The Next Age Of Real Estate

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The Real Estate Paradigm Shift:

Real Estate’s “Next Age” ©2010 Nextage Realty International • NextageRealty.com

Paradigms are a belief system – the way we view different aspects of the world in which we live and operate.Our paradigms shape the way we do business and make decisions.Paradigms are usually difficult to change, and often times restrict our ability to see coming trends and embrace new market innovations.

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Paradigms

Horse & buggy The AutomobileTrains AirplanesRadio Television

Paradigm shifts continue today

Paper Books Digital BooksVideos Online RentalsReal Estate Franchising, 100%,

Revenue Sharing

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Typical Paradigm Shifts

VisionaryCourageous

Risk-TakersThick-Skinned

LeadersA Bit

Crazy?Are You an Agent FOR

Change or a Victim OF Change?

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Traits That Define the Paradigm Shifters

The real estate industry has been evolving for more than four

decades, seeking to find a “better way”.

But in the past few years the pace has accelerated significantly

as the challenges presented by current market conditions expose the shortcomings of the existing

business models.5

The time has come to shift business paradigms and move the industry

into its next age - operationally, structurally

and professionally. 6

“Real estate has never experienced such a ‘perfect storm’ of events and factors, which have combined to force wrenching, dramatic changes upon a staid industry not accustomed to dealing with such seismic shifts.”

- Michael McClure, CEO,

Professional One

Source: Swanepoel Trends Report 2010

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The Perfect Storm

Until the 1960’s the real estate industry remained

largely unchanged – relatively small brokerages with a few

agents focused on a particular segment of a larger market.

Then came…

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The Birth of Franchising – Stage 1Large, multi-office regional companies became dominant in the 60’s by:• Creating massive advertising

campaigns in local media to build brand awareness

• Developing their own sales training programs

• Establishing their own pre-license schools to improve recruiting efforts

• Building offices with large numbers of agents

The Evolution of the Real Estate Industry

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Franchises gave the smaller independent broker a way to compete by:• Giving them a common brand name

that was recognized across the country• Providing coordinated sales training for

all agents• Coordinating group advertising in local

markets to create greater exposure• Offering recruiting focus and pre-

license training to increase agent population


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Franchised and independent offices alike were structured similarly:• Most agents were on a 50/50

commission split• High producing agents received as

much as 60/40• Brokers paid for most marketing

and operational expenses for agents

• Most agents were loyal and movement from one company to another was rare


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The Shift to the “I” World - Stage 2100% concept gains popularity:• Agents operate their own business within a business• Agents pay a flat monthly fee (desk fee) plus their

own expenses & keep all or most of the commission• Agents begin branding themselves at the expense of

the company as the marketing emphasis shifts from company to agent – “WE” to “I”

• 100% companies offer little support to agents as agents operate almost independently from company

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The “I” World – Stage 2aThe 100% concept morphs into Freedom Shops:• Agents pay a lower fee – as low as $25/month

plus a transaction fee• Agents receive very little to no broker support• “Everyone for himself” – against everyone

else• Little to no camaraderie• No company loyalty• Ultimate example of the “I” World

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Residual Income Model – Stage 3Profit Sharing (Keller-Williams):• Agents are encouraged to help build

the company by recruiting other agents, and if they do, they will share in the profits generated by the company

• Very popular as agents search for income beyond personal production

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Residual Income Model – Stage 3Revenue Sharing (Exit, Avalar):• Agents are encouraged to help build

the company by recruiting other agents, and if they do, they will share the revenue generated by agents

• Very popular as agents search for income beyond personal production

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Can these models help brokers and agents meet

the challenges of the industry today and in the

future?

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For Agents:• Limited to earning commission exclusively from

their own production• Their own production is limited to their available

time and energy• Continued pressure to perform leads to burnout• Not really ”building a business, just “doing”

business – income stops when personal production stops

• Offices are closing because agents are leaving for other industries due to a reduction in income

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Challenges for today and into the future

For Brokers:• Agent Recruiting – Broker (and manager, if any)

are the only ones interested in recruiting• Agent Retention – Agents are continually enticed to

join other companies with higher commission splits or lower desk fees creating huge agent turnover

• Brokers lose quality agents that open their own brokerage business - thus training their competition

• Agents are competing against each other rather than working as a team

• Desired company profitability is difficult to achieve

Challenges for today and into the future

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Most industry leaders agree that the current real

estate business models are broken and no longer work for either brokers or

agents.19

“I don’t think a pure brokerage play as a business strategy is a viable play in this

economy or going forward.”

— Ron Peltier – President & CEO,

HomeServices of America


What are the experts saying?

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“In cases where their franchising is faltering, the culprit is most often that

the models of the real estate company are not suited

for these times.”

— Byron Ellington – Chief Products Officer, Keller Williams Realty



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“[We are seeing a] decline in the number of ‘big box’ real estate office

operations, which simply cannot survive given the high overhead levels typically associated with such large operations.”

— Michael McClure – CEO, Professional One



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“Brokers need to change their business

model NOW.”

— Sherry Chris – Better Homes & Gardens Real Estate

Source: Swanepoel Trends Report 2010 23


• Multiple franchise brands under one ownership

• The real estate business model continues to evolve – constantly searching for a way to deal with the realities of today’s market and the challenges of tomorrow

• Historically independent regional brokers are moving towards franchising

• NAR now provides much of what franchisors used to

• Other vendors and suppliers have also filled many of the gaps in tools, training and support

How have the traditional real estate franchises reacted to the

challenges?

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• Many franchises have cut back on expenditures and staffing, which affects services offered to franchisees

• Fewer franchises, fewer agents…and lower profits, if any

• Trouble justifying the royalties paid by franchisees and agents

• Many franchisees and agents now question the value of the brand name – which most feel is the only real value they’re receiving from their affiliation with the franchise

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How have the traditional real estate franchises reacted to the

challenges?

Are these the solutions - the proper and necessary

paradigm shifts that will lead the evolution of the industry

into its next age?

Is there a business model that will address the challenges?

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Can any model survive in this economy and

marketplace?

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• Traditional models struggle with their “value proposition” – what do I get for what I pay?

• 100% models struggle with changes in market conditions – cyclical nature of the business

• Profit sharing models can only share profit when there is profit

• Residual income potential in revenue sharing models must be large enough to be enticing

• Regardless of the model, the customer MUST always come first

The “We” model of real estate is structured not only to survive in this economy and marketplace,

but to thrive when a lot of the other models are consolidating,

losing offices/agents or going out of business.

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Stage 4 – The “WE” age

• The traditional real estate model is broken.

• Nextage Realty is built for the future of real estate!

• Nextage Realty’s model is leading the evolution of the real estate industry!

The Future of Real Estate

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Now is the future & Nextage Realty is NOW:•Strong Franchise Support System•Strong Training Systems & Mentor Program•Team Atmosphere•Recruiting Solutions – National Team Building•Retention Program•Unlimited Earning Potential•Predictable Residual Income•Consumer-Centric Focus

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Now…Is The Future of Real Estate

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There will NEVER be a better time.

©2010 Nextage Realty International • NextageRealty.com

NOW IS THE TIME!

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The Next Age Of Real Estate