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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 BloodhoundRealty.com 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 BloodhoundRealty.com, 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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  • 14 comments

    14 Comments so far

    1. Mark Madsen January 29th, 2009 11:54 pm

      “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.”

      Very appropriate. I consider this every time I post a new article on my industry focused blog.

      “What would my clients think if they were reading?”

      The word “leads” is not in my vocabulary. If I’ve accidentally abused my clients by calling them a lead in one of my online discussions, please help me out and let me know. I talk about the strategies loan officers can use to enhance communication that ultimately builds trust and relationships with a target audience. I prefer “Borrowers” or “Mortgage Clients” vs “Consumers” as well.

      Either way, I agree with you. While our clients are researching for a new lender or agent online, they run across hundreds of advertisements from industry gurus essentially labeling them as leads and closing ratios.

      Our clients have every reason not to trust us.

      Even placing someone within a “target audience” sounds bad. However, Google describes that marketing process as providing the most relevant search experience for its users.

      Another thought to pay attention to –

      If we’re so high and mighty about promoting a huge web presence as the future of our business development, then why do industry professionals assume their clients won’t find them engaging in online “lead conversion” conversations? I guess it takes transparency to a whole new level if you really think about it. Kind of like exposing the locker room talk the day after the senior prom.

      Look forward to the discussion. Thanks for the post, Greg.

    2. genuinechris johnson January 30th, 2009 8:10 am

      Ah, leads. I’m not one to run away from semantics, words do have precise and discrete meanings. However, leads are entirely appropriate, and in lieu of a 300 word comment, I’ll have a 600 word post up.

    3. Greg Swann January 30th, 2009 8:32 am

      >> One of the huge benefits of real estate weblogging is that Realtors are openly discussing the tricks they deploy to strong-arm their “leads.”

      > Ah, leads.

      The object of that sentence is tricks, not leads.

    4. Greg Swann January 30th, 2009 8:44 am

      > Kind of like exposing the locker room talk the day after the senior prom.

      Ouch! Now you’ve got me looking over my own shoulder! ;)

    5. Michael Cook January 30th, 2009 9:01 am

      Perhaps one of the best posts I have ever read. While I disagree with your approach on licenses, I think brokerages do not put enough stock in their own reputation/brand. It is quite interesting that Realtors put so much effort into defending their trademark, but put so little effort into defending the quality it should stand for. If more Realtors read and acted on this post, the entire industry would be better for it.

    6. Austin Smith - Goomzee.com January 30th, 2009 9:11 am

      Very nice post Greg. I’m happy to see your keyboard is up to it’s usual antics, welcome back.

      I think the key to successful marketing, in any business, is to look at your advertising campaign (or blog, or sign, or website, what have you) strictly as the end-user views it. This will not only have an effect on your campaign’s goal(s), but will also affect your imagery and verbiage, most often in a beneficial way. You said yourself, most consumers are active on sites like Bloodhound or ActiveRain, and most of the time all they see are the labeling terms sales professionals apply to their ‘victims’ (reference Madsen’s words of wisdom).

    7. Mike Kennedy January 30th, 2009 9:28 am

      Great post. I completely agree with your point about not hiring brand new agents – or bringing on new people that have not proven themselves yet. It’s too risky to do so. Our strategy over the last 20 years has been to hire the most experienced, top producing agents in our marketplace that have good reputations – agents that we know will take really good care of their clients. In a smaller area likes ours, its easy to identify those agents. In fact we rarely recruit at all – the top agents usually approach us over time.

    8. Kevin OBrien January 30th, 2009 11:27 am

      Greg,

      Great post. I have to agree, most people in the real estate world, do not understand their business. I have to imagine that is why 5% do 80% of all the business. The professional well run companies dominate the market and leave the crumbs to the rest that do not understand their business.

      As far as your points on licensing, you are 100% correct. People pass a class, then are allowed to be involved in the largest decision in many people’s lives. The system could definitely stand the competition.

    9. Doug Quance January 30th, 2009 12:56 pm

      Perhaps agents should have to serve an apprenticeship the way appraisers do.

      The level of experience necessary to be an appraiser is relatively high… while no experience is necessary to be an agent. Just pass the test, place your license under a willing broker – and you’re good to go.

      We’ve had this discussion several times over the last few years… funny how little things have changed.

    10. Sean Purcell January 30th, 2009 3:23 pm

      Greg,

      You, at your best, regarding the problems we have created for ourselves in this industry. Last Tuesday you posted on founding a new brokerage and today the same theme arises in the comments here. I am particularly interested in the concept of creating / protecting / doing business based on one’s reputation. That was one of the driving forces when I wrote about this topic here on BHB and on LifeThatPOPs as well:

      The structure, which I will lay out more specifically in the next post, by its very nature creates a need for professionalism. The reputation, and by extension success, of the firm is based on how it treats its clients. Professional behavior, knowledgeable agents and ethics that are beyond reproach become paramount.

      I believe the essence of future, successful brokerages will be in their ability to create a structure that encourages and even necessitates reputation-based business. This can’t happen in the current model and disbrokeration must happen before we will see it widely embraced in any other models.

    11. Thomas Johnson January 31st, 2009 12:04 am

      Judging by the porkulus puppet show this week in DC, Pinocchio is alive, well and in charge. “He won.”

      Greg: No statutory relief in sight. Integrity remains, as always, what is done when no one is watching.

    12. Thomas January 31st, 2009 2:14 pm

      Greg,
      Simple and accurate. I’m a potential buyer who can’t find a transparent agent. I went with my bank’s referral service but the agent is playing the ‘send 5-6 listings at a time’ card that I’ve read about on their blogs. I’ve read the ‘insider’ info and what ‘they’ think about ‘us’ the customer. That’s why I love the diverse contributions on your blog. I know it’s not for customers in the classic sense, but it serves my needs to understand the process. On the flip side, I also understand the ‘buyers are liars’ meme. I want to be completely transparent to maintain my ethical core but it seems the whole economic system/model we have is designed to deceive, and not just real estate. Regards,

    13. Greg Swann January 31st, 2009 3:01 pm

      > I’m a potential buyer who can’t find a transparent agent.

      Tell us where you’re looking and we’ll buy a battery for Diogenes’ flashlight.

    14. Greg Swann January 31st, 2009 3:15 pm

      Amending this:

      Thomas is looking for a home in the Tampa Bay suburbs of Brandon, Valrico or Riverview.

      If you work in those towns and can give unPinocchio-like service, assert yourself. Thomas is a ready, willing and able “lead,” and all he wants is to be treated like a rational human being.