Let's talk about the money. The real estate brokerage premise has one great overriding premise: the generation and retention of gross commission income. This should come as no surprise to any red-blooded capitalist entrepreneur because income generation and profit retention is the basis for any viable business enterprise.

During the 1994-2004 time period, the commission proforma for the real estate industry took it on the chin. The following illustrates what occured during this decade of transformation:

 

Transaction Commission per Closing
Decreased 20-40%
Commission Paid to Agents per Closing
Increased 25-50%
Annual Brokerage Office Operating Costs
Increased 15-20%
Technology Operating and Training Costs
Increased 150%
Transaction Skimming by New Middle Entities
Increased by 1000%

Commissions per transaction closing have dropped while all of the operating costs related to commission disbursement have dramatically increased. There are more entities involved in transacation skimming than ever before. These are the non-brokerage lead generating entities who intercept buyer and seller prospects and refer them to brokerage firms for referral fees.

To any trained and astute accounting firm, the trends in the table above are a formula for disaster...an industry train wreck. The entire commission proforma is out of control at almost every level from income to referrals to agent payment, forcing brokerage owners to scamble for ways to survive. There is only one major expense to be eradicated in the new real estate economy...overhead, traditional operating costs that do not make direct contribution to commission generation must go.

A new, lean-n-mean model will emerge and it will include brokers without walls, agents without offices and markets without barriers.