Last month, Inman had its annual conference for Realtors. One of its sessions was on what the Realtor market will look like in 2020 — less than 600 days away. The panel included representatives from Zillow, Warburg Realty and Keller Williams as well as a Wall Street analyst. Two of the Realtors said that the days of the 5-6% commission real estate agent are over because it is hard to justify a high commission for not doing that much. What they envision is that average Realtors will have a hard time surviving while top-end Realtors who handle the more complex transactions and higher-end deals will do well. They estimate that roughly the top 15% of Realtors will succeed but the others will be eliminated or become hourly employees. This should be a wake-up call for the mortgage industry that still depends primarily on Realtors for business. This raises two important questions: How many originators can handle the top 15% real estate agents and how many originators will be needed 18 months from now? Both questions are game-changers for mortgage origination.
Let me address the big question of doing business with the top 15% Realtors. The top Realtors are the best in their industry and in many ways, they are individuals who run their sales business with a self-employed mindset. As we all know, self-employment is not for the faint of heart. Trust me, I have lived it every day for over 20 years.
A self-employed individual must work hard to find and service customers. This is not easy to say the least. Being self-employed means experiencing the “thrill of victory and the agony of defeat” on a daily basis. It requires balancing the now with the long-term. A self-employed sales professional needs to have talent plus mental toughness to beat the competition and win. Top Realtors must be aware of what their customers want and need; disciplined to ensure that they can deliver a great customer experience; and be willing to change their selling model on the fly because of market volatility.
The point is that the top 15% of any profession will not suffer order-takers or selling zombies who repeat why their company is great. Top professionals are looking for much more than that —they want insights that can change their business model for the better; they want introductions that will help them improve their business; and finally, they want leads. Anything less and top Realtors will not do business with the originator. This raises the question of how many originators are able to deliver this type of value to top Realtors?
In my view, mortgage sales organizations may be in for a rude awaking two years from now for several reasons. First, the Realtor industry is changing faster and more dramatically than the mortgage industry. Second, the Bureau of Labor reported that the mortgage industry continues to hire people in a market where volume is not robust. Hiring warm bodies is an old strategy that is just too costly. It really didn’t make sense before and is madness now as I pointed out in my recent blog.
If Realtors are seeing a future where consumers will not tolerate overpaying for a real estate agent’s services, why would consumers tolerate overpaying mortgage originators that don’t deliver value?
I believe that future mortgage sales organizations will be smaller with better quality sales personnel. This new sales paradigm will require the mortgage industry to hire originators with the sales talent to persuade and the self-employed mindset to match their referral sources. This will require companies to install a predictive and analytical hiring process to make sure they are selecting the right talent. It should also prompt companies to seek out sales candidates who are willing to learn since the marketplace is constantly changing. Old sales models don’t have a place in the 2020 Realtor world. Mortgage firms who want to win business from the top 15% real estate agents must invest in hiring the right individuals for the originator position.