I hated my last REALTOR?. Well, hate is a strong word. I don’t really know him well enough to hate him. But I’m sure if the sale had taken just one week longer, I would have known him just long enough to wish him all manner of ill will. I KNOW I hated the work he did. I hated even more the work he didn’t do. The story of my last home sale is a rant all in itself. (Yes, ARDELL, I will write about it one day.) But that day is not today.
Remember, I’m not a REALTOR? or a real estate agent. And before I got into the business I’m in now, I could NOT have told you the difference. I freely admit that I don’t know 1/100th of what the other writers on this blog know about real estate or title or lending. I probably know more than your average consumer, at least you’d hope so, but I’m still a consumer.
I just finished reading some of the writing on this blog and others about disintermediation. Greg Swann’s “Disintermediaton where? Oh, yeah…” set me on a bit of a reading tear. Thanks, Greg. Just when I thought I’d get to bed early.
Given how bad my last transaction was, you’d think I’d be the first to jump at the opportunity to sell my house on my own without the use of a “middleman” and use all the latest available technology to let me do that. You know, seller connecting directly with buyer. You’d be wrong.
Of course I’d be tempted. In many moments of passion, I’ve even said out loud that I would. But if I needed to sell my house tomorrow, I’d still call one of the extremely good REALTORS? or real estate agents I’ve met in the last three years and I’d have them do it for me. Why? Because I don’t know how to sell real estate? No. I would be willing to bet all the equity in the house that I could get as many buyers to visit my home as just about any real estate professionals I know. That’s got nothing to do with real estate. That’s marketing. I know marketing.
It’s what comes after you get someone there and they say, “Gee, you’ve got a nice house. I think I’d like to buy it.” That’s when the fun begins. OK. Great. You want to buy my house. Now what? Now, I’m in uncharted territory.
I know there are options. I’m not ignorant of the options.
I have neighbors who sold their last house without an agent on either side. This was three years ago. Someone wanted their house. So, they set the price 20% above the previously sold home that was of the same model and the buyers agreed. They then paid an escrow company to handle the whole deal. They paid $1000 on the sale of a $400,000 house. The total time they spent with the escrow company was one phone call to explain the process and 15 minutes in their office to sign the papers and receive their check.
I know this person and I know I’m at least AS SMART as they are, and I still wouldn’t do it. That’s a great anecdotal story. Love it. But I know there are real estate professionals out there who could comment on this post with 100 other stories of deals gone bad, title messed up, and on and on and on.
Greg said something in his “How much future…” post that is right on target for me. He said, “In general, I do not intend to pay for ordinary information. Period. If you want my money, you have to deliver something that I can’t get anywhere else — and that I can’t get along without.”
Well, for me, that’s real estate knowledge. Knowledge is not facts. It’s not information. It’s not details about houses and neighborhoods. True knowledge goes way beyond what I can read on Zillow’s very pretty Real Estate Wiki or any real estate blog.
The kind of knowledge I want only comes from experience. The lovely ARDELL DellaLoggia, who wants so badly for me to write about the sale of my last house, said something a while back that has been stuck in my head ever since. She said, relative to sharing information with consumers, if you tell them everything you know, “they won’t know WHAT you know, they’ll know THAT you know.” That, my friends, is truth. The fool will read all the blogs and the wikis and think they know what a real estate agent knows. They won’t. They can’t.
Disintermediation? If all we’re talking about is information – sure. It’s already happened. We’re way past that. Information is free. As my good friend Bill Leider recently wrote, “As a REALTOR?, your value no longer lies in that arena. Your value lies in helping your clients understand and interpret the information and make wise lifestyle and financial choices. That’s true for sellers and buyers alike. That kind of measurable, wise counsel is worth a lot of money. The information, in and of itself, doesn’t do that.” And the reality is this, it’s always been the real value.
I’ve listened to every minute of the Russel Shaw podcasts — Parts I, II and III. Good stuff, even if you’re not a real estate agent. He said in one part that people aren’t buying him, “they’re buying a result.” He’s right. As a consumer, I want results. I’ll let Greg say it for me again, “I do not intend to pay for ordinary information. Period. If you want my money, you have to deliver something that I can’t get anywhere else.”
Listen, there are a whole bunch of real estate agents out there who shouldn’t be in the business. My last agent is one of them. They make the Zillows and Redfin’s of the world possible. They even make them look attractive. But I know there are those who know things that could save my butt if a transaction turns sour. There are those who know how to keep a transaction from ever going sour. Are there lots of transaction processes that could and should be completely automated. Sure. Is all of this transparency good. Of course. But, this aint like planning a vacation.
I think people forget that there are human beings involved in these transactions. My life experience tells me that whenever there are people involved, there are going to be problems. Maybe not this deal. Maybe not the next. But at some point, they’re going to be there. And in a real estate transaction, when they arise, there are often legal consequences. Do you really think I’m going to have the knowledge to solve it just because I’m really intelligent? Just because I can read all about the legal consequences of negotiations? Give me a break.
Me? I could fill out a tax form online if I wanted. Maybe one day, that form will be able to anticipate problems and look out for my best interests like my accounting firm does. But until that day comes, my friends Ken Ray and Leon Gendelman at Kirsch, Kohn & Bridge LLP are safe. Some middlemen are worth the price.
Broker Bryant says:
Love the post Jeff, It’s the intangibles that I bring to a transaction that are valuable. Solving problems and keeping folks focused on the end result is what I do best. With out a calming force in the transaction the smallest little bump in the road can derail the entire transaction. It’s my job to keep it on track.
January 28, 2007 — 8:23 am
Brian Brady says:
I can wash, dry, and iron my clothes, too.
When I want it done right, I go to Solana Beach Dry Cleaners. They do it faster and with greater effectiveness.
January 28, 2007 — 9:06 am
Jeff Turner says:
BB, the FACT that many real estate agents don’t is what is driving the notions of disintermediation. I’m not sure disintermediation is possible in real estate, not by strict definition. “The elimination of an intermediary in a transaction between two parties.”
I see the word used when “transparency” is what they are describing. I see it used when what they are describing is a change to a different kind of middle man with a different kind of value proposition. John Battelle has a popular piece directed at the media. http://adage.com/article?article_id=46255
He starts, “Those who fear disintermediation should in fact be afraid of irrelevance — disintermediation is just another way of saying that you’ve become irrelevant to your customers. It doesn’t mean there isn’t a customer, or middlemen of some sort who service that customer, or that the core proposition of your business has disappeared.”
The real issue is value. How is it defined? How is it delivered? I have a hard time believing there won’t always be a middleman in real estate transaction.
Battelle also wrote, “the truth is, the products that are threatened by disintermediation are not imperiled because of technology; they are imperiled because they are based on models that offer less value to the customer than competing alternatives. In example after example, the middleman isn’t being cut out. He’s simply being replaced by a better one.”
January 28, 2007 — 9:12 am
Monika says:
Jeff,
I love this post and want to use in my next class if okay with you. I am teaching a class on the changing real state arena…consumer centric…your post says it all so well!
Irrelevance absolutely a fear some agents have…what’s important…your value and it’s measured by your knowledge and how you deliver it!
January 28, 2007 — 10:16 am
Kaye Thomas says:
Jeff,
We need to understand what the public wants and expects from us. We are selling knowledge,experience and access. If we want to stay in business we had better understand what that means. Housing information is in a thousand places but we are the keepers of the keys. Most people want to use an agent because it is easier. No matter which side of the transaction we represent our job is to make the transaction easy for all the parties involved.. including your fellow agent. Ardell expressed it well.. people want to know that we know what we are doing.. they expect it from us.. No one will write you a note after the transaction telling you how much they liked your car or your lipstick color. They write to thank you for your knowledge.
January 28, 2007 — 10:39 am
ardell dellaloggia says:
“The story of my last home sale is a rant all in itself. (Yes, ARDELL, I will write about it one day.) But that day is not today.”
The longer you make me wait, the more detail I will expect 🙂 But I want both sides of the story. I want the story of the agent who represented you in the purchase of your next home as well.
Real Estate is the story of getting from here to there. The big picture is in the success of both ends, and one does not exist without the other. When I represent someone who is relocating, I often have to reach my hand into another state and grab the listing agent by the neck and shake him up. Sometimes I even fire him and replace him.
What good is it if you eventually sell someone’s home, if in the meantime they lost their dreamhome to another buyer, and then settled for whatever was available by the time their house sold. When you have an agent who gets their brain around the big picture, that helps you get from here to there and isn’t just “selling a house”, you have your money’s worth.
But bottom line is, there is always, always, always a time when that money’s worth is a settle up at the end factor. When agents get to the end and say, “you know, this was a lot easier than it could have been, here’s what I think is a fair price for my services, so I’m returning the difference”. Last year I treated the commission as a “retainer” fee. When the work needed was less than the amount retained called for…I returned the difference to both buyers and sellers.
If you hand your attorney a $10,000 retainer fee, and in the next hour you decide to settle the issue and not go to court, does he keep the $10,000? Or does he subtract what is rightfully due him, and give you back the rest?
That is the key to the future. Not MORE crap on the list to make it LOOK worth it…but charging a fair price for the work. Not taking it all because you CAN.
I have spent the entire year experimenting with that, and will post the results soon. No matter HOW GOOD you are…disintermediation will come, when you charge too much. I don’t care how good an accountant is…I’m not paying him $80,000 to do my tax return.
There comes a point when doing it yourself becomes a necessity, if the marketplace refuses to get real about the cost of its services.
January 28, 2007 — 11:31 am
Jeff Turner says:
Monika, please use at your pleasure.
Kaye, I think the question at hand is “what is that worth?” At least that’s what I’m hearing. ARDELL echoes that above.
ARDELL!!! You’re right, of course, I wouldn’t pay my accountant $80,000 to do my tax return. But I do pay him more than I could pay other places. So there will always be those who can, will and should charge more for their services. Not just because they can, but because they are worth it.
What interests me most in your comment above is your allusion to the retainer fee and ease of transaction. I’ll be very interested to hear about your results from your year long experiment. I’m sure others will as well.
As for “disintermediation.” As long as we’re all talking about the same thing, I think you’re right. However, if, by disintermediation, you are saying that there will truly be NO middleman, well, I’m not buying it yet.
The middlemen may look different or may even be some of the same people, and the value proposition may be changed as a result of the piercing of the veil, but that’s not the same as doing away with the middleman.
January 28, 2007 — 4:18 pm
Brian Brady says:
I don’t care how good an accountant is…I’m not paying him $80,000 to do my tax return
That’s the point. You pay $80,000 for the advice not the tax form preparation. Of course, you’d have to be making mid seven figures to get value for an $80,000 fee.
I think we understand each other, Ardell.
January 28, 2007 — 4:24 pm
Kaye Thomas says:
But would you pay $80,000 to stay out of jail because of what your accountant knew that you didn’t? We know it’s about money and value received for the money paid. If my client determines that by using my services I have saved him money and time then he will gladly pay my fee.
January 28, 2007 — 5:12 pm