Above: Howard Hanna Real Estate Services CEO Hoby Hanna. Photos by AJ Canaria.
There’s a sea change confronting the residential real estate industry, and Hoby Hanna isn’t mincing words: “Brokerage is not enough anymore. Not for Howard Hanna, not for your company, not for our agents, and ultimately not for the consumer.”
Hanna delivered this message to an audience of almost 400 brokerage leaders at RISMedia’s 38th Annual CEO & Leadership Exchange in Washington, D.C., earlier this month. During his presentation, “Longevity, Resilience and Growth: An Independent Blueprint for a Shifting Market,” the CEO of Howard Hanna Real Estate Services spoke candidly about the industry upheaval and market forces that are necessitating a paradigm shift in today’s residential brokerage landscape.
While Hanna stressed that selling homes and serving consumers will always be at the core of real estate brokerage, he urged broker/owners to broaden their view and their companies to encompass the larger “housing business.”
“The housing transaction,” said Hanna, “is already being reorganized. It’s not just the sale of the house. It’s brokerage, it’s mortgage, it’s title, it’s insurance, it’s technology, it’s data.
“The question is no longer whether housing will become more organized. It’s who will shape the future, whose interests it will serve, and where we, as real estate brokers and salespeople, sit in that. So either we can decide to organize or we’ll get organized.”
With the housing market representing some $55T in wealth, Hanna cautioned the audience on the dangers of fragmentation as companies outside the industry seek to claim a share of that bounty.
“Over the next decade, the ‘silver tsunami’ will accelerate the transfer of that wealth from one generation to the next, creating significant opportunities for assets to be reinvested in what we do and love: real estate. And yet the industry surrounding it remains totally fragmented,” said Hanna.
“We all talk about consumer service, and we’ve made the consumer the general contractor in the most important acquisition in their life. That model has to change.”
Hanna appealed to brokers to build a more connected experience for homebuyers and sellers—with the caveat that “no single company should control housing.” Instead, he encouraged services to work together responsibly to create “a simpler, more transparent, more efficient and ultimately, less expensive” transaction experience for the consumer. And at the center of it all, always, the agent.
While many brokers are voicing concern over widespread consolidation, Hanna said leaders should instead be focusing their attention on non-brokerage companies seeking to control the entire housing transaction.
“What is changing right now is who wants to organize the transaction,” he said. “The largest mortgage company is now a real estate broker. The largest portal is a mortgage company. Businesses that once occupied one part of the transaction are saying, where do we come in and take the whole transaction? They’re entering the housing ecosystem. So the industry is being reorganized…are we just sitting back and watching?”
Hanna broke down the financial incentive driving firms to extend their tendrils across the entire housing ecosystem, comparing the tight margins surrounding the brokerage portion of Howard Hanna’s business (between 6% – 7%) with the significantly greater margins of mortgage (14%), title (21%) and insurance (36%).
“You don’t think other people are looking at that and saying, ‘Hey, the loss leader is brokerage?’ You don’t think other businesses are saying, ‘Let’s cut the broker out. Let’s take them out for a 4% margin. We’ll just be an insurance company?’ That’s who’s looking at our business,” he said. “That’s where the change is.”
This is why, Hanna stressed, brokerage leaders must be at the forefront of delivering the full spectrum of housing to consumers, not outside companies. “Done well, that integration means fewer handoffs, less repeated work, better continuity of transaction, clearer accountability and real savings,” he said.
“It’s not just about capturing more dollars,” Hanna added. “It’s capturing the consumer experience and hopefully making it more efficient, smoother, and reducing cost friction…we’ve done all that as a company and you can too, because none of it happened overnight.”
“Every company in this room has to decide what it wants to become.”
Data: ‘The next moat’
Hanna then turned to what he described as the “next moat as we look toward the future”: brokerage data.
“For 20-some years, our industry surrendered pieces of our digital consumer relationship,” he said, “much of it through MLSs; not as a criticism, but MLSs were built as a B2B, not a B2C—not to compete with those of us who are investing in our own companies, but to support us, to support a marketplace.”
Hanna emphasized his support of the MLS, but also advised them to remember who their consumer is: the brokers who provide the data. Hanna believes that data is critical to helping agents remain at the center of the transaction, despite advancements in AI and other technologies.
“A great agent can tell you to buy it or not buy it. And why? Because they become part of your family and your relationship. Our job is not to protect agents from technology, it’s to organize the data and put the best technology and services in their hands, making them more valuable,” he said.
As the debate surrounding the ownership and distribution of data plays out across the industry, Hanna believes that, ultimately, “Whoever organizes the housing data will shape the housing experience. We realize how valuable that data is and so do outsiders who are looking at our industry. We need to figure out how we come into a more trusted advisor role by taking that data.”
Six moves for taking control of the housing ecosystem
Hanna outlined six ways for the brokers to take control and organize the housing industry, before those on the perimeters of real estate brokerage do it for them:
1. Consolidate with purpose. “Bring like-minded, culturally aligned companies together so that you have greater resources to grow. Scale isn’t about bragging rights. Scale done right can fund talent, technology and compliance.”
2. Attach “essential services” (mortgage, title and insurance). “They should be available in every transaction. It shouldn’t be a handoff (making) the consumer the general contractor. Let’s do that for them in a really smooth way with full disclosure and real consumer choice.”
3. Serve the home for life. “A closing should be the beginning of the homeowner relationship, not the end of it.”
4. Organize your data. “Know what your organization creates, where it goes, who it benefits, who benefits from it, and make sure that it comes back to you and your agents without a fee.”
5. Invest in your agents. “What are you providing for them to grow, for them to have an extraordinary experience with their consumers?”
6. Think in generations. “Housing runs in cycles. Many of you have already seen this cycle. Many of you have lived it. Markets do this. They ebb and flow.”
Ultimately, said Hanna, brokerage leaders have three paths ahead of them when it comes to their future success: build it themselves; find the right partner and join forces; or sit back and let the market decide their fate.
“You can preserve the status quo and wait and feel safe until the market makes the decision for you. Then someone else will set your timeline, define your values and write the terms of how you’re practicing business,” said Hanna.
Waiting is also “the most expensive path,” he added, suggesting that finding the right partner is often the most expedient and lucrative path to brokerage growth and success.
“Find an organization that builds to your strengths and brings the capabilities you need without taking away the leadership, relationship and identity that made your company valuable in the first place,” he said. “Don’t lose that. The strongest partnerships don’t erase what made either company successful.”
Hanna scoffed at the notion that industry consolidation is barrelling toward one or two companies controlling the entire market. “There will be a lot of us left,” he countered.
“There will be a set of stronger connected housing companies and platforms competing to serve the customer, and the race is already underway. So why shouldn’t it be us? By us, I don’t just mean Howard Hanna. I mean the operators, agents and companies in this room that run this business…why not improve what we’re doing and take control of that business in the future?”
Hanna closed his presentation by issuing a rallying cry.
“My challenge to everybody is simple: Stop defending yesterday’s brokerage. Start building tomorrow’s housing business. Don’t let people who’ve never understood this business come in and change it for us or to us. Let’s do it ourselves…let’s not surrender the data and the relationships that we’ve built for all these generations and years, because housing is essential and it does deserve an industry that’s organized to support the consumer.”
