OPTIONS REPORT FORSTRATEGIC PLANNING

BASED ON RESEARCH FROM THE JOURNEY OF DISCOVERY

With funding support from

18 August 2014

BCREA undertook the Journey of Discovery (JOD) so we could make fact-based decisions about how to ensure the continued value of BC REALTORS®. Over the past seven months a research team, in collaboration with BCREA leadership, has led an objective research effort to build an under-standing of trends and critical changes that could significantly impact the real estate profession by 2020. Based on nine extensive research reports and mul-tiple engagement events with REALTORS®, Brokers, and ORE (organized real estate) leadership from around the province, BCREA now has the current and targeted information necessary to create a fact-based, five-year strategic plan.

The research clearly indicates that the real estate profession is at a cross-roads. The role of REALTORS®, Brokers, and ORE has shifted and will continue to radically change over the next five years. BCREA, together with member board leadership, must proactively plan and then implement strategies to get ahead of this change curve. If we don’t, we will see external companies replace the role of ORE, and then it will be too late to catch up.

BC ORE has the opportunity to take a leadership role in adapting to the challenges and opportunities identified in the JOD research. To do this, BCREA’s strategic plan must respond to the challenges and opportunities forecasted for the next five years, and operationalize a plan that creates a more sustainable and thriving profession. The JOD research began with no preconceived outcomes on the future of BC ORE. Going into strategic planning, BCREA is not tied to any specific role or outcome for itself, but rath-er seeks the best outcomes for BC REALTORS®, Brokers, and Consumers.

Planning Our Future

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Image Credit: Crossroads: Success or Failure by StockMonkeys.com under CC Attribution 2.0 Generic

3. Number of BC REALTORS®: Changes in demograph-ics, REALTOR® entrance/retention requirements, and fee structures would shift the number of REALTORS® in the province. Given that the funding model of Brokers, regional Boards, BCREA, and CREA are all tied to the number of REALTORS®, changes would have a ripple effect across BC ORE.

4. REALTOR® Reputation: An increase or decrease in reputation would alter the Consumer/REALTOR® relation-ship. Honesty and ethical standards impact whether Con-sumers choose to use REALTORS®, and affect the level of trust in the relationship. Expectations of expertise and performance also shift based on whether REALTORS® are perceived to be innovative. (see Professionalism Report)

5. REALTOR® Value Proposition: As a climate of increas-ing Consumer autonomy and new technologies changes the real estate transaction, the value proposition for many BC REALTORS® has become increasingly murky. How REALTORS® define their value to Consumers will affect how and when Consumers use REALTORS® in the future. How ORE supports BC REALTORS® in ensuring a clear and compelling value proposition will become increasingly important. (see Consumer Autonomy & Transaction View Reports)

Preparing for 2020: Industry Factors

As part of any strategic planning exercise, it is important to understand the operating environment for the organiza-tion over that time horizon. For this reason, the Journey of Discovery process identified nine Industry Factors that will likely have a significant impact on the profession over the next five years. While BCREA’s efforts may influence these factors, they are much larger than our organization alone. It is important to understand the underlying relationship of each with BCREA’s strategic decisions. It is imperative to collectively discuss potential changes and the implications of those changes up to the year 2020. The factors have been listed alphabetically.

1. BC MLS®: With multiple MLS® systems across BC, ORE maintains different data standards, practices, and relationships with third-party providers. Potential changes could occur in the number of BC MLS® systems, which would have implications for ORE roles and data frameworks.

2. Consumer Expectations: Changing consumer expec-tations for both the transaction process and engagement with REALTORS® would challenge existing models of education, practice, and compensation. It could also create new needs and roles for BC ORE. (see Transaction View & Consumer Autonomy Reports)

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8. Structure of BC ORE: Our current structure divides roles and responsibilities in a way that may or may not still be in place by 2020. Changes could potentially occur in collaborations between Boards and/or BCREA, consolida-tion in the number of Boards, and/or in Board(s) breaking away from ORE. (see Rural & Urban Report)

9. Technology: New Technologies have the ability to alter and even disrupt the industry’s operating and business models. The ability of organizations to meet the evolving needs of Consumers and REALTORS® would have a direct impact on the value and effectiveness of BC ORE. (see Service Innovation Report)

At the Joint Meeting in September, we will discuss the potential outcomes for each of these nine Industry Factors. This discussion will identify assumptions about how the industry is likely to evolve over the next five years, and how BCREA’s strategic plan should anticipate and plan around that evolution.

Preparing for 2020: Industry Factors

6. Regulation: As a self-regulating profession, we have many levels of regulation that affect REALTORS®, Brokers and Consumers. Changes in one or more of those regula-tions could have dramatic effect:• The Real Estate Council of BC (RECBC) controls the

requirements to become a licensee, the number of real estate licenses, and brokerage requirements. (see Regulator In-Depth Interview Report)

• Member Boards and RECBC control ethical and legal infractions by REALTORS®. (see Professionalism Report Pg19)

• BC ORE controls the distinction between a REALTOR® and licensee. (see Service Innovation Report Pg8)

• The Competition Bureau monitors market competitiveness.

7. Significance of Brokerages: We’ve heard clear con-cerns from Broker/Owners of continued pressure on their business models, and the challenges faced by an aging Broker population with a limited number of exit strate-gies. Broker/Owners are struggling to find the individuals who have both the leadership skills and financial ability to purchase their brokerages. The role of ORE has adapted based on changes in brokerages. If the significance of brokerages shifts, the needs and roles of ORE will need to adapt along with it. (see REALTOR® Match Quantitative Research Report)

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A number of opportunities and challenges were brought to light within the five Forces of Industry Change Reports–Consumer Autonomy, Professionalism, REALTOR® Match, Rural & Urban, and Service Innovation. On the following pages, you will find Strategic Options that BCREA could undertake over the next five years in response.

The Strategic Options fit into four Strategic Categories:• Strengthening Professionalism• Improving Reputation• Enhancing Customer Experience• Encouraging Innovation

The BCREA Board of Directors and staff recognize that it would be impos-sible to achieve these Strategic Options alone. However, the pursuit of these Strategic Options is critical to ensuring BC REALTORS® thrive. Targeted and coordinated action will increase our chances of making a significant difference, and ensure we are not duplicating services across different levels of ORE.

As you review the Strategic Options, please note that they are not intended to be mutually exclusive; meaning BCREA may pursue all or a combination of Options based on discussions at the Joint Meeting and the chosen direction of the BCREA Board of Directors. These Options are intended to represent, in combination, the full extent of BCREA’s activities by 2020.

We look forward to discussing these Strategic Options with you in September.

Options for Consideration

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CATEGORY 1: STRENGTHENING PROFESSIONALISM• REALTOR® Accreditation• Quality Assurance• Educating the Next Generation of Leaders

CATEGORY 2: IMPROVING REPUTATION• Advocacy• Matching REALTORS® & Consumers• REALTOR® Brand Appeal

CATEGORY 3: ENHANCING CUSTOMER EXPERIENCE• Creating Extraordinary Customer Experiences• Central Research Source

CATEGORY 4: ENCOURAGING INNOVATION• Technology Evaluation• New Technology Investment

Strategic Options Index

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Category 1: Strengthening Professionalism

Consumer sentiment about REALTOR® Professionalism has remained largely unchanged over 40 years, ranking us in the bottom quartile relative to other professions. This also demonstrates that efforts to date have not moved the needle. Consumers don’t understand the distinction between a REALTOR® and licensee; they do not know about infractions generally, or specifically how to report them; they know little to nothing about ORE; and don’t know about E&O protections. Research indicates an emerging consumer sentiment that REALTORS® are a hindrance rather than a help for an efficient transaction.

To measurably improve, BC needs a transformation in our Professionalism initiatives. Based on past surveys of Canadian REALTORS® who consist-ently rank Professionalism as one of the most urgent issues for organized real estate to address, there should be broad support. Building on the 2012-2014 BCREA Strategic Plan’s focus to Advance Professionalism, we must move beyond Professionalism as a general term to recognize it as a multi-faceted concept with distinct categories–body of knowledge, quality, ethics, public service, licensing, association, and recognition. BCREA will use those com-ponents to create explicit initiatives that address different facets of the Profes-sionalism puzzle, and define expected behaviour to REALTORS®, Consumers, and communities.

Based on several months of discussion we have identified three Strategic Op-tions within Professionalism that could guide our focus–REALTOR® Accredi-tation, Quality Assurance, and Educating the Next Generation of Leaders. Together, we think these could have significant positive impact on perceptions of REALTOR® Professionalism both amongst ourselves and most importantly, by Consumers.

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One of the keys to increased Professionalism is the set of requirements by which licensees become REALTORS®, and the set of requirements necessary to retain status as a REALTOR®. While RECBC is responsible for licensee requirements, member boards and BCREA can set and shape additional requirements for BC REALTORS®.

BC REALTORS® want higher standards to increase value to the Consumer and to other REALTORS®. Operational functions around Accreditation include defining require-ment standards, evaluation systems, designations, specialty certifications, and bringing current REALTORS® onboard.

Research Support: JOD research highlighted three ways to increase BC REALTOR® Professionalism:1. Ensure REALTOR® proficiency and performance

significantly exceed those of licensees, 2. Create a tiered system of different levels of

REALTORS®, and 3. Return to the previous model of a fixed number of

REALTORS® such that market forces determine value and quality standards.

REALTOR® Accreditation

Michelin has a three-star system for rating restaurants across five dimensions. Receiving one-star is an immense accolade. Receiving three-stars is exceptional, meaning it is one of the highest quality experiences in the world.Image credit: Michelin via The Independent

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BC real estate has no standardized outcomes across the transaction process. A systematic approach to quality im-provement requires identifying service outcomes, and then creating the infrastructure to establish and maintain quality. BCREA could encourage a continuous improvement culture that ensures processes are constantly evaluated and improved upon in light of their effectiveness.

BCREA could fulfill two essential roles to improve quality: 1. Quality Assurance System: define, establish and main-

tain a series of optional Brokerage quality standards that are routinely audited, improved, and certified.

2. Quality Enforcement: host a common infrastructure for BC whereby infractions can easily be reported and tracked. This would standardize complaints entry, evalua-tion, judgment and access to rulings.

Research Support: During JOD research, Consumers mentioned wide variability in service quality. Consumers are having difficulty identifying top performing REALTORS®, and are concerned by the potential of ending up with a low-quality one. Due to an unclear and difficult process, REALTOR® complaints are likely under reported as Con-sumers would find it difficult to even know where to report, and REALTORS® know the personal time requirements would be extensive as the complaint is adjudicated.

Quality AssuranceOver a million organizations are certified ISO 9001. The International Organization for Standardization (ISO) develops and publishes a set of standards that third-party certifiers use to provide independent assessments.Image credit: Duraloy

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Education already plays a vital role in the Professionalism of BC REALTORS®. Transformative Education was identified in the 2012-2014 BCREA Strategic Plan as one of the components necessary for a Quantum Leap.

Research Support: We see many reasons for the expan-sion of Education both in terms of the scope of learning opportunities, as well as the structures that enable the learning. Based on JOD research, we are lacking in three areas: technology, leadership development, and innovation. All three are integral not only to increase Professionalism, but also to ensure REALTOR® success over the next five years.

Consumers perceive a lack of innovation by REALTORS®. Broker/Owners highlight the ongoing challenge of attract-ing new leadership who can manage the next generation of brokerages and guide the future of ORE. Other industries have overcome their innovation and leadership challenges through Centres of Excellence, which serve as places to build a culture of innovation through leadership develop-ment, best practice and research sharing, and training.

Educating the NextGeneration of Leaders

The GE Customer Innovation Centre in Calgary brings together government, academic, and industry experts to explore technologies across the oil & gas industry. Above is one of their simulation spaces for interactive presentations.Image credit: GE Grid IQ Innovation Centre tour by MRI Ontario

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Category 2: Improving Reputation

Word of mouth referrals are the main form of lead generation. Even as con-sumers move online to identify and evaluate prospective REALTORS®, the strength of both individual and industry reputations will remain the most important influence on future REALTOR® success.

Consumers are searching for REALTORS® who are both top performing and have the knowledge that aligns with their needs. However they are having trouble finding them. In the short-term, this may result in a slow erosion in the use of REALTORS® or loyalty. In the long-term, it will create a significant de-terioration in REALTOR® brand equity. In other words, ORE’s ability to match Consumers with REALTORS® is integral to the long-term strength of the REALTOR® brand.

We also need to face head-on the challenge of attracting young talent to our profession. This must happen for the sake of Consumers and Broker/Owners, but also REALTORS® who have spent their careers building the Profession, and want to leave it stronger than when they began.

We have selected three Strategic Options within Reputation to guide our focus–Advocacy, Matching Consumers & REALTORS®, and REALTOR® Brand Appeal. Together, we think these paint a picture beyond advertising campaigns and events, showing the depth of need in building a stronger brand that supports BC REALTORS® in the future.

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BCREA has long provided a Provincial Voice for REALTORS® through government relations, research and economic data. We anticipate an ongoing need for BCREA to be on the front line of industry advocacy, poten-tially expanding coordination at the regional and national levels in addition to the current provincial involvement.

BCREA can also enhance collaboration across regions, provinces, and nationally. As there are already moves afoot to consider different structures for ORE, BCREA can play an important neutral role between parties striving for greater efficiencies and innovation.

Furthermore, as RECBC continues with current regulation or changes regulation in how they protect consumers and set licensing standards, they could create new needs for advocacy by BCREA.

Research Support: New business models that promote shared ownership and avoid the need for licenses are chal-lenging the legal system. We should anticipate precedents being set by other industries in regards to new ownership models proposed under the sharing economy. Other poten-tial areas of legislative shifts could come in the form of REALTOR®/client representation and information access.

Advocacy

Protests against Uber in cities around the globe is just one example of the legal challenges brought on by sharing economy business models.Image credit: London anti-Uber taxi protest June 11 2014 035 by David Holt, Attribution-ShareAlike 2.0 Generic

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To ensure the long-term value of the REALTOR®, we feel it is no longer a choice of whether we assist Consumers in finding the right REALTOR® match. If we don’t, we will likely witness one or two of the following unfortunate realities:1. The number of Consumers who use REALTORS® will

dramatically or gradually decline, and/or2. Companies outside organized real estate will do the

work for us, and we lose control of the process.

Of course, we should do everything we can to prevent the first scenario. And the second is only destructive if ORE does not take an active role in helping these com-panies best match REALTORS® using the data we have. A poor match could be just as destructive as no match at all. Therefore, it is in the best interest of ORE to assist in making the ideal match between every Consumer and his/her REALTOR® counterpart.

Research Support: The majority of Consumers want to use a REALTOR®. The irony is that they cannot tell who the good ones are, nor who would be the best fit for them based on their personal profile and criteria.

Matching Consumersand REALTORS®

Google Ventures backed HomeLight creates personalized recommendations for Consumers by analyzing transaction data and licensing records of over two million real estate agents. Image credit: HomeLight via Techcrunch

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REALTOR® Brand Appeal

The value and strength of the REALTOR® brand is being challenged because of low REALTOR® trust, question-able value propositions, and concerns over value to the Consumer. BCREA can play a significant coordination and credibility role within BC–as well as with other provinces, and with CREA–on recruiting, awards, events, public recognition, and advertising. More importantly, BCREA can help BC ORE understand current perceptions of Consum-ers, and help reposition the REALTOR® for the next gener-ation of buyers and sellers through emotional experiences.

Two metrics can be used annually to benchmark the strength of the BC REALTOR® brand: aggregate percent-age of consumers choosing to use REALTORS®, and the number of new REALTORS®. Creating new structures across BC such as an apprentice program could improve perceptions of real estate as a desirable career.

Research Support: Research with Millennials revealed they predominately search by “real estate agent” rather than “REALTOR®,” demonstrating ORE is missing the Mil-lennial mark in how we promote members and not estab-lishing a clear differentiation from licensees. This poses challenges both to attracting Consumers and new talent. We also revealed supporting data on REALTOR® under-representation with younger demographics, with declines in the numbers of new REALTORS® year over year, while the older demographic continues to grow.

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Category 3: Enhancing Customer Experience

Research paints a clear picture of an increasingly involved Consumer–one who is interested in doing parts of the process autonomously, and other parts of the process in collaboration with their REALTOR®. Examples such as the IKEA effect demonstrate that consumers have both a higher appreciation for the outcome and a greater willingness to pay when they have a hand in creating the end product. Given these changing Consumer expectations, we have the near-term opportunity to design processes and experiences that anticipate high involvement, with Consumers at the centre of the process rather than the edges.

Our collective role is to help Consumers make good decisions. Our reputation depends on it. REALTORS® can support good decision-making by lending specialized expertise where needed. The other way is by providing Consumers with access to information and tools that help them to be more informed. We need to consider both. The real estate industry sits at a crossroad where signs of the middleman being pushed out of the equation are evident but not widely acknowledged by the profession.

We have selected two Strategic Options within Customer Experience to guide our focus–Creating Extraordinary Customer Experiences and Central Research Source. Effective implementation of these strategies foster a real estate Consumer who is not only more informed, but also more likely to use a REALTOR®.

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Every Four Seasons Hotel has a daily morning meeting called the “Glitch Report” where they review errors made on the previous day to look for new service opportunities. This creates a team culture of working together to exceed customer expectations.Image: dscn0953 by Alan Light under CC Attribution 2.0 Generic

Creating Extraordinary Customer Experiences

ORE can play a pivotal role in easing the buying and selling experience by eliminating friction points, which will likely increase transactions, REALTOR® trust, and professional reputation. JOD research revealed that Consumers are both in the dark about various aspects of the real estate transaction, while also feeling an increasing desire to be involved with the process itself. Equipping Consumers with the tools to navigate the transaction experience would likely result in both higher customer satisfaction, and higher qual-ity service delivery.

Standardized outcomes for service excellence would clarify what Consumers should expect from their REALTOR®. Conversely, REALTORS® would be inspired to achieve both consistency and excellence in service delivery.

Research Support: JOD research revealed a potential connection between the methods and level of REALTOR® compensation, and the overall satisfaction levels with the real estate experience. Compensation models where incen-tives are tied directly to customer satisfaction encourage REALTORS® to provide high quality customer service as exemplified by Redfin’s 97% satisfaction score.

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Under the mission of “free access to the law,” CanLII is a centralized database that gives the general public the same access to information as the Canadian legal profession. CanLII supports a more informed legal “consumer” in working with legal counsel and in self-representation. The project is funded by Canada’s notaries and lawyers.Image credit: CANLII website

Currently, there is no location where real estate research is created and centralized to create a complete market pic-ture for REALTORS® and the general public. REALTORS® have access to pockets of market data that only scratch the surface of how industry data can be ana-lyzed and visualized. Consumers are challenged by having to assemble information from various sources. This frag-mented information landscape means that both Consumers and REALTORS® have to search multiple sources, and in many cases make subjective deductions about certain market information due to a lack of available data.

BCREA sees a significant opportunity to become the research organization for BC REALTORS®, Brokerages, and Consumers by both creating a richer data picture and by creating a central hub.

Research Support: In the words of one of the experts we interviewed, “information has a great desire to be free and open.” Based on analyses of other industries, external organizations will step in to provide that information if ORE does not do it ourselves. By allowing a non-ORE entity to become the central information hub, we will lose the ability to serve REALTORS® in ways we think best for the profession.

Central Research Source

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Category 4: Encouraging Innovation

JOD research makes a clear case that Consumers perceive a lack of innova-tion by REALTORS®. Both high service quality and being perceived as innovative are key determining factors that influence whether consumers switch service providers and likely whether they continue to use REALTORS®. Companies will step in to fill the innovation gaps left by ORE, as exemplified by the recent merger of the two portal giants, Zillow and Trulia.

Organized real estate is in an ideal position to support strategies encouraging greater innovation across BC real estate, as well as to ensure BCREA’s services are innovative. In fact, these two levels of innovation should be linked as a measure of BCREA future success.

We have identified two Strategic Options within Encouraging Innovation to guide our focus–Technology Evaluation and New Technology Investment. These two efforts could boost the “Innovation Quotient” of BC REALTORS®, ensuring both the long-term sustainability of the profession and a valuable role for BC ORE.

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TechnologyEvalutation

BCREA could play a unique role in being an objective evaluator of new products and services being created for REALTORS®, Brokerages, and Consumers. We think of this concept as a kind of Consumer Reports for real es-tate, where these three groups can find unbiased product tests and ratings, articles about new product and service categories, and research. This could alter both the level of technology adoption by REALTORS® and Brokerages, while radically improving industry efficiency by having a single organization generate evaluations that are available to all. It could also create a more informed Consumer.

Research Support: JOD research revealed that the level of technology adoption is highly correlated with REALTOR® performance. The highest performing REALTORS® are those leveraging new technologies the most. With a complex number of products and services being created for the real estate industry, REALTORS® and Brokers are facing a unique challenge in trying to keep pace with new tools that can alter their practice. Consumers are also demanding more technology tools.

Consumer Reports recognizes the challenge Consumers have in making informed decisions. They offer a subscription-based model for access to unbiased product testing and ratings, research, journalism, public education, and advocacy.Image credit: Consumer Reports

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Innovation can come from direct service delivery by BC ORE, and/or indirectly by creating an environment for oth-ers to succeed in creating new technologies. BC ORE investment could come in many forms. While JOD re-search identified a proliferation of “technology incubators” in U.S. real estate from NAR, Inman, and Realogy, this is only one way to encourage innovation.

BC ORE does not have the resources to compete with the private sector. However, we can leverage our strength–nearly 19,000 REALTORS® members. BC REALTORS® are a valuable pool of talent and users who are largely inaccessible to new companies. BC ORE can use networking events, mentor resources, and marketing channels to foster stronger connections between technology companies and REALTORS®, Brokerages, and Consumers. This increased collaboration could improve the likelihood of success for new real estate technologies, while providing direct benefits to BC ORE “customers” through the development of new tools and ways of thinking about this industry.

The primary and secondary effects of direct investment in new real estate technologies could significantly improve innovation at the provincial level.

New TechnologyInvestment

While NAR’s REach program is directly managed by its investment wing, Second Century Ventures LLC, other organizations partner with companies like Techstars to manage the program for them.Image credit: Techstars, Powered By program

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