What is the reason real estate brokers are closing offices?  I believe this is the result of a convergence of factors, but there are two main reasons, and in some ways this plays out to the benefit of buyers.

Why Real Estate Brokers Are Closing Offices

First, there are fewer buyers than there were in the good times.  This is obvious, and this has hit the large overhead bricks-and-mortar brokerages hard.  Many are going out of business.  But it is the implications for buyers and sellers that are of interest to me.  For buyers who are qualified to buy now either with cash or a large cash down payment (or a high credit rating and high income), this real estate market is not just a buyer’s market, it is a super buyer’s market.  Later I’ll write an article about the terrible mistake sellers are making in this market when they have an interested buyer, and it is a mistake that is literally chasing good qualified buyers away.  (Imagine being a seller who looses that one buyer in a hundred in this market.)

Real Estate Brokers Are Closing Offices

Second, real estate brokers are closing offices because they have incredibly high overhead and not enough income.  Buyers and sellers no longer need the buildings.  In fact, clients don’t care about the buildings.  What sellers do care about is the marketing (effective marketing), a professional with experience that knows how to get the job done, and an agent with a vast Internet presence (which is where buyers are showing up).   Buyers want a professional buyer’s agent with integrity and experience.  The traditional brokerage is learning that the phone no longer rings off the wall, if at all, that print advertising and local radio advertising (not to mention T.V. and billboards) simply don’t connect with buyers anymore.  Of course, that leaves their listing clients unhappy, too.

What buyers and sellers are looking for is not a brick building but a professional who has a business model that bridges the gap to the new marketing approach that is so powerful on the Internet.  It is absolutely amazing how the Internet has set so many consumers and businesses free to connect in entirely new ways.  I’ve written a book on this subject entitled, “The New World of Marketing for Real Estate Agents,” which is available on Amazon.com.

Real Estate Brokers Are Closing Offices:  The Spin

I’ve been fascinated with how brokers who are closing offices are framing their business failure.  ZipRealty recently announced they are closing offices in 11 markets.  They don’t admit how many offices they are closing, just that they are closing offices in 11 markets.  That could represent a lot of offices.  They are also laying off field sales staff by 35% and making huge reductions in “infrastructure and costs associated with the Company’s legacy employee-agent business model.”  So what does their news release say?  It doesn’t tell why they are closing offices, what was wrong with their business model, or why they did not anticipate these dramatic changes.

Instead of a story headlining the topic, real estate brokers are closing offices, the story starts out like a great success story, “ZipRealty, Inc. (NASDAQ: ZIPR) announced today a series of changes to enhance the Company’s focus on core strengths in technology, online marketing and its most attractive local real estate markets.”  Isn’t it amazing how some will spin?  We all know politicians are typically spinners, but now real estate brokers are spinning.

Buyers are much smarter than the crowd of brokers and agents out spinning.  Buyers simply use their search skills on the Internet to find a buyer’s agent and search the MLS, and they do all that from the comfort of their homes any time of the day or night.  They don’t need a large expensive real estate office.  No wonder real estate brokers are closing offices.

Last Updated on September 4, 2011 by Chuck Marunde