Brokerages face threats from AI and shrinking profits

Real estate brokerages are navigating a landscape filled with challenges, from shrinking profit margins to the rapid advancement of AI technology. At HousingWire’s The Gathering, industry leaders debated whether these factors could lead to a mass extinction of brokerages. While opinions varied, all agreed that agents and brokerages will persist, albeit in evolved forms.

Key Threats: AI and Profit Margins

Panelists identified two major threats:

• Shrinking profit margins: With companies like Rocket and Zillow aiming to reduce transaction costs, broker compensation is under pressure.
• AI technology: While AI won’t replace agents, those who don’t adopt it risk falling behind.

The Evolving Role of Agents

James Dwiggins, co-CEO of NextHome, emphasized that agents remain central to transactions, serving as guides through emotional and complex processes. However, he predicted a shift toward ancillary services and potential consolidation in the industry.

Linda O’Koniewski, CEO of Leading Edge Real Estate, countered that focusing on core competencies—like selling real estate—can still yield success. Meanwhile, Craig McClelland of Local Realty stressed the need for profitability over growth, warning that brokerages must adapt to survive.

AI’s Impact on Efficiency and New Agents

McClelland and Dwiggins agreed that AI will enhance efficiency but could make it harder for new agents to compete. Dwiggins noted AI’s superior ability to handle tasks like comps and offer writing, urging brokerages to explore AI adoption.

The Future: Consolidation and Industry Giants

Panelists foresee companies like Zillow and Rocket dominating the industry in the next decade. While brokerages won’t disappear, they must evolve to stay relevant in a changing marketplace.

Key Takeaways:

• Brokerages must adapt to AI and shrinking profits.
• Agents will remain essential but their roles will evolve.
• Ancillary services and consolidation may shape the future.