the 1990s got a rude shock when consumer products giant Procter & Gamble Co., then the world’s biggest ad spender, decided to do away with the 15 percent commission on media buys it paid to firms producing its advertising and marketing campaigns. P&G downgraded the agency relationship from marketing partner to another vendor dealing with the procurement department.

Did that end the agency business? No. Agencies adapted, changed their business model and negotiated fees and billable hours with their clients. They entered the turf of management consultancies such as McKinsey, Boston Consulting Group and Bain, and started offering strategic advice to the C-suite. And then the consultancies started buying the agencies to strengthen their portfolio.

In the auctions space, Sotheby’s, Christie’s and Phillips came under assault from online players such as eBay, 1stDibs and Artsy. How did they respond? They launched their own online auction websites, bolstered their CRM, email and social media programs, and improved the in-person auction experience with vastly superior pre-auction exhibitions and storytelling.

Again, not surprisingly, that line of creative thinking and adaptation paid off. Sotheby’s and Christie’s are still the names to beat in the auction space.

The world of watches got its comeuppance last decade with the debut of the Apple Watch – now the No. 1 selling timepiece brand worldwide.

How did players such as Patek Philippe, Rolex, Cartier, Audemars Piguet and their ilk respond? They went more exclusive, upscale and creative with design, quality materials and in-store experiences. They stirred even more desire and anticipation among collectors and watch aficionados with limited production and waitlists.

Unsurprisingly, the demand for Rolex and Patek Philippe models is as strong as ever. One brand is marketed as a sign of achievement and the other as a custodian for the next generation – unbeatable positions that weather time and market vagaries.

Like their peers across industries, luxury watchmakers have turned their products and services from utilitarian and transactional – reading the time on an expensive, souped-up timepiece when a plastic Swatch can mark the hours with equal ease – to works of exquisite craftsmanship, unforgettable in-store experiences and symbols of success. Perhaps a lesson here for luxury agents and brokers?

The media industry was, arguably, the first industry to be disrupted by the Internet’s arrival in the early 1990s. They continued charging for print editions and gave the online versions away for free. Not surprisingly, audiences migrated online and on mobile with advertisers. Ad dollars in print got reduced to dimes and cents in digital.

Then, the smarter players in media turned to digital subscriptions and bundles including print. They convinced the more loyal among their readers to pay for value-added digital content that was now gated. The New York Times and The Wall Street Journal are posterchildren for how to adapt when the chips are not in your favor. They have millions of loyal subscribers and growing.

There are numerous examples that illustrate how other industries have adapted to evolutions and revolutions in the way they do business. While they give a good fight, they have never neglected their customers. Similarly, the real estate industry should not forget its first customers – agents, the very people who brought them to the dance.

Luxury real estate agents who are nimble and attuned to market movements excel over their peers. But what are the qualities that work in their favor day after day?

Back on your feet
Having worked with thousands of agents over my career, it is clear that their jobs aren’t easy. They have to be highly self-motivated and driven, completely aware of their micro and macro environments and be the eyes and ears of their clients for market opportunities.

Above all, they are competing in an industry where the barrier to entry – the professional qualification required to become a real estate agent – is not that high. So, there is a fair amount of transiency in this business.

One very important factor to keep in mind is this: real estate agents are not full-time employees, at least under the American model. Each one of them is a small business. They are shouldering the majority of the risk. No listing, no commission – and no split with the brokerage.

In the past four years, I’ve noticed a dire need for agent upskilling and knowledge reinforcement – more strategic thinking, better marketing and communications, more master classes, networking and culture-building events, and more proprietary research. All of these are key to differentiate the brokerage and its agents from competition and prove their value to sellers and buyers of homes.

I’ve also realized that brokerages are being pulled in all directions due to a deteriorating commission split structure in favor of agents, dearth of quality inventory and legal pushback on buyer commissions. Budgetary cuts and paring back in staffing and offices have become de rigueur – tactical measures that leave little time to think creatively about the future viability of the real estate brokerage model.

I urge all smart-thinking brokers and their firms to rethink what they’re doing. They should invest more in their best and rising talent of agent sales associates. They should hire staff who know how to navigate crises from other industries and reinvent themselves. They should think of the day-after. Disruption is another opportunity to restart the real estate industry, which is the bedrock of any economy.

Each industry has intermediaries that bring value to the table – retailers deliver manufacturers’ goods to shoppers to ease the purchasing process, media organizes the news in one location to spare reader and viewer valuable time, and ad agencies offer outside expertise to help internal marketing departments strategize and communicate, just to name a few. Their value is not called into question, as the real estate agent’s currently is.

Leading from the front with focus, decisiveness and communication clarity are key to organizational and personal success

IN A WAY I feel the real estate industry is ripe for a national campaign along the lines of the 1980s’ “Pork. The Other White Meat” and a decade later, “Got Milk?” Both these efforts were industry driven that sought greater market acceptance for their product by proving their value to customers.

We need a similar campaign for the real estate industry centered on the value that agents bring to buyers and sellers of homes and the overall U.S. economy. Maybe we can see something if luxury property players such as Compass, Sotheby’s International Realty, Christie’s International Real Estate, Luxury Portfolio International, Coldwell Banker Global Luxury, Engel & Völkers, Berkshire Hathaway, Douglas Elliman Real Estate, Barnes, Corcoran, Keller Williams and William Raveis Real Estate, just to name a few leaders, take the national initiative?

Before that, however, the agent army needs to be fed with the right upskilling diet of know-how transfer, confidence-building messaging, peer networking and broker marketing support for listings acquisition and sales. Right now, the rations are being cut back and the agents expected to maintain the pace, enthusiasm and motivation – it’s not realistic.

The challenge to the real estate brokerage business model – which is driving decisions from a position of fear – should be a call to reinvent and reinforce for the better and for the future with an empowered and enlightened agent force at its core, especially in luxury. Brokerages must not fall prey to a victim mentality. Above all, they must remember the first rule of holes: when in one, stop digging.

Mickey ALAM KHAN is a luxury expert, advisor to luxury real estate brokerages on agent upskilling and broker market-growth positioning, keynote speaker, CEO of Luxury Roundtable and previously ran Luxury Portfolio International, the world’s leading network of independently run luxury real estate brokerages. He consults and works with leading real estate brokerages and networks on luxury strategy including marketing, branding, PR and merchandising, master classes for agent upskilling, programming of in-person, digital and networking events, proprietary research, content strategy including magazines, social media, blogs and newsletters, and brand partnerships and alliances. He is based in New York, but travels frequently to brokerages across the country. Reach him at mickey@napean.com. Website: mickeyalamkhan.com

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