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White Paper

Leveraging Technology to Improve the Profitability of Real Estate Firms

How Savvy Owners are Adopting Best Practices from Other Industries to Transform Their Businesses

Today’s competitive market has prompted many brokerage company owners to take a closer look at how they run their businesses. Consequently, many leading firms are evaluating and adopting ideas, practices, and processes from other industries to help them run their companies more effectively.

Across industries, managing the performance of the sales force, or in the case of real estate—the agent force—has always been a major challenge. In residential real estate, the cultural legacy associated with the independent contractor model creates significant challenges. For example, most owners have no visibility into the sales pipeline, little infrastructure to manage agent productivity, and don’t “own” a centralized customer database. The result: owners often struggle for control of the business.

How can firm owners get better visibility into their agent sales activity? Is there a simple way to create a centralized customer database for the firm, without resistance from the agents? How can firms institute performance standards and a culture of accountability? How do they gain deeper insight into business operations to make better decisions and drive profitability?

To meet these challenges, owners are turning to company-wide customer relationship management (CRM) solutions. These established technologies can help real estate firms improve profitability, build long-term affinity with customers, and enhance the recruiting and retention of productive agents. Not only do these systems have the ability to transform businesses, but they are now very affordable. Delivered online via a monthly subscription model — commonly referred to as Software-as-a-Service (Saas) — there is little to no investment in hardware, installed software or IT personnel. As a result, firms can achieve exceptional results quickly with relatively low financial risk.

This white paper examines the latest real estate industry trends and investigates the many advantages of company-wide CRM

Real Estate Trends

It is no secret that consumers rely heavily on technology when purchasing a home. Back in 2005, nearly 80 percent of homebuyers were using the web to search for a home. Today, nearly every buyer has a smartphone and uses it extensively in the real estate buying or selling process. A recent Swanepoel Real Estate Trends Report explains, “It is universally recognized that technology has become an essential ingredient in the (consumer’s) real estate experience.” Buyers’ and sellers’ expectations regarding response time and access to information have risen significantly with access to these tools.

While technology has primarily been focused on consumer-facing applications, its use to improve company and agent efficiencies is a new and growing trend. Evidence suggests that when agents leverage technologies like CRM, their sales increase. “Two recent surveys showed that agents who embrace technology earn three to four times more than an average agent,” said John M. Peckhamm III, executive director of the Real Estate CyberSpace Society.

Old Standards Hinder Productivity and Margins

Many firms have been slow to enhance their processes. Relying on old procedures directly impacts company margins. “Many traditional brokerage companies remain dysfunctional, burdened with layers of unnecessary costs, still struggle with the independent nature of their agents and stick to old vestiges, systems and ways,” stated the Swanepoel report.

In a recent survey exploring differentiators between “rich” and “poor” real estate agents, ActiveRain found that the rich agents spent six times more money on technology than the poor agents. Of the three technologies examined in the survey, successful agents found the most value in their CRM systems. ActiveRain found “almost twice as many rich real estate “gents use a CRM or lead management system than poor real estate agents. It’s this systematic management of their database that allows rich real estate agents to build a high volume business. This is the most dramatic and visible difference in the entire survey.”

When agents are less productive, team profits begin shrinking. “Management is increasingly recognizing that carrying under-trained, under-skilled and under-motivated agents while competing for fewer transactions is greatly impacting their shrinking margin.”

It is evident why an effective CRM solution is a high priority for successful agents when we see that most of the leads are generated from repeat business and referrals. In their 2012 REALTOR Technology Survey, the National Association of Realtors states “referrals, repeat business and the Internet remain the top three most important methods of generating leads.” In fact when compared to the Internet, respondents cited referrals and repeat business 30% more frequently as “Very Important” for generating leads.

Real estate professionals have clearly identified their existing client base as the best source of new business. However, a number of challenges stand in the way of success beyond just tracking your clients.

 

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