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Supplanting the National Association of Realtors will turn it into a toothless vampire overnight

The Minnesota Association of Realtors went on another foot-shooting expedition yesterday, again calling for paid-up members of the statewide trade group to quit the business so other paid-up members can earn more money. I made fun of them the last time they did this, and I could easily have another go at them tonight.

But: Here’s the thing: What good would it do? After money, criticism is the best gift you can have from the marketplace, but many people don’t know how to respect that kind of wealth. They suck at what they do and they intend to go on sucking, and if you point out what they’re doing wrong, they puff up into an outraged defensive posture and try to portray you as the bad guy.

Even worse, the NAR hierarchy seems to self-select for mental and moral midgets, mealy-mouthed morons, minds enmired in mush, utterly incapable of conceiving that the only emotion they inspire among the membership is a tepid sort of revulsion. There is no sport in making fun of them. It literally is like picking on actual retardates. It’s not funny, it’s cruel.

Plus which, criticism, even raucously funny criticism, is not what’s needed. Here is the full and final cure to the problem posed by the National Association of Realtors, along with every rancid state and local branch:

Supplantation.

Not replacement. We can’t get rid of it, no more than we can get rid of the cartel-creating real estate licensing laws the NAR foisted off on an unsuspecting public. We can’t kill this vampire, no matter how much blood-sucking havoc it wreaks. But we can rob it of all its power.

How? By supplanting it. Just as the NAR seeks to elevate Realtors — dues-paying members — above mere licensees, we can create another, higher organization to deprive mere Realtors of any valuable marketing cachet.

This is something the Council of Residential Specialists could have done, but it, like REBAC, is nothing more than a lap-dog of the NAR. The real estate broker’s level of licensing could have and should have meant something serious, but, if anything, it’s an even worse joke than the salesperson’s license.

What is needed is an analogue to the Underwriters Laboratories for residential real estate agents, an objectively determined standard of excellence — hard to get, easy to lose, and impossible, ultimately, to do business without.

Do you see? By marketing to this much higher standard of care, and by promoting that standard of care to the public, we will essentially eliminate every lower category of licensee. They can scrap over the scrub business, but every duly diligent buyer or seller will opt for a certified practitioner — in exactly the same way that only fools buy electrical equipment lacking the UL seal.

Given where we are technologically, this can be a hugely rigorous, essentially real-time certification process. Transaction histories and reputation-management come together under one roof, with mediation of conflicts and on-demand search of a practitioner’s history. This is so much more than the state licensing authorities are doing, and, of course, the many-tentacled NAR is doing virtually nothing to police for bad behavior.

I believe in capitalism, not as an economic policy but as a moral philosophy. Perfect justice is a piece rate and a toll road: You are rewarded for what you actually do, and you pay for the values you actually receive. A truly intelligent way of marketing real estate representation is one that celebrates and rewards good behavior — and massively penalizes vice. Structuring things that way assures that the good people will get progressively better and the bad people will get flushed out of the system with dispatch.

This is what state licensing does not do.

This is what the NAR does not do.

But this is what we can do, all on our own.

And, having done it, licensing will be understood by everyone to be a meaningless formality. And the NAR and the MLS systems will simply be crosses we will have to bear — for now.

What’s wrong with the NAR? Everything. What should we do to fix it? Nothing. All we have to do is supplant it, and the NAR will become a toothless vampire overnight.

Amend me, if you would. Tell me what I’m missing. Tell me what I could be seeing more clearly. Tell me what this thing is called, for goodness’ sakes. If you’re flush with cash and you want to throw some seed money at something that really matters to the future of real estate, I’d love to talk. I am not the committee type, and I am not the campaigning type, but this seems to me to be a chance to make an enduring difference in the way the real estate business is done. What can we do to make it happen?

 
More viewpoints, pro and con, on supplanting the NAR:

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Related posts:
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  • 29 comments

    29 Comments so far

    1. Josh Hohman August 29th, 2007 10:48 pm

      Amen, brother, but if we supplant the NAR, where will we get the idiotic interpretation of data that always seems to show that the real estate market is peachy-keen?

      Disclosure: I am a licensed broker and Realtor, but only because I am an investor and did not want to spend another nickel on an agent that can’t even open Microsoft Excel when ‘analyzing’ a market.

    2. J. Ferris August 29th, 2007 10:57 pm

      I’m a Realtor because I need it to access the MLS and I hate NAR, the local board of Realtors and the incompetent fools who run the MLS. They refuse to display property addresses so I can use Google Maps with their datalink because it isn’ requested by enough people. Put it to a vote why not?! Back on topic, this is a brilliant idea and if anyone can help move it forward it would be you Greg. The problem does still remain: Why DO you call these professionals and will it have a snappy acronym title like NAR?

    3. Michael Wurzer August 30th, 2007 3:31 am

      I think this is a great idea but the devil is in the details, especially this: “Transaction histories and reputation-management come together under one roof, with mediation of conflicts and on-demand search of a practitioner’s history.” Defining reputation management and what warrants the “seal” is doable, I believe, but won’t be easy. All measurement is subject to gaming. Designing a system that does this well and captures a critical mass of competing participants will require much of the same collaboration I called for recently.

    4. marc August 30th, 2007 4:42 am

      “But this is what we can do, all on our own.”

      I seriously doubt it. I question whether any system defined and managed by the very participants it measures would appear objective in the eyes of the consumer.

      However, you could get behind and support one or more of the many services who are already measuring agent performance and reputation. You’ve poked fun at such services in the past, but we’ll forgive you ;)

      And maybe it’s not just one party, but a consortium of agent rating systems similar to credit scores. I can imagine Yahoo! Real Estate adding a directory of brokers/agents with three independent ratings similar to how they are currently doing home values.

    5. Greg Swann August 30th, 2007 7:40 am

      > where will we get the idiotic interpretation of data that always seems to show that the real estate market is peachy-keen?

      Yeah, they can keep that part, along with all the Rotarian Socialist legislative initiatives. All I care about is the standard of care for the consumer.

    6. Greg Swann August 30th, 2007 7:53 am

      > the devil is in the details

      Here’s a simple idea: Going forward, certificants would have to provide contact information for the buyer, seller and cooperating agent for each transaction. Each one of those parties would be contacted by mail and asked to fill out a survey. Negative survey responses could be mediated, since the ongoing objective is client satisfaction. The history of responses is a component of that agent’s score.

    7. Joe Strummer August 30th, 2007 8:22 am

      “Defining reputation management and what warrants the “seal” is doable, I believe, but won’t be easy. All measurement is subject to gaming. Designing a system that does this well and captures a critical mass of competing participants will require much of the same collaboration I called for recently.”

      It’s true that any reputational system is ripe for gaming, but as Underwriters Laboratories demonstrates, gaming the system can be resolved by making sure that the certifier is independent of individual interest groups with in the realtor community and has the resources to properly certify.

      What Greg describes would become considerably cheaper over time, but at least initially would require the investment of significant resources to create the Certification Brand and the Certification Regime. UL did not pop up overnight. It’s doable in a digital world, but still costly until the brand becomes something that people *want* as a condition of being agents.

      Still, once he does it for the Real Estate Market, maybe he could next move to Lawyers – although given the even more highly regulated nature of that industry, the challenges are more significant.

    8. Joe Strummer August 30th, 2007 8:26 am

      “I question whether any system defined and managed by the very participants it measures would appear objective in the eyes of the consumer.”

      That’s the problem to be resolved, isn’t it. But every day we rely upon reputation systems (whether it’s UL or the Good Housekeeping Seal of Approval, or Consumer Reports). What Greg describes is just the creation of an institution that makes money on reputation. An institution that relies on its reputation and brand – as opposed to the desires of the participants it measures – is the ideal certifier in the sense that it is both objective with regard to particular interest groups but responsive to general structural or technological changes within the market.

    9. marc August 30th, 2007 10:11 am

      What Greg describes is just the creation of an institution that makes money on reputation

      I got a different impression. I understood Greg to be writing from an insider perspective…that of a broker…and was rallying other insiders to organize in order to “self police”. My point is a reputable solution will not come from insiders.

    10. Greg Swann August 30th, 2007 10:25 am

      > I understood Greg to be writing from an insider perspective…that of a broker…and was rallying other insiders to organize in order to “self police”.

      What I’m talking about is a third party entity — I assumed non-profit, although it doesn’t have to be. In fact, the entire strength of the push would come from highly-skilled, highly-ethical real estate agents, since consumers will have to be educated by marketing in order to know to care about certification. This is why the current reputation-management schemes don’t work, first because they’re toothless, and second because they are essentially link farms. The proposal Barton blurted out might work better except that agents are not going to trust Zillow.com. A movement started by and for the best of agents can work where nothing else will. Ergo: If you want join forces with me, I’m listening.

    11. Michael Wurzer August 30th, 2007 10:34 am

      Each one of those parties would be contacted by mail and asked to fill out a survey.

      But what’s in the survey? If it’s just, “are you satisfied?” or something to that effect, then there are already several of those companies up and running as other commenters to this post have noted. Also, the lack of specifics will not lend itself to a true standard of care.

    12. Greg Swann August 30th, 2007 10:49 am

      > Also, the lack of specifics will not lend itself to a true standard of care.

      You’re way ahead of yourself. Right now we’re canvassing for support. In the meantime, stop to consider me and my reputation: Do you think I would be proposing something weak and timorous? What I want is a certification that will be unattainable to at least half of the current membership of the NAR. I want something that will be a bear for me to qualify for. The only way this will work is if it is a badge of honor for the certificants, since it will be their own face-to-face promotion of the idea that will have the greatest impact on consumers.

      > there are already several of those companies up and running

      That much is false. There are toothless and moribund web sites devoted to self-promotion by agents. The real lynchpin of what we’re talking about is here:

      By marketing to this much higher standard of care, and by promoting that standard of care to the public, we will essentially eliminate every lower category of licensee.

      Individual practitioners already do this in their marketing, with some success. The challenge is to get the consuming public to understand that there are gradations of quality among real estate agents, and to teach them to pursue the best available to them.

      This is what Underwriters Laboratories does for electrical equipment, and it is what the many and various so-called reputation-management sites do not do. Consumers don’t even know these sites exist, and they wouldn’t care if they did. Until consumers understand why they should care about the quality of their representation, they will continue to be victimized by state-licensed, NAR-dues-paying buffoons.

    13. Michael Wurzer August 30th, 2007 11:30 am

      Do you think I would be proposing something weak and timorous?

      Good point. :-)

      You’re way ahead of yourself.

      Yes, I do that from time to time. In this case, though, the chicken and egg phenomenon is very real and I guess I was suggesting that support may be predicated on understanding more details.

      I suspect few “best” agents would disagree that providing consumers a valuable reputation management system would be great, but there will be many divergent views among those top agents on what constitutes the best standard of care and how to measure compliance to it.

      Though I’m looking down the road, I think this post is similar to my post about the MLS industry needing a constitutional convention. It’s the right idea but I need to create that first draft of the constitution to get others to begin joining the process.

      From the standpoint of buy in to your idea, I think your idea for a new certification process goes very nearly hand-in-hand with reinvention of the MLS. I think you as much as recognized this in stating, “And the NAR and the MLS systems will simply be crosses we will have to bear — for now.” However, what I’ve been advocating for months is that getting competitors to cooperate is difficult, and yet that’s exactly the purpose of the MLS. Without it, there is no aggregation of listing information and all will be worse off without that. Coupling that issue with reputation management perhaps makes it even more difficult, but I think it can be done, to the benefit of consumers and practitioners alike.

      What’s the next step? Start writing the standards. Do it on a wiki so others can join in. You’ll quickly find out whether others are interested.

    14. marc August 30th, 2007 12:11 pm

      the push would come from highly-skilled, highly-ethical real estate agents

      I absolutely agree. A rating system wouldn’t “tip” if it wasn’t highly prized in the industry by all agents.

    15. Marc Grayson August 30th, 2007 12:24 pm

      “…Going forward, certificants would have to provide contact information for the buyer, seller and cooperating agent for each transaction. Each one of those parties would be contacted by mail and asked to fill out a survey. Negative survey responses could be mediated, since the ongoing objective is client satisfaction…”

      Greg, your hitting home on many elements of the Quality Service Certified (QSC) certification (http://www.qualitycertified.org/), where surveys and client satisfaction are at the crux of ongoing cert requirements

    16. bs August 30th, 2007 1:29 pm

      If we want to eliminate half the licensees just raise the barriers to entry…require an apprenticeship…or raise the licensing fee…or make the licensing test harder…or make the continuing education harder…or all of the above. These steps alone will raise the quality of service in the industry.

    17. [...] On a slightly related note, Greg Swann writes today about wanting a new certification for the best agents, similar to Underwriter’s Laboratory.  I peaked at the UL web site and was surprised to see them promoting a Mutliple Listing Service.  Alas, it has nothing to do with real estate MLS.  Nor does Major League Soccer.  Now, not too many are going to confuse soccer and real estate, but, on the web, those terms matter.  Of course, the term MLS also is a registered trademark of CREA in Canada.  So, there are plenty of reasons not to invest too heavily in the term MLS. [...]

    18. Apella August 30th, 2007 1:52 pm

      Greg,
      I think that you are on the right track. I also think that this post is one of the most refreshing because it demonstrates evolution… the use of a blog to trouble shoot a problem and repair an industry. I fully support you on this topic and efforts and would be willing to work with you and others to see it through. The proof in the pudding I think is in the embarrassing of technology.
      A small group of appraisers in Michigan have been working on something similar and another group of appraisers can be found in Washington State. The goal is to improve the appraisal industry by the means of supplementing the state appraisal boards through mediation and education by an independent member group coming from the industry. They are in the roughest form currently with the Washington State group supporting the most in advancement and members. The name slips my mind but I will research it and forward it to you ASAP.
      Likewise I am in the process of working with others to compile a system that will allow for signature security for appraisers among other things. This is an area that I have been researching for some time.
      The idea of open MLS systems is already being put to what I would call the Bata test and one that could be seen as a rough proto-type is by the Estately team (shack prices) blog people in the Washington State/Seattle area. I think that they are a little better format vs. the Zillows for the current subject.
      I support you in this because I think that this idea really is something the real estate sales industry needs. Two establishments that I would look at is the Appraisal Institute and the other is the Appraisal Foundation for a great starting point to get ideas. I respect that there will be differentness between sales and appraisals, but with the appraisal groups one is policy based and the other is educational based.
      I think that this is something doable and more so that others would work at it and in the end forcing the NAR’s to improve or fade away. Commercialism is Evolution in its own right and I agree that this is worth working toward because change is coming rather the industry takes an active role or not, there were those that said that moon travel was undoable too.

    19. Matthew Hardy August 30th, 2007 4:51 pm

      After getting licensed (purposely lapsed to enter the real estate software business), I remember thinking how little the testing had to do with the actual business of real estate. Really, it seemed almost a absurdly useless exercise. It would seem that testing the bejesus out of people on more relevant, real-world material might help. But consider this: many of the top agents may be perfectly happy to have so many thousands of doofuses screwing up regularly because it makes differentiating themselves from these doofuses easy. Market slumps accentuate this.

      Is Amazon.com or J.D. Power in the real estate business? Perhaps they could start a rate-a-real-estate-agent thing. I feel I’ve gotten pretty good at reviewing the Amazon reviewers to purchase good products, none of which I’ve returned.

      Agent: “I’d like to list your home!”
      Seller: “I’ll look you up on Amazon to see what your clients think of you and let you know.”

    20. J. Ferris August 30th, 2007 6:54 pm

      A J.D. Power type scoring on a local and regional basis would be interesting. The Amazon.com concept gets thrown out the window alongside Agentpolis.com.

    21. Artur Urbanski August 31st, 2007 12:31 am

      Greg,
      As usually I loved reading your post. You made a lot of excellent points. However there is one, and I believe, a major fault in your thinking. You believe that you need to replace a bad organization with another one:

      “What is needed is an analogue to the Underwriters Laboratories for residential real estate agents, an objectively determined standard of excellence — hard to get, easy to lose, and impossible, ultimately, to do business without.”

      You believe that a new organization will be totally altruistic guardian of “the new standard of excellence”. I don’t think that it is possible. Organizations are created by people and all of them have great and noble ideas when they start. I am sure that it was the case when NAR was created as well. The problem is that if you don’t have the foresight to establish ‘a right constitution” for the organization, the organization will loose its ability to do the right things and to remain faithful to its initial objectives. Creating such constitution might be simply impossible.

      The issue is not to create a new standard of excellence, but to create a mechanism that will automatically promote the better quality of service. You said that you believe in capitalism. I do too. So, let’s create an economic mechanism that will eliminate bad agents and bad brokers. Mark Nadel, a policy advisor with a federal government, gave a really interesting idea how the economic system like this might be created in his 2006, and recently updated, report Critical Assessment of the Traditional Residential Real Estate Broker Rate Structure. The system proposed by Mark Nadel relies on a simple decoupling of the listing broker and selling broker fees. The following statement comes from Mark’s reply to my post Is your income below $12,000 a year?: “I believe that the decoupling of buyer and listing broker fees will require a substantial amount of education by consumer affairs media reporters and editorial writers – TV, radio, and print media (online and off). But I believe that the market will work as follows: increasing numbers of sellers will learn that a growing number of buyers desire the option of doing some of the work of searching for a home on their own and thereby saving a significant amount of money – using an excellent broker who passes on the lower costs s/he faces by charging a lower, non-traditional fee. Particularly in a buyers’ market, most sellers will not want to deny an interested buyer this option, if the buyer wants it. Sellers will want the flexibility to accommodate such buyers.”

      You can find a full exchange between Mark and me in the above mentioned post.
      To summarize, a new organization is not a solution to the problem. Let’s focus on fostering competition and positive selection. Markets have tendencies to straighten themselves, as long as we don’t over-regulate them. If we need to regulate – we should stimulate market forces. Preventing accumulation of power in “single hands” is another basic principle that helps markets. You cannot solve the “NAR problem”, but creating another organization and transferring power to another group of brokers and agents.

      I agree with you that the NAR elimination is not necessary. The process of NAR supplanting has already started. I talk about in my post “Who started the real estate revolution?”. Appearance of Zillow and Trulia have sent unmistaken signal to NAR and MLS. And the signal was received. Within last year we observed more positive MLS changes in the Bay Are than in the last 20 – 30 years, give and take. I addressed this issue in my post “MLS in Turmoil”. The process of supplanting NAR is already under way. Additionally, I believe that NAR might rediscover its ability to evolve under intensive market pressure. It might provide provided more control to the “supplanting process” as a “revolutionary supplanting” might need to market disruptions beyond our imagination.

    22. David G August 31st, 2007 11:30 am

      An industry wide Realtor reputation system is interesting but I think it’s a leap to consider it a solution for the industry’s reputation problems. The math doesn’t seem to work;

      The average Realtor does 6 transactions a year. 25% is a good response rate for consumer satisfaction surveys. Most Realtors’ clients are poorly qualified reviewers because they use a Realtor so seldom that it’s a fair assumption that you’d need at least 5 reviews per Realtor to draw any conclusions.

      So, it would take 3,33′ years just to collect enough data on the *average* Realtor for the system to start to work. In most cases, it will take much longer than that. And is data from 4 years ago are even relevant to today’s performance?

      You see where I’m headed with this; customer reviews don’t provide enough information for this ‘certification’ to be useful to consumers.

      I do LOVE the idea of making transaction experience transparent though and I think that angle should be explored further. If consumers were offered a system that allowed them to select a Realtor based on their experience in similar transactions (database sortable by side, size, price, location and DOM), I’m convinced they’d use it rather than “asking a friend.”

      Keep on pushing the envelope, Greg.

    23. marc August 31st, 2007 1:31 pm

      An industry wide Realtor reputation system is interesting but I think it’s a leap to consider it a solution for the industry’s reputation problems. The math doesn’t seem to work…it’s a fair assumption that you’d need at least 5 reviews per Realtor to draw any conclusions

      Not so fast. Today, a consumer will hire an agent based on one offline endorsement alone. You might think it has to be a trusted source (family/friend), but it’s just as likely to be someone you meet at a cocktail party who makes the recommendation.

      Furthermore, there’s not a huge difference between an online reputation repository (current proposal) and offline word-of-mouth (current reality) anyway. They’re the same transactions occurring in the same time period. I’d guess a similar percentage (25% you estimate) are talking up the agents offline anyway.

    24. Michael Cook September 2nd, 2007 6:31 am

      Greg,

      This is a great idea and would work well in a network strategy. Essentially, you could start an organization in Arizona or even just one city, gathering the best agents and creating your own brand of certification. Given a year and some good results, you all could move it to the next city or state. At some point the word gets out and this new organization, simply speads like a virus. The major piece of this would be controlling who gets in. Rigorous testing and other requirements would need to be in place. Think of this like the ISO certification process (google/wiki ISO if you havent heard of it). It literally came in and established strong criteria, well above anything previously thought of. Now the best of the best are ISO certified, can charge a premium, and work with the best clients. I think the same can happen in the real estate space and I think someone could make quite a handsome profit doing it. It would also probably force the NAR to become a better organization. A lack of competition always tend to make a company lazy and lathargic. This is one of those ideas I really would pursue if I had more time. It would be an easy money maker for a VC firm. I should know, since I have seen my fair share of vc ideas.

    25. [...] One of the commenters to my original post on this subject wrote: If we want to eliminate half the licensees just raise the barriers to entry…require an apprenticeship…or raise the licensing fee…or make the licensing test harder…or make the continuing education harder…or all of the above. These steps alone will raise the quality of service in the industry. [...]

    26. [...] There has been a lot of talk about how to fix the National Association of Realtors or even how to supplant the organization completely.  As an outsider looking in, I have one simply question:  Why are realtors paying good money to an organization that they hate?  As an investor I cannot not think of a more egregious instance of throwing good money after bad money.  I have said more than my fair share of bad things about the NAR and realtors, so I think it is my turn to be solution-oriented. [...]

    27. [...] an outstanding line-up of speakers. The very same day Greg Swann of Bloodhound Realty posted another article regarding, “supplanting the NAR (National Association of Realtors), with a more rigorous predictor of [...]

    28. [...] an outstanding line-up of speakers. The very same day Greg Swann of Bloodhound Realty posted another article regarding, “supplanting the NAR (National Association of Realtors), with a more rigorous predictor of [...]

    29. [...] an outstanding line-up of speakers. The very same day Greg Swann of Bloodhound Realty posted another article regarding, “supplanting the NAR (National Association of Realtors), with a more rigorous predictor of [...]