There’s always something to howl about

The rest of the real estate industry might be Pinocchio — false in every particular — but nothing prevents you from being genuine

Real estate is the most unbusinesslike business in the history of business.

I don’t want to defend that statement comprehensively, because it’s late and I’m tired, but I can offer some data points.

When we sat down with Greg Tracy, I argued to him that licensing inhibits the kind of competition for reputation that we expect and depend upon when deciding which restaurant to go to, for instance, or which auto mechanic to use. Instead, in real estate, after 90 hours of nonsense classes, we say, “Here’s your license, kid. Get out there and wreck someone’s finances!”

I met with a new buyer client on Wednesday, and we had a wonderful time cataloging all the things Realtors and brokers would do if residential real estate were organized like any other sort of business.

What kinds of things?

If real estate were a real business, Realtors would market the damn product, instead of engaging in two or three acts of rain-dancing and then waiting — for months or even years — for the rain to come.

If real estate were a real business, Realtors and brokers wouldn’t be so transparently mercenary about using, abusing and burning through their clients. One of the huge benefits of real estate weblogging is that Realtors are openly discussing the tricks they deploy to strong-arm their “leads.” In no other business do vendors have such contempt for consumers.

(Incidentally, although I say this all the time, apparently no one believes me: Consumers read industry-focused weblogs. When you admit that you do certain things to “force people to call,” you’re not telling them anything they didn’t already know about the real estate business.)

If real estate were a real business, commissions would be divorced and incentives would be aligned to put the agent and the client on the same side in negotiations. The longer the real estate industry delays in reforming its practices, the greater the opening it offers to vendors offering a better or cheaper alternative to traditional real estate.

I love it when I really get to talk to my clients, because I conceal nothing from them. We do well by doing good: This is not only the right thing to do, it ends up being very good marketing for me and my brokerage, because my transparency takes away all of the unnamed fears my clients might have. This again is what we would expect from any sort of real business — which to say any business that is not founded upon secrets and lies.

My client and I were meeting at a Starbucks, and I got there early. I bought a latte and a cookie, more to pay rent for the table we would be using than anything else.

The kid who made my coffee was obviously working her first day “solo” as a barrista. She was doing everything right, but she was slow and methodical about it, working from conscious memory rather than from the kinesthetic memory we expect in an experienced barrista. The coffee was good, but that young woman would not have been given command of the bar at a busier time of day.

And this is how real businesses are run. Entry-level employees are given few responsibilities and a lot of supervision. Day by day, task by task, the new hire learns more about how the business is run and is given more and more freedom to work without direct oversight.

Work your way up to it, and you get to be a barrista. Get good at that, and you can work the drive-through bar. Demonstrate that you know how to put the company first and you can be a crew boss, a shift manager, an assistant manager, a store manager. But every promotion is based on mastery of your last job. And if you screw the pooch in the new job, you’re probably fired for good.

That is the way a real business is run.

I just closed a transaction with Those Calloways, which I think is the busiest team in the Phoenix market. They don’t do all the things we do to market a listing, but the things they do, they do all the way. That pays off in reputation, as you might expect, with the result that they are by now pretty much unassailable in certain Scottsdale zip codes. What impressed me most about them was the quality control built into their systems — and if “quality control” is a term you never thought to associate with the real estate business, you’re not alone.

The residential real estate business is Pinocchio, a marionette delivering up a pantomime of a real business. We cling to our licenses and to the broker’s license to steal and to the withholding tax exclusion and to all of our secrets and lies, but we don’t have a hand free to grasp the kinds of relationships that real businesses are based on. Everyone knows that Pinocchio is a liar, and so people use us because they have to — for now — but no one ever really trusts us. We were so afraid of honest competition that we structured our business in such a way that no one can trust us — nor should they. Why do people think Realtors are out to fleece their clients? Because that corruption is rife and rampant in the DNA of the tree we were carved from.

The best part of this comedy — and a marionette can never know that it is the object of comedy — is that we think consumers don’t see right through us.

The client I met with on Wednesday has been following for more than a year. He came across us at one of our open houses, with the custom yard sign being the precipitating factor that brought him through the door. He’s been reading our weblogs, including BloodhoundBlog, since then. He was one of the ninety-and-nine I talk about all the time. He contacted me when he was ready to work, and he wanted to meet me to be sure I live up to my rhetoric.

And: His business is still mine to lose. All I have to do is not deliver on my promises. But if I live up to the expectations I have set, we will have a relationship that will last for years — much like the relationships he has — and you and I and everyone have — with our attorneys or our accountants — or our doctors or dentists or auto mechanics or our favorite restaurants.

And that is the way a real business ought to be run.

It’s been fun to read about all the young brokers and their plans for adding agents. We’re scared to death of adding new people. The quality control issue is too important to us. When we do add people, we’ll add them in the way Starbucks does, a little bit of new responsibility at a time, coupled with a lot of supervision. We don’t need to be the biggest brokerage in town, but I will be damned if we’re less than the best in the way we treat our clients.

Is this the future of real estate? You tell me. In every marketplace there is always a better and a worse, and there are always people wise enough to shop for the better. No one sorts through the melons at the supermarket so they can buy the bruised one. But one of the huge marketing successes of the real estate business has been to dissuade people from shopping on the basis of quality — of the reputation for quality. Teams like Those Calloways, and, to a lesser extent, like, can do a lot to help people understand that there is a difference in the quality of representation your money can buy, and that it’s worth your while to pursue the best.

But come what does, no matter how well we might or might not do, virtue is its own reward. Despite the licensing and the income tax safe-harbor and the secrets and the lies, despite the way the deck is stacked, there is nothing that prevents you from running your real estate business like a real business. I hope and pray that Pinocchio gets laughed off the stage. But even if he does not, you can still be real, genuine, authentic — and therefore trusted by your clients.

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