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A 30 year old real estate brokerage in the  East Bay region of California, Century 21 Heritage, closed its doors last month. The  company cited the slowing market in  their decision, but highlighted the internet putting pressure  on  the firm. Customers  are using  the internet and to use it properly to grow the business is putting pressure on the margins as customers are expecting other forms of advertising to  be used concurrently.

I have the feeling that shrinking margins and the internet are going to force real estate brokerages from  advertising in newspapers and home magazines. They will be smart to reallocate their assets to the internet where  the customers are looking these days.

Churchill specifically pointed to the Internet as a catalyst for change in the industry, providing consumers with more information but at the same time sapping resources from many real estate companies.
“The advent of the Internet is a wonderful thing for the agent and the consumer, however (providing online service) in the correct fashion is extremely expensive,” she said. “At the same time, advertising costs have continued to go up. Even though 85 percent of the consumers find us on the Internet, we are still having to advertise. Again, the margins are extremely small.”

Robert Kleinhenz, deputy chief economist with the Los Angeles-based California Association of Realtors, confirmed that the latest technology and brokers nearing retirement — CAR’s largest demographic — may be the most critical factors in a five-year-long trend of consolidation in the industry.

A slowing market is also a cause, he said.  via Inside Bay Area

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