To say that real estate is in a state of deep reinvention is like saying the market is bad. We all know it. We're all looking for ways to start over and build anew.

Yet, when I suggested in a previous guest article (see "Brokers, change your ways [2]") the notion that brokers should rethink their real estate office space and get rid of it to cut costs, many protested.

Some said we need space to show that we operate a professional business.

I say, if you're looking at space as a sign of professionalism to your consumers it's really time to rethink what the word "professional" means, and how that might be illustrated today — especially within the context of what a real estate office is and should be going forward.

Space, a final frontier

If you believe in a consumer-centric business model rather than or in conjunction with an agent-centric model, then the question remains: Do consumers need four walls in order to be convinced that a brokerage is a legitimate operation, and do agents need space or order to feel professional?

We learned from the exhaustive surveys performed by both the National Association of Realtors and California Association of Realtors that consumers judge agents based on whether they meet their service needs or not, rather than where agents spend their day. This much is crystal clear as indicated by survey respondents' expectations for quick responses from agents.

Possessing a cubicle, on the other hand, rarely if ever shows up as an indicator of professionalism or a customer need.

So where does space enhance the experience for both parties? We know that a cool, clean, unencumbered space — conveniently located and designed to optimize your services, extend your brand position and build a culture — is critical to any organization.

But the old model — that catacomb-of-cubicles-that-barely-sees-human-life space; the maze-of-PCs-printers-phones-and-fax-machines space; the back-office-conference-room space; the uninviting-waiting-area-toward-the-front-door-with-a-couple-of-chairs-for-visitors space — is for the most part expensive, useless and enhances little for your agents and the consumer.

Turning space into a great place

Let's look at how a consumer-centric broker might approach space for their real estate office today. For that preview, I offer you a look at one of the world's brand geniuses: Apple Computer.

Apple did not start out with retail stores in every major city, but it has them now. Why? Because its executive team thought about what a consumer would need in a retail space. More than just a cash register where you purchase your Mac, iPhone or iPod and then leave until next time, Apple stores indeed have become consumer-centric hangouts.

From the Genius Bar, where you can take your laptop to be examined or get help with a particular problem, to the simple treat of being able to stop in and check e-mail on a glorious new machine, to the space dedicated to teaching users about new Mac applications — these stores are packed daily.

Yes, real estate is to computers what apples are to oranges, but your customers are the very same people and I can’t imagine them not being intrigued by real estate providing a very similar type of experience.

By building consumer-centric stores, Apple took whatever brand experience they had to levels unheralded in retail. I believe this model translates well for real estate brokers who constantly struggle for meaning in their brands, loyalty among consumers, and their agents as well.

Transformation

If you're looking to cut costs, think about the possibilities. Either keep the large museums filled with old machines and empty spaces that draw little interest and hardly leverage the treasure inside, or build and occupy sleek destinations that offer insight, hands-on touch, a "genius bar" of local agents who waft interest into the street.

Bricks and mortar for real estate need not be cold and boring. Dismantle the cubicles. Install a free wireless network and a corner of computers where people can come in and surf the Web for new real estate listings. Add couches where consumers can feel relaxed while discussing the type of home, neighborhood and future they want to build for their families. Turn your place into a living room rather than the clinic so many offices look like today.

Quit what doesn't work and start reinventing things that do.

Seth Godin covers this practice extensively in his book, "The Dip," and nowhere can it be more appropriately applied than to today's brokerage model, which is running full steam on yesterday's expense engine. Brokers are struggling to stay on top of their business, as the cost of maintaining failing operations add insult to the injury of the declining economy and stagnant housing market. Many brokers are in need of a new direction to help them through the remainder of this housing recession.

To do this, they need to let go of old habits, processes and the apron strings of traditional models that continue to cut into revenue and that no longer make sense. Here are the six things brokers need to let go of today:

People. Reducing headcount is the most difficult thing for us all to do but is also the most logical place to start. It's heart-wrenching and personal and it never gets easy. Unfortunately, however, it needs to be done and the sooner the better. Begin with the folks and/or departments that are not performing. Trust that their lack of production is not only affecting the firm, it's affecting others inside the firm that are producing. When you take this sort of action, the signals you send across all channels will, in fact, energize the entire organization. Next, remove those parts of the organization that are not necessary to your core business. If it isn't core, you might very well be able to reduce its cost by outsourcing. This is particularly true of administration, internal support, information technology, accounting and other such groups. Become better organized and leverage technology and you won't miss the "luxuries" of support staff to which you have grown accustomed. Start now.

Expensive Applications. Another by-product of the boom are clunky brokerage applications that can be easily swapped for freeware that works as well if not better than what your vendor custom-built for you years ago. From mail servers to comparative market analysis (CMA) tools and lead management, alternatives are now available that did not exist a year ago that are sleek, easily programmed and simple-to-use and can replace a host of aging functionality. Brokers, think of replacing your e-mail system with Google or Yahoo mail. Think of replacing your contact management system and calendaring with ones available for FREE. When you have a system that you get only 3 percent use out of, is this worth the cost?

Web sites. Is your Web site designed to be consumer friendly? Does it offer the tools and information that a CONSUMER requires? If not, throw away that old Web site and replace it with a new one that does. Your site should attract and engage customers while allowing you to capture business. Remember that your office on Main Street has been replaced with the one on the Web.

Advertising. I know some sellers still expect print ads to advertise their homes, as do agents. But how much longer can brokers continue to feed these fantasies? And so what if you've advertised on search engines for the last five years. Are these efforts returning value that pencils out at the end of the day? Too much of brokers' money is being wasted on the wrong ad buys and destinations that no longer provide the best visibility and return on investment. And even more money is wasted on the ads themselves, replete with bad copy and missing the key triggers that will incite a quality call-to-action. Brokers, start tracking your Web ads. Measure every penny spent. Scrutinize the ad copy. And quit everything that no longer works.

Desk fees. Granted, this is how some brokers make money and yet even the term seems so antiquated as the need for a desk — let alone many of the things that come with it — are of no use to agents today. Analyze the tools you are supplying your agents and how often they are used (if at all), then compare that to what you could be offering them that applies to today's business. You may find that many of your agents are already paying outside vendors for things you could be providing, such as Web sites, blogs and listing syndication, among tools and services. Study your own agents, find out what they need to operate efficiently, and match these needs to the most basic functionality they crave. You will find that in many cases you are overpaying for technology that is not even being used.

Physical space. Today, it is possible to run an entire company virtually. Agents don't need office space. Accounting departments don't need office space. IT people don't need office space. In fact, brokers don't necessarily even need in-house accounting or IT staff since all of these services and more can be outsourced. Between task-flow software, cloud computing, digital paper and e-signature, and working from home, most medium-sized companies can go completely virtual and most very large firms can scale down immensely. Seek out a $500 lease on office space for meetings, and relegate your agents to work from Starbucks and the host of public destinations where free Wi-Fi exists. Let's face it: As walk-in traffic has waned, agents need to be as public and available as they can.

We are in an incredible time of transition in the real estate industry. Brokers are continuously rethinking costs, investments and processes, and considering options to cut costs and improve efficiency.

While the country is in a financial tailspin, the housing market is already bruised from taking punches over the last two years. Plenty of brokers have already folded, crumbled by failure to downsize and cost cut. Today’s times call for lean budgets, when all brokers – no matter the size – should be reviewing their operational waste and sharpening their ax.

We previously discussed in this blog how brokers waste tons of cash on unnecessary IT departments with elaborate systems such as exchange servers along with their salaries that could be easily replaced with free online systems like Google and call-in help desks.

So what else can you do beyond choking the IT department?

Operationally, there’s plenty. As I visit one brokerage facility after another all I see is waste. To you they may look like expensive copy machines and phone lines, and store rooms filled with file cabinets and stationary. But in today’s times, I see them as unnecessary leases, useless square footage and easily replaceable services.

Below are five things brokers should consider as a way to save money and radically shift your processes to meet the future head on.

1. Ax your administrative transaction help.  Tons of brokers employ what are known as expeditors, people paid to follow up on details of their agents' deals. Given today's climate, there is no reason why agents cannot be persuaded to do these things themselves. For many of these follow-up items, an agent simply needs to set up a tickler on their calendar to remind them to make a 2-minute phone call or check that a document has come through with the required signatures.

Follow-up resource:  Some new tools available online to help expedite this are www.jott.com and www.rememberthemilk.com.

2. Ax your office personnel.  Let's be honest here. With most agents living a mobile lifestyle away from the office, and with most offices no longer entertaining walk-in traffic, why pay someone to answer phones and make copies? Between call forwarding and electronic processes, i.e., tablet computers and e-signature software, your agents should be handling both of these operations anyway, so why pay a salary to push paper around? Agents should be servicing leads that mostly come in via the Internet directly on their smart phones, not via a desk phone answered by someone who takes a message on a Post-It note – services and supplies you pay for.

Follow-up resource:  Consider sources such as www.liveperson.com to connect your Web site to your phone.

3. Rethink your Internet lead management group.  What I'm hearing is that many brokers employ a team of people whose job is to follow up on the lead forms that come in through the brokerage Web site. With today's housing markets as slow as they are, I see no reason agents can't find the time to do this themselves.

Follow-up resource:  Consider sources such as http://www.Realping.com to get consumers connected with your agent immediately or considering using live chat on your site to route interested parties directly with agents who are online. Look into http://www.meebo.com or www.plugoo.com

4. Outsource your finance department.  Again, if the volume of transactions is down as statistics show, you don't need a team of people in-house people to manage finances. Shrink it down to one person if you feel you still need someone and outsource the rest to a service that handles this more effectively and more cost efficiently than a full-time employee. Or outsource the entire process.


Follow-up resource:  Look into services such as http://www.accountantsoffsite.com or www.QuickBooksOnline.com.

5. Downsize or eliminate your physical real estate.  Your agents aren’t employees. Unless your revenue model is based on desk fees, why do you feel obligated to supply individual works spaces to agents that are hardly ever there? I’ve seen the occupancy rate at broker facilities and they are, for the most part, never more than 30% full. The bulk of your agents' work takes place outside the office. So why pay premium retail prices to maintain oversized bricks and mortar? Plenty of innovative and intelligent brokers have proven that a virtual office can work very well in this industry. In fact, there are examples of brokers who vacate large buildings they own, lease them out and relocate into smaller, more affordable spaces.

An aggressive combination of all of these strategies could save you tens of thousands of dollars each month, depending on your brokerage size. Just switching from your mail server to Google mail (for brokerages who require 200 mail addresses and under) can go from whatever you currently pay to $0.00 per month.

Times are lean. Brokers need to get mean if you want to survive.

ROI is something we all talk about in business. It's the tell-tale signal that your efforts are either working or they're not. While it sounds easy enough – test, measure, tweak your campaigns – the problem in real estate is that most brokers aren't doing it. Many don’t even know where to start.

Brokers: It's time to seriously ask yourselves, do you really know your return on investment for each and every dollar you spend on technology, lead generation and conversion? In a time when business is scarce, you can no longer ignore this key component. In fact, you should rely on these measurements now more than ever.

Three things to consider today:

You've paid someone to build your Web site, but is your site capturing any leads? Is it delivering any value to you at the end of the day? Are you closing business directly due to your Web site's efforts? How can you know for sure?

Are you paying to publish your listings or send feeds to other Web sites? If so, do you know exactly what you are paying, whether this exposure is converting to closed business and what the price per closed transaction is?

Are all your eggs in one basket? If you're still using print, you probably see this as a big expense. Do you know whether this cost is returning anything to you? If you pulled all your advertising at once, would it make a difference to the amount of business you have coming in? Try it.

Your business depends on you mastering calculations like this. It is important to analyze the source of every lead that comes your way, and it's also not that difficult. Here's how to start:

Go to your Web site provider and get a full report on where all your traffic is coming from. You have to see for yourself whether it's worth it to continue paying third-party publishers and nothing speaks louder than cold, hard facts.

Upload listings feeds to a variety of sites in order to diversify your potential sources of consumer leads. Analyze each feed individually and in relation to all feeds, then rank them according to which are sending you traffic and which are not. Pull your feeds from any place that does not generate traffic or pales in comparison to your top destinations.

A radical, yet highly effective approach to analyzing ROI is to pull all ads and feeds from every place for two months. This will open your eyes to what is working and what is not.

If no one in your office can produce a simple spreadsheet that shows a direct line of where every closed transaction came from, then you aren't properly tracking your ROI.

And if you’re not tracking ROI, well, you can be certain you’re wasting money.

Most real estate brokerages didn't have IT departments before the '90s. Then the age of computers and Web sites came. Now every office in the country has a costly department that keeps Web sites running, listing feeds live and mail servers breathing.

The reality is the smartest business decision a broker can make today is to cut loose their IT department. In the age of outsourcing, this is perhaps the easiest thing for brokers to let go while enjoying a significant cut to operating costs.

Coming from a person with a heavy technology background, you're probably wondering why I would advise dumping your tech employees. It's simple: IT departments just aren't needed to the degree that many brokers now have them. Brokerages are sales businesses, and should be run as such. Brokers really have no business operating huge mail servers, tethering agents – who aren't even employees – to their in-house legacies. They certainly have no business building customized technology platforms.

From an agent's perspective, it doesn't make sense to get wound into a broker's system, only to have to deal with prying out your contacts and mail when it's time to move on. After all, agents are independent contractors. Why should they be tethered to a broker's mail server like this? It's a waste of money.

Many small businesses today are following the mobile computing trend, setting up company email using the Google Gmail platform, utilizing online document storage and other Web-based applications from Google Amazon and others. There's no reason brokerages can't do this too.

The most underutilized person in a real estate office is the office manager. Brokers looking for ways to streamline costs and processes should pay close attention to their managers and how they spend their time. A good office manager could easily oversee the processes currently owned by IT staff.

It's time for brokers to return focus to running their office as a business, not a technology center. Most of younger agents coming into the business these days will be quite comfortable with this arrangement and you’ll restore some sensibility to your P&L.

Let's get back to the business of real estate, not the business of technology.

Roughly 900 MLSs serve real estate markets across the United States and nearly all of them are in danger of becoming extinct. It’s time for MLSs to realize there is a new master in town – the consumer – and they will need to shift their thinking to how to serve this segment to stay alive.

The MLS mess is evident on many levels. Inconsistent methods for measuring and communicating basic property data continue to plague the systems. The same parcel can be measured in square feet within one MLS and as acreage in another. One MLS will record a partial bathroom as one-tenth, and another simply says partial bath. Some markets still struggle with the hard grip on information like those in which MLSs will not allow property addresses to be displayed.

This mess causes unbelievable problems for technology systems, brokers who are trying to serve areas that fall into more than one MLS’ turf, and consumers who just want to be able to compare homes in their searches.

It’s true that MLSs were not built as consumer utilities, but the reality is that the world has changed drastically since most opened their doors many decades ago. Because most MLSs do not feel the need to serve consumers, an unmet need already has been seized by online companies offering easy access to information.

Here are three things that brokers, agents and MLSs should do now to shift their place in the new world and secure value propositions that are consistent with the needs of the marketplace:

1. Make data transparent and consistent. Real estate data needs to be readily available to everyone in order to conform to today’s standards and the way in which consumers expect to interact with the industry. And this data needs to be consistent. A partial bathroom must be defined and consistent from MLS to MLS – at least among geographically neighboring MLSs.

2. Accept their new roles. We all understand that MLSs initially were not built as databases to be seen and utilized by consumers, but it’s time to grow past this and catch up with the modern world. MLSs and agents alike need to get beyond the notion that they are guardians of some secret treasure. Information is ubiquitous in a Web-enabled world.

3. Become consumer-centric. Once everyone accepts that they have a new role with consumers beyond information gatekeeper, each can focus on building an incredible set of services around the data that is now everywhere. MLSs can focus on providing technology or governance services to members. Agents can focus on helping consumers interpret all this data and process it in a way that helps them meet their housing goals.

Releasing data is the best thing that could ever happen to the real estate industry. When consumers reach a point where they have so much information to the point of being overwhelmed, suddenly, the agent is even more necessary to the process. Consumers need the expertise of an agent to help guide them through all this information and match it to their lifestyles in a way that makes sense.

Today, all online real estate searches start with a 30,000-foot view of the earth, then pull you into states and cities. If you’re lucky, you get neighborhoods that you can understand in the terms that you have in mind. After this, you must draw parameters around your preference for number of bedrooms, bathrooms and square footage.

But when is the last time that a buyer stepped into a real estate agent’s car and laid out their desires like this? When seeking our next home, we tend to think more about our lifestyle. We want to be able to walk our kids to elementary school and not have to go more than five blocks to get basic grocery items, as an example. A park would be nice.

This is the way we think about buying our next home. This is the way we think about where we want to live. Yet, no MLS systems or real estate search sites capture information this way, let alone enable agents and consumers to search in this manner. Agents include descriptions next to listings, but people rarely pay attention to those due to the twisted meaning of phrases like “cozy and comfortable,” which means small and cramped, or “urban and hip,” which often means crime-ridden and grungy.

What’s missing from real estate is a system that helps push matches to consumers based on their lifestyle choices, their demographic. These systems exist within other verticals. Just look at Amazon, where you can search for a book and be led down a path that offers other books you may be interested in based on what other people who looked at this book also looked at or purchased.

Everyone in real estate has the same product with no different ways of presenting it.

One way to solve this problem is to build systems that capture this information, systems that capture and quantify what defines a livable neighborhood based on buyers’ real preferences. This system needs to capture what the buyer tells an agent when they first meet. “We want a nice, quiet neighborhood where people are friendly and kids have a place to play together. We want a house that fits our family of four, with room for grandma when she visits.” This, rather than “2,000-square-foot rancher with four bedrooms on a quiet street.” See the difference?

It is critical that real estate search systems begin to capture information about what is just down the street or three blocks away, what a school that’s rated a “four” really means, what a buyer is really looking for when considering their next move.

Maybe it’s a wiki that captures this lifestyle information. Maybe it’s agents taking note and quantifying the livable aspects of neighborhoods. Or maybe it’s deeper integration of various data into real estate search. Whatever the technological answer, it needs to infuse meaning into real estate search. If Amazon can do this for books, it can be done for homes and lifestyle.