Regulatory creep and large financial penalties increase compliance costs. The CFPB was established as a new bureau through the authorization of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act of 2010. It has overwhelmed each of the industries it has entered (Student loans, Automobile loans, Credit cards, and Mortgages) and, given its short but impressive history, there is every indication it will have a significant impact on national, large, and/or diversified real estate groups. The intent behind its creation is to: • Give consumers a vehicle to enforce the provisions of the Dodd-Frank Act and other consumer financial protections laws. • Educate the public about financial transactions. • Utilize research to prevent future financial crises, such as another housing bubble. In its mission to rebuild the mortgage banking landscape, the CFPB has attempted to examine every aspect of the home buying transaction and the roles of the various participants facilitating the transaction. Its investigations haven’t been limited to the lenders whose practices were a large contributor to these recent changes; the investigations have extended to real estate brokerages. Important to note here is that the CFPB was also granted responsibility to oversee the Real Estate Settlement Procedures Act (RESPA), which was formerly overseen by the U.S. Department of Housing and Urban Development (HUD).

Traditionally, data was aggregated on a local level with an excess of terms, conditions, and criteria, all of which was deemed to be accurate. With the advent of the portals there is a movement toward the aggregation and syndication of data that has resulted in data collection from multiple sources that are not always kept updated, and is therefore compromised. The battle over the ownership of the data has resulted in certain data sources being disallowed, which in turn has further compromised the accuracy of the data. Furthermore, the data mentioned really only refers to the listing data and, while it is a key piece, it is just part of the overall real estate data portfolio—tax records, insurance info, demographic records, mortgage loans, credit reports, drive times, lifestyle information, school performance, criminal activity, etc. So now the entire industry is focused on and concerned with controlling the consumer search process, which incorporates the creation, compilation, and distribution of all data.

The relationship between brokers and agents has been redefined a number of times during the last 50 years. Each time the redefinition of the relationship resulted in the formation of a new company and/or group of companies. The innovations brought to the industry by those new companies caused a disruption in the industry that resulted in an increase in the number of agents jumping between companies. In the 1960s and 1970s the franchise model created new national entities, in the late 1970s and 1980s the 100 percent model exploded, and in the 1990s and 2000s the interdependent and team model gained significant traction. Each new business model led to new global companies that dominated the industry for decades. The next winning model could be a technology-powered, agent-centric, flat fee, transaction-based fee, salaried, or auctioneering model.

The real estate industry has always been slow to adopt new technology. However, in recent years, the pace of technological change has accelerated, driven by advances in data analytics, artificial intelligence, and automation. Brokers are finding it increasingly difficult to keep up with these changes. The rapid pace of technological change is creating significant challenges for brokers. They must invest in new technology to remain competitive, but the costs are high and the return on investment is uncertain. At the same time, they must ensure that their agents are trained and able to use the new technology effectively.

The idea of imposing a sales tax on real estate transactions has been floated in various jurisdictions as a way to raise revenue. This would have a significant impact on brokers’ profit margins, as they would likely be required to collect the tax and remit it to the government. The additional administrative burden and the potential reduction in transaction volumes could have a significant impact on brokers’ bottom lines.