4 min read · September 9, 2022
Ever since the world’s first online real estate brokerage opened its virtual door to agents in 2009, the industry has been increasingly shifting away from paper-based transactions and brick-and-mortar office space.
The shift can actually be traced even further back to the early 2000s when cheap printers, home computers, and the fax machine have reduced the need for customers to drop by the office to sign a contract. Brokers, for their part, have dispersed across co-working spaces that offer high-speed internet access.
As you may imagine, the pandemic has only accelerated this process, with virtual home showings and drone videos replacing in-person meetings, and Zoom calls becoming the go-to way for agents to interact with their peers and other brokerage staff.
With all of the above in mind – are traditional brokerages about to go the way of the dodo? What do they offer in the first place? Are cloud-based real estate brokerages really better?
Let’s find out!
Even though all brokerages are different, they do share a number of key features.
The largest brokerages out there cover an entire country and have massive budgets that enable them to build recognizable brands and have thousands of agents working under their umbrella. For those just starting out, major brokerages offer a good way to learn the ropes and develop a contact network that can be leveraged to great effect upon going solo (i.e., upon joining an online brokerage that promotes agent brands, rather than its own).
Smaller, locally based firms make up for their lower visibility at the national level by highly personalized customer service and a business model uniquely tailored to the needs and dynamics of their respective markets. These brokerages may have fewer leads to offer (and typically charge extra for office space), but they do provide 1-on-1 training and a greater sense of camaraderie.
There are, however, some problems. One is that traditional brokerages take around 30% of your commission (upwards of 50% in some cases), putting a fairly sizeable dent in your earnings. They’re also at times slow to respond to inquiries and provide software touted as cutting-edge, but in reality quite outdated and cumbersome. In other words, they still haven’t changed their mentality and embraced the fact that agents are their customers, and as customers require a high level of care.
Traditional brokerages give their agents insurance, some marketing templates, a brick-and-mortar office, and handle much of the paperwork and legal overhead. All else falls on the agent’s shoulders, including marketing, listing coordination, vendor management, and tons of other busywork, which limits how much time agents have to exercise their actual skills.
Unlike traditional brokerages, their virtual counterparts have no physical location and operate exclusively online. Given that, since 2006, property listings have become available to everyone online, there’s little reason for clients to meet brokers in person, as they can now find homes and other real estate on their own. This means that having a physical office is often an unnecessary expense.
What clients really do want is expert advice, which only seasoned agents can offer. And this is one area where cloud-based real estate brokerages shine..
Having a low overhead allows online brokerages to adopt the latest technologies and develop advanced proprietary software. For instance, online brokerages may provide agents with tools for making paperless transactions directly from their smartphones. After getting past the learning curve, these can be a real godsend for handling day-to-day business.
Online (AKA cloud-based) brokerages can also take care of all legal matters, advertising, brand development, lead generation, success management, and much else on behalf of their agents. This frees up a huge amount of time better used for dealing with clients and closing deals.
Last but not least, online brokerages have no desk fees and offer a better commission split, allowing agents to take home a bigger slice of their earnings. At Pinnacle, for example, we charge agents a modest annual or monthly fee, leaving 100% of the commission in their pockets.
There isn’t (and can’t be) any one-size-fits-all solution when it comes to meeting people’s individual needs and professional aspirations. For instance, cloud-based real estate brokerages aim to partner with highly self-motivated agents, which means that if you’re someone who’s more productive working from a physical office, it might not be ideal for you. It is, however, more or less clear that cloud-based real estate brokerages are the way of the future.
For one, the massive migration of real estate agents to a work-from-home model during the pandemic would have likely been enough to permanently change the industry on its own. But since the trend of moving the real estate business online has been simmering for a while now, it’s safe to say that, when it comes to legacy institutions, they’ll either learn to adapt or experience a slow and painful decline.
Pinnacle is an agent-first, cloud-based real estate brokerage focused on empowering agents to build their own brands and keep a much larger share of their hard-earned money. We already have a vibrant community of 500+ agents that offers a wealth of useful advice, information, and training opportunities.
At the end of the day, an online real estate brokerage may not be for everyone – but you better make sure that you’ve made the right choice, for your career may depend on it!