Mortgage. Insurance. Title services. Closing Services. Real estate brokerage firms continue to look to the one-stop shop for a couple of big reasons.
First, profitability: Brokerage profit margins are abysmal.
According to Steve Murray, president, and owner of REAL Trends, brokerages are facing thinner gross margins in their core business. By the end of 2016, Murray wrote that “The average gross margin per agent has fallen nearly in half.” And based on competitive pressures from firms like Compass does anyone expect core business margins to improve?
Brokerages need new revenue sources.
Until now, the most common ancillary services brokerages have looked to for new revenue have included mortgage, title, and escrow. But more and more brokerages are adding moving services to their list.
Moving presents an opportunity for more revenue for big brokerages as there’s a lot of potential purchases that come into play with a move: digital entertainment, cell, internet, insurance, banking relationships and more. Startups like MoveEasy are offering a to share with larger brokerages a slice of this pie.
It’s a huge pie. Nobody moves more than Americans — an average of more than 11 times in our lifetimes. The total economic impact of the moving industry was $85.7 billion in 2016, the most recent estimate available.
And there’s another upside for all brokerages to get their arms around moving that also helps their bottom line, indirectly. Moving sucks: Consumers hate to move. It even stresses most of us out. People in the UK move less, but a study there showed almost two in three (61%) placed moving as number one on their stress list.
But here’s the conundrum.
Brokerages want to provide excellent customer service. Exceptional customer service is the most common attribute claimed to be the great “delineator” – what sets them apart from the competition. Their agents work like crazy to provide exceptional service only to think the transaction is over when the paperwork is signed, and the deal is recorded at the County. It’s not.
In the mind of the consumer, the real estate deal is not done until they are moved into their new home. But a lousy move can wreck the entire buying or selling experience for a consumer. Even though it’s not the fault of the agent, an agent seems to get the blame for whatever happens. The fact is in one out of every five professional moves, a consumer files a claim!
Those are a couple of compelling reasons why moving could become real estate’s next big play. For years we’ve largely ignored, as an industry, what MoveEasy dubbed “the last mile of the real estate transaction” and they’re probably right.
There’s an untapped opportunity in this sector. It indeed is ripe for disruption. These are just two big reasons – revenue and customer service – that brokerages should take an interest. Looking at the players who are already jumping in, I’m sure there are many more.
After all, Americans certainly like their stuff: we have more self-storage units in the U.S. than all McDonalds and Starbucks locations combined.
# # #
Full disclosure: WAV Group has provided services for several moving related services firms including MoveEasy and MooveGuru