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We All Live in a Data-Driven World

Brokerage firms now have the means to look at tons of data and use it to guide their investment decisions in ways about which firms in the past could only dream. 

by Steve Murray, publisher

There is more data and more availability to data than ever before in the residential real estate brokerage business. Think about it. For consumers, access to listing, sales and price information is more available than at any time in the history of our business. There are more firms tracking the housing business than at any time before. Firms that track existing home sales, foreclosure and delinquencies, new home permits/starts/sales along with investor-owned homes have grown significantly. 

Everyone Publishes Housing Data

There are more than a dozen TV or internet shows about housing—fixing, flipping, investing, managing and selling. Wall Street organizations that research and publish findings about trends in housing and housing finance have proliferated. The number of reports on web usage and visitation has multiplied.

For brokerage firms, there are more market analysis tools than ever before and more firms offering them. A broker or agent can track micro-level market trends among competing agents and brokerage firms. REAL Trends provides operational benchmarking which allows brokerage firms to compare their profit and loss statements to peer companies. Other data that we have access to and publish compares year-over-year performance differences between national, regional and local brokerage firms as well as similar data for individual sales associates and teams.

What Does all This Data Mean?

Brokerage firms now have the means to look at this data and use it to guide their investment decisions in ways in which firms in the past could only dream. Some are taking advantage of these new capabilities by using tools such as Broker Metrics to zero in on which companies make the best merger and acquisition targets. They can also track and identify the elite potential agent recruits. Others use web tools to drive their spending decisions for online digital marketing. 

Smarter Decisions

Brokers and sales associates have amazing tools to use data to make smarter decisions based on real activities and results, rather than anecdotal stories. Here’s the rub—brokers who use this new-found access and analytic tools are increasingly going to outperform those who don’t.

Why? Because as the gross margin for brokerage firms continues to shrink, there is less money for investment in growing the business. A shotgun approach will not work. A firm growing 5 percent a year may be doing fine but not if the market or key competitors are growing at 10 percent. Having a 6 percent net margin may be fine, but not if competitors and peers have margins of 15 percent.

Brokers, agents and teams should all be seeking the best sources of data and analytic tools that can deliver answers to the questions, “How well are we doing against our peers?” “What areas of our business are we underperforming or outperforming our peers?” and “What investments are likely to provide the best growth opportunities?” The time spent understanding how to use data to guide your investment decisions is likely among the most important use of a leader’s time.

 

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This article originally appeared in the January 2017 issue of the REAL Trends Newsletter and is reprinted with permission of REAL Trends Inc. Copyright 2017

 

 

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