Pub Date: May 14, 2015
Publisher: RealSure, Inc. and National Association of REALTORS®
Retail: Free Download
The Definitive Analysis of Negative Game Changers Emerging in Real Estate
The goal of the DANGER Report is to provide the residential Real Estate Industry with a comprehensive and objective analysis of the most significant threats, risks, and black swans that could possibly impact the industry. The Report does not identify solutions for any danger. It was decided at the beginning of the project that creating solutions is the responsibility of each respective leader and organization.
The initial research was focused on the residential real estate brokerage industry in the United States. Subsequent studies covering commercial real estate, property management, and the global markets outside the U.S. are being considered.
Printed copies of the DANGER Report is available from the NAR bookstore at no charge.
DANGER Report Overview
The Strategic Thinking Advisory Committee of the National Association of REALTORS® was tasked with the responsibility to identify those future events or clashes both anticipated and unexpected, that could negatively impact the real estate industry.
The goals was to provide Organized Real Estate, as well as its members, a comprehensive report identifying the most significant threats, risks, and black swans facing the real estate industry without disregarding then, without placing blame or picking sides, and without attempting to solve them.
The Report seeks to identify the most significant dangers but does not provide solutions for any danger. It was decided at the beginning of the project that identifying solutions is the responsibility of reach respective leader and organization.
“Black swans,” it is said, are unpredictable future events. Of course we do not know which black swans, if any, will occur, but with this Report identifying so many, you now have more knowledge than before. It is our wish that the DANGER report will be a resource for the entire industry.
The initial research was focused on the residential real estate brokerage industry in the United States. Subsequent studies covering commercial real estate, property management, and the global markets outside the US are being considered.
We acknowledge that most catastrophic type events, such as an Economic Collapse, a major Natural Disaster, a Global Disease Outbreak, a significant Terrorist Attack, and/or a Nuclear Accident- would most likely trigger a chain reaction of events negatively impaction society in general.
The Swanepoel | T3 Team researched over 200 reports, survey, focus groups studies, student dissertations, white papers, journals, articles, and other related academic resources, including reports from Harvard, Fannie Mae, Canadian Real Estate Association, various large real estate franchise groups, and many others.
To ensure that the Report would also include opinions from the brokers/agents in the field, an extensive random survey of REALTOR® members was taken from October 13 2014 to October 27 2014. The survey received more than 7,899 responses.
In addition to the research and survey, 70 CEO’s an other senior executives from the largest franchisors, the largest real estate brokerage companies, national, state, and local REALTOR® associations, MLS organizations and a variety of large service providers were interviewed.
The results of the research and analysis are incorporated in the DANGER Report. The research data, survey results, and interview responses were categorized into one of five major industry sections: Agents, Brokers, National Association of REALTORS®, State/Local Associations of REALTORS® and MLS organizations.
In order to best evaluate and present each danger an Index was created based on the probability of each danger occurring, the future timing of the potential danger, and the possible impact of each danger. The combined scoring of these factors results in the PTI Index.
PTI / Danger Index
In evaluating each danger, the overall results is presented in the PTI Index, which ranks the danger in order to provide a level of comparison between the dangers/sections of the report. The Danger Index represents a composite, overall score.
At the end of the Report a detailed checklist of all dangers is provided, first in priority order by section and second in overall combined priority for a quick comparison.
Remember that the 50 dangers listed in the DANGER Report are about hypothetical future events that may or may not occur. The dangers included are compilation of the opinions of a large group of the most knowledgeable and influential leaders in out industry.
The 160-page DANGER Report is distributed electronically to the real estate community at no cost. The Report will be available separately in each of the five sections as well as one combined Report can be downloaded from dangerreport.com.
The DANGER Report was researched and authored by Stefan Swanepoel, CEO of the Swanepeol T3 Group, on behalf of the National Association of REALTORS®. All rights are reserved and copyright is owned by the National Association of REALTORS®.
The real estate industry is saddled with a large number of part-time, untrained, unethical, and/or incompetent agents. This knowledge gap threatens the credibility of the industry.
Commissions Spiral Downward
A variety of powerful forces exert significant downward pressure on real estate commissions.
Agent Teams Threaten the Survival of Brokerages
Teams cannibalize brokerage companies by siphoning off their profits, leaving them exposed to all the risk.
IRS Forces Exodus of Independent Contractors
An IRS ruling is handed down that reclassifies the legal status of real estate agents from independent contractors to employees.
The Decline in the Relevancy of Agents
The role, function, and perceived value of agents deteriorates as agents fail to properly assess and respond to changing consumer demands and expectations.
The disproportionate power that independent contractors have enjoyed over the past three decades does out of vogue as capital or economies of scale change the rules and the Wall Street reign begins.
Housing Finance Systems Fails
Mortgage-backed securities as a method of financing is discontinued because it’s too risky and the related fines imposed on banks too severe.
Commoditization of Residential Real Estate
The concentration of residential ownership into the hands of a few large investors commoditizes residential real estate and impacts market dynamics and liquidity.
Commissions Concentrate into Fewer Hands
A very small group of very efficient and effective agents discover the winning formula and secure a disproportionate market share.
The Agent is Removed from the Transaction
The tech company cracks the code and connects enough of the dots to conduct real estate transactions without the need of an agent.
Regulatory creep and large financial penalties increase compliance costs.
Paper Brokerages Cause Distribution
With no walls and little operating costs, Paper Brokerages proliferate and become a major force overnight.
Brokers Lose Control of Data
Consumer confidence in industry data erodes due to the multiplicity of conflicting data sources.
A Consumer Brand Crashes the Party
A well-established consumer brand is introduced into the marketplace and a new multi-billion dollar residential real estate brokerage brand is created.
New Business Models Go Mainstream
The existing compensation structure gets eclipsed as new business models gain rapid traction.
Brokers are undercut by outsiders offering the same support and services at a fraction of the cost.
Technology Becomes a Runaway Train
The financial resources necessary to build the technology solutions required exceed the average broker’s ability to remain competitive.
FSBO Develops into a Do-It Yourself Model
With so much real estate information and so many apps at their fingertips, it has never been easier for consumers to buy and sell real estate.
Sales Tax Threatens Margins
Sales tax on real estate commissions impacts already thin profit margins and forces fundamental change to the already strained broker/agent relationships.
Portals Leverage Lead Gen Dominance
Portals leverage online dominance and morph their business model into a more aggressive transaction-based revenue sharing concept.
NAR’s complex governance structure encumbers its ability to adopt the strategies, tactics, and policies that are appropriate for the future.
The Three-Tier Structure Liability
The unique three-tier REALTOR® Association structure emerges as the trigger of major crippling channel conflict between national, state, and local REALTOR® Associations.
Out Positioned as Industry Spokesperson
The continued proliferation of voices and huge ad budgets challenge NAR’s position as “The Voice of Real Estate.”
NAR expands beyond its core focus, which hinders its ability to respond to a broad base of threats.
The Catch-22 Tech Quandary
Major technology initiatives by NAR succumb to political headwinds.
The discord caused by trying to be both on association for everyone and an association only for the best reaches a breakpoint.
Insufficient New Blood
All levels of the REALTOR® Association world- national, state, and local- struggle to attract young recruits.
Shortage of Leadership Talent
There is simply isn’t a large pool of talented, dynamic, knowledgeable, young executives available to lead Organized Real Estate (ORE).
REALTOR® Brand Loses its Desirability and Power
The widely recognizable and powerful REALTOR® brand no longer has the same appeal, prestige and value proposition it once did.
Core Standards Too Low
If not enforced, or if sub-contracted by another association, the standards will be another exercise in futility.
The inability to recruit, train, and engage the skills required to lead associations through transition.
Too Many Uninformed Decisions Are Taken
Misguided decisions are made by leaders who don’t clearly understand their obligations and responsibilities.
Broad Resistance to Consolidation
Hundreds of small associations fear loss of identity, custom services, and a voice.
The Lowest Common Denominator Impediment
The inconsistent REALTOR® mindset regarding the understanding and implementation of ethical standards, best practices, governance, organizational structure, and business planning has resulted in the standard of the lower common denominator being allowed to continue to drive key decisions, defying efforts to strengthen organized real estate.
The Unwieldy Governance Structure
The cumbersome association governance structure and process limits the ability of associations to timely and effectively address the complex challenges currently facing them.
Many business leaders are unwilling to spend time in committee meetings, debating unproductive issues with uninformed brokers/agents.
Loss of Primary Revenue Source
The loss of MLS ownership, control, and/or revenue threatens those associations that depend heavily on this asset.
Changing of the Old Guard
As association executive officers age, innovation declines.
Local Associations Charter Revoked
Local REALTOR® Associations that do not meet the Core Standards requirements may find their charters revoked.
The Dues Disconnect
REALTOR® Association dues no longer correlate to the actual costs and efforts involved in delivering contemporary association programs, products, and services.
The current warlike environment in real estate becomes attractive to a large non-industry company that see opportunity.
Unclear End Result
The MLS movement hasn’t thought through what a post REALTOR®- owner MLS might look like or how it would operate.
Control of a National MLS
A national MLS has been talked about for decades, but never before has the likelihood of it actually becoming a reality been so high. The threat arises out of who ends up with control and how they will use it further their business and fiscal agenda.
Decentralized Infrastructure Becomes Obsolete
Driven by technology advances, the pre-Internet local MLS model is dated and consolidation is a logical step.
Large Patent Troll Attack
Lawsuits and other legal actions undertaken by “Patent Trolls” pursuing questionable patent rights could cause economic and innovative instability in the industry.
Cyber criminals could attack the industry, breach the MLS, and cause disruption.
Off-MLS Listings Escalate
Off-MLS Listings (pocket listings), and/or the availability of pre-MLS listings on major portals and MLS organizations becomes common practice.
Increased Hostility in the Real Estate Community
Today’s rapidly transitioning marketplace becomes a growing source of controversy between brokerage operations: big versus small, franchise versus independent, local versus regional, branded versus unbranded, and 100 percent versus traditional.
Consumer-Facing Websites at the Crossroad
Friction escalates regarding Association/MLS-owned Consumer-Facing Websites.
A Better Mouse Trap
The MLS process is at risk of becoming obsolete if the real estate listing and transactional order is changed.
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