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Transaction Management: What’s the Big Deal?

Slowly but surely, the pace is picking up. After more than 15 years of lost investments, misguided priorities and stalled initiatives, the transaction management (TM) movement is finally reaching critical mass within the traditional brokerage community. Yet even with this new momentum and apparent enlightenment, the most frequently asked question regarding the transaction management remains: “So what is the big deal?”

The answer remains simple. “Everything.” TM was an important concept in 2000 when the market was being likened to a gold rush. It was a great idea in 2006 when the market was in chaos. Today, as our industry continues its rapid transition into new relationships and alternative possibilities, TM has become absolutely critical.

There is still a lot of confusion in the market about TM. Yes, TM is a technology, but it is one that will reduce overall workloads, increase productivity and enhances profits. Yes, it promotes the paperless transaction, but its relationship to paper is the same as an automobile’s relationship to listening to music. It’s nice to have, but a consumer wouldn’t buy an automobile because it comes with a great stereo. No, it doesn’t create more work.It reduces existing workloads while creating a whole new capacity for monitoring and tracking every transaction in order to determine how to use everyone’s time more efficiently. No, it isn’t experimental or tentative; the technology has been around for years. The debate isn’t about the system, but rather the willingness of real estate professionals to move their work to the next level of efficiency, accountability and consumer satisfaction.

In order to best understand the importance of TM to today’s industry, marketplace and transaction, one must view the industry from the 100,000-foot perspective. The traditional real estate industry is losing traction in the minds of consumers, providers and, most importantly, institutions that might provide the capital for the purchase of existing brokerage firms or the creation of new ones. Because of this waning confidence, it has become increasingly difficult to sell an existing brokerage, acquire the capital to start a new one or find the capital necessary to upgrade a continuing business. This is unfortunate for agents and brokers alike.

The central focus of this challenge is capitalization. The good news is that the industry appears to have finally stopped the losses that have characterized its financial posture over the past several years. The bad news is that there is very little capital left in the system. Absent significant changes in brokerage operating procedures, it is unlikely that the brokerage return on investment (ROI) over the next few years will even begin to reach acceptable or market levels that would be sufficient to support new infusions of capital.

The key to maintaining a market-level ROI is profitability. In today’s real estate business environment, TM is by far the best tool available to plan, track and monitor profitability. TM can make the difference.

TM systems do far more than create paperless transactions. They offer the entire brokerage team (agents and managers) an opportunity to join together and protect their joint economic interests. TM programs have the capacity to increase revenues to both agents and brokerages while at the same time improving efficiency and providing brokerages with a better way to do business.

TM programs also help agents and brokers address the best interests and demands of today’s increasingly powerful consumers. TM provides the level of transparency and efficiency today’s consumer is demanding in a transaction.

It is at this point where what should be a simple conversation comes to a roaring halt when an agent stands and asks why he or she should be interested or concerned about broker profitability.

Once again the answer is simple. Every productive broker and agent in the country should be aware of the fact that organizations like Zillow, Sawbuck and Trulia, just to name a few, are successfully pursuing business models that, in the long run, will not be agent-centric. The ability of these organizations, almost all of which use TM to meet the consumer’s demands for accountability and transparency, is causing more and more consumers to see them as the preferred real estate experience.

Every time agents take actions that are inconsistent with the ability of their traditional brokerage to generate a market-ROI, they are promoting the future success of these organizations.

Throughout its history, America has been a capitalistic society. For good or bad, this means that capital always wins; that is the rule. In the case of the current real estate industry, capital has two ways to win. Agents can refuse to cooperate with the efforts of their broker to utilize TM, in which case capital will win because it is venture capitalists that finance alternative Internet based entities such as those discussed above.

As an alternative, agents can support the profitability of their current brokerages by supporting TM programs. In this case, capital wins again because capital that allows traditional brokerages to stay in business, to be sold and to be formed.

So the real decision is whether to support the success of a capitalist entity that is committed to ending agent centricity in the industry or to support an entity that has demonstrated a lifelong commitment to supporting agent careers and lifestyles. It won’t take much longer for the decision-making process to finally determine which of these business models will go the distance. See you at the finish line.

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