The demise of the broker? Not so fast!

By: J. David Chapman/June 22, 2023

Recently, I spoke to a group of Realtors at a conference about the future of real estate brokerages. I have always been amazed at the power that the residential broker has in transactions and the control that they maintain over the customer. They are the driving cog in the wheel around which everything happens. From the lender the customer uses, the title company they close with, to referrals for insurance – they are incredibly influential. This power is the result of what we call a broker-centric model, where the broker is the first contact for the customer, and they control the housing options via access to the MLS database.

Others have also noticed the power of the broker and the traditional brokerage is under attack. Wall Street and Venture Capital companies are investing in alternative-brokerage companies like Redfin, Opendoor, Compass, SideDoor and Open Listings. All of these new companies are threatening the incumbent brokerage-centric models by going after consumer attention directly. Clearly, these companies have only made a small dent in the overall market, but as they gain further economies of scale and lobby for legalization, their impact will only grow.

Real estate portals aggressively provide increasingly valuable agent tools for “free,” not only eroding the value of the broker-provided technology and marketing tools in the eyes of agents, but also affecting consumer perception of real estate brands. Can you see a day when a “Zillow Premier Agent” is considered as valuable as being a “Coldwell Banker Associate”?

I am cautiously optimistic when it comes to our careers as brokers. Those predicting the demise of the current model are undervaluing the fundamental strengths that brokers have to stave off existential threats and in finding new opportunities ahead.

Most obvious, the broker is the legal and transactional center of real estate. They provide experience in risk-management, regulatory maneuvering, and financial strategy, especially in a hyper-local industry. These are not things that alternative-brokerage models or technology startups can garner in just a few years, no matter how much money they throw at the problem.

So, regulations change, consumer sentiment evolves, and brokerage market share shifts. Yet, in my view, these advantages and assets are still robust and are ready to be extracted. The broker head start is still huge.

J. David Chapman is a professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).