It is spring, a time of new growth, new opportunity and new ideas. The setting was a five star ocean resort in Mexico. The event was the annual senior executive and management retreat for one of North America’s oldest and most successful real estate companies. The subject on the creatively designed printed agenda was simple; The State of the Real Estate Transaction. On stage were two men and one woman, all with impeccable credentials. The first, an expert in consumer behaviors, the second, an expert on current Internet trends and, the third, an almost entertaining economist. Yours truly was honored to be the facilitator.

What followed was one of those moments in life when a number of factors come together to create an epiphany, a moment of supreme enlightenment when a number of seemingly unrelated facts combine to create a new reality. Like all matters of this nature the task of recreating the moment after the fact presents a significant challenge. Nevertheless, the attempt shall be made.

The consumer expert’s presentation wound its way through a number of observed scenarios, trends being experienced by other industries and speculations and concluded with the following findings.

• Today’s consumer feels invincible

• Today’s consumer is not REALTOR® conscious and does not understand the agent value proposition

• Social media has made today’s consumer powerful without resorting to legal remedies

• The “X” and “Y” consumers place a high value on technology and automated functions

• Today’s consumer believes that information is the key and that they either already have it or can get it my themselves

• Moving forward consumers will have less money on both the selling and buying sides and will be counting every dime

• Moving forward generation “Y” consumers will be buying less house than their predecessors and will be focused on finding money for post transaction upgrades to compensate.

• Moving forward Boomer generation sellers will have less equity and will thus be focused on monetizing what equity they have

The Internet expert presented evidence that established that:

• By and large third party players are focused on replacing the “human element” with technology

• New third party Internet players will be entering the marketplace over the next two years

• A significant number of consumer transactions have already been impacted by on line automation in the areas of law, health care, finance, purchasing, selling and financing

• Internet entities are much more attuned to consumer behaviors and trends than industry entities

• The automation of a real estate transaction using a low cost facilitator is not that significant an advancement, especially for the garden variety transaction

The economist presented a brief economic history of the past fifteen years, an explanation of the current economic environment, and a prediction of the likely future course of the economy. As an added benefit he presented a litany of human behaviors that could be anticipated given the future circumstances that he had predicted. The essence of his presentation is that today’s consumer is already checking out their own groceries and checking into their flights so taking responsibilities for other transactions will not come as a shock.

The specifics of these three presentations were not particularly surprising. The eye opener was how they came together to paint a remarkable picture of a 2013 and 2014 real estate marketplace. The intellectual bonus came as subsequent speakers carefully engineered how the company was planning to take advantage of the opportunities that would be presented within the marketplace outlined by these presentations.

The most dramatic prediction to come out of this program was that the marketplace would determine that up to 60% of real estate transactions do not require the services of a real estate agent. The basis of this prediction was simple. Consumers are not convinced that the current agent centric system has value. There are not sufficient funds in the real estate economy to pay commissions at the current levels. Within the next 18 to 24 months the major Internet real estate portals, having won the information war, will offer automated “user friendly” transaction management programs (including the mortgage process) that will allow many if not most consumers to complete the transaction without professional support. The presentations suggested that 30 to 40% of transactions would require some level of support that could be provided by a succession of assistants from facilitators to lawyers. It was suggested that this approach would also end the long-standing tradition of sellers paying for the transaction in favor of whoever required the services to be paying for them.

Another speaker predicted was that none of these developments would result in a lower level of consumer expenditures but rather a redistribution of existing expenditures. Funds formally expended for commissions would be used to secure services that would either protect the parties in some way (inspections, early appraisals, warranties and/or legal representation) and/or which would enhance the overall value of the transaction in terms of quality of life issues such as renovations and improvements.

On the second day the program revolved from discussing the predicted scenarios to evaluating how the senior management team had decided to respond to the various scenarios. Matters of license require that this piece now focus on intended outcomes rather than specific strategies and tactics.

• The host firm is placing a high level of reliability in the information presented by its experts but at the same time recognizes the necessity to prepare for a wide range of market, consumer and transaction adjustments. The management team has developed contingency places for four specific economic and market outcomes. These contingency plans include elements that address facilities, staffing, alternate work assignments and expense profiles.

• The host firm is taking steps to assure that it is tracking and measuring market behaviors on a very near time basis. It is also improving the integration of metrics and benchmarking into its management activities.

• The host firm has created a sophisticated financial plan that allows it to control expenses and adjust expenditures in direct response to conditions determined from its market data.

• The host firm believes that through these steps it can realize the opportunities a wide range of market developments.

It was a very impressive meeting. The host firm has examined current industry, consumer, market and technology trends that might impact its marketplace. They have developed specific plans to deal with the four most likely scenarios in their marketplace. They have employed financial tools integrated with current market metrics that will allow them to adjust their expenditures on a near time basis. They are conducting training that will empower their staff and some agents to assume new roles. It all makes excellent sense. We can do this!