As Banks Move into Real Estate
As 2004 draws to a close, we start looking forward to the trends we see emerging for 2005. One that has enormous implications for most brokers is the increased participation of banks in the real estate industry.
Banks can take three approaches to entering the real estate market:
- Buy – In some states, banks can already acquire real estate brokerages.
- Build – Banks can hire realtors to put in the bank's branch offices, building their own team of agents.
- Partner – Banks can create alliances and provide leads in exchange
for a referral percentage, as LendingTree is currently doing.
As you plan for 2005, here are some New Year's resolutions to consider:
Prepare for acquisition
Being bought by a bank can provide an attractive exit strategy. The stronger your position in the market and the greater your competitive advantage, the higher the price you can command. For 2005, you'll want to invest in strengthening your balance sheet, and develop systems and processes so your business can run without you, should you choose to retire when you sell.
Invest in retention
Banks that are looking to build their own team will be trying to recruit your top producers. For 2005, you'll want to develop programs that help you better meet the needs of your agents. You might want to add benefit packages or more support services. Make sure you restructure your compensation plans to pay for the added value you're offering, eliminate minor annoyances like technology fees, and get your agents excited about selling more.
Ensure solid financials
If you plan to build alliances in 2005, you need to make sure your commission plans are structured so you can afford the referral fees. There's a possibility you'll be paying for referrals on business you already have, which simply increases your expenses. But a bigger problem is that you may have a design flaw in your commission structures. If you acquire significant additional business, which moves your agents to a higher split that contains the flaw at the same time that you're paying increased referral fees, your company dollar can disappear. You need to make sure your plans are structured properly.
If you add these resolutions to your list for 2005, you'll be well prepared to weather – and even profit from – the entry of the banking industry into your market.
