The last 36 hours have been interesting to watch, both on ActiveRain and here on BloodhoundBlog. Perhaps there’s something in the water, but there have been a slew of posts about REALTOR? commissions and what is the “fair price” to pay for their services.
Here are a few:
Are you being short changed? Not by me! (recycled and edited): Bryant Tutus
Perception = Reality: Real Estate Agents Suck: Mariana Wagner
How I Defend My Pay … A Posted Reply to Mariana Wagner: Sarah Cooper
A Different Perspective on the Value of Realtors: Michael Cook
If there is no Realtor monopoly — then what explains the commission structure?: Michael Cook
Whatever it takes: A determined Realtor is a bargain . . .: Greg Swann
Overcharging? A dedicated Realtor is a bargain . . .: Greg Swann
$68,745.00 Paid to Rain City Guide Readers: Ardell DellaLoggia
The opinions and ideas shared in the posts have been enjoyable to read, but the comments are what have been most interesting. It’s clear that some ideas are unwelcome. In many cases, it appears that the reaction to any idea that is outside the commonly held perception of reality, is to attempt to kill the discussion around the idea as quickly as possible, either by ignoring it or covering it with comments that defend the status quo or simply cast the current reality in a different light.
It’s unfortunate.
This is not a problem reserved to REALTORS? or the real estate community. The vast majority of all people in this world have a hard time leaving their comfort zone to conceptualize an idea, even if just for the sake of argument, that is contrary to their personal experience. This is especially if their assumption of the result of the idea may harm them in some way. It’s natural. They are simply unable to suspend judgment long enough to see where the exploration of The New will take them. The forest is too close to see the trees. And that’s unfortunate, because the journey is often what is most important.
As a result, true innovation from inside any industry is rare. History has taught us this time and time again. When a disruptive technology, product or service develops, it is often met with yawns by the traditional market. Why? Companies invested in the traditional market will not invest in ideas that are not appreciated by their current high value clients. Of course it’s completely logical. It’s also fiscally responsible. Because the true application of disruptive technology and ideas can’t be seen before they are full conceived, their clients can’t appreciate them. They can’t know what they don’t know. Market’s that don’t yet exist, simply can’t be dissected. Failing, over and over and over again is a necessary part of the success of disruptive ideas or disruptive innovations. To get to that kind of innovation, to the truly disruptive, you must be willing to allow all ideas to live until they kill themselves. Kill an idea too soon or never let it live at all and the best you can do is sustain. There’s nothing wrong with sustaining, unless someone else is going after and succeeds in developing the disruptive.
You must be willing to hear and explore an idea, even an idea that may seem to you obviously “bad” on it’s face, and carry it to it’s ridiculous extreme to find out what else it might reveal. The journey to failure is important. Killing a new idea the moment it is born because it doesn’t “fit” will only lead you to sustaining technologies, to improving the performance of the existing products or services, or to defensive strategies aimed at the same goal, sustaining. It won’t lead to a completely new and innovative product or service. The process of carrying ideas to their own end is necessary if you really want to innovate anything. You can’t dismiss any idea on it’s face. You have to embrace it, for a time, let it live to it’s own demise and see where it leads you.
There are no bad ideas, only bad decisions. The truth is, there is no reason to decide on anything in the idea process, because creativity stops at the decision. Ideas are just ideas. Give them room to grow and they may surprise you. Or they may just die on their own. Either way, the value is in the process.
The Lovely Wife...ROAR! says:
Well there you have it. Finally, someone who is willing to speak up about the idea cover ups that take place all around us. This is an excellent post Hubba aka Jeff Turner.
Broker Bryant and I brought range pricing into our market 12 years ago. What did our peers do with this innovative way of marketing? They tried to eat us alive. ROAR! They boycotted our listings, they tried to convince us what we were doing was illegal, they went as far as trying to close down our business. All of this was done as a way to kill a new idea. Of course our peers failed at their attempts. The Seller’s in our market love range pricing and they love us. This made it very difficult for our peers to continue boycotting our company. Geez. I could write a post about this, oh wait, I already did. SVW (smiling very wide)
P.S. Range Pricing has been blessed by the The Florida Real Estate Commission.
TLW…ROAR!
February 2, 2007 — 12:51 pm
Greg Swann says:
BloodhoundBlog is the locus of real reform within “The System.” If people here have a negative reaction to false charges — monopoly, price-fixing — this doesn’t make them reactionaries. Start here. If you go here and work your way backwards, you’ll see most of what we’ve done on the subject.
February 2, 2007 — 1:30 pm
Jeff Turner says:
Greg, my comments were not directed toward reactions to false charges, those are obviously appropriate.
Now, I’m off to read.
February 2, 2007 — 1:47 pm
Jeff Turner says:
I started where you told me. You wrote:
“But the question at hand is this one: If sellers routinely negotiate commissions, why don’t buyers?
Because they don’t know they can, for a very simple first thing.”
And WE don’t understand why that fee protects the buyer.
That post alone, along with the 1 1/2 hour impromptu phone conversation I just finished 50 minutes ago is worth having written this post. I aint done reading, but I had to get that out.
February 2, 2007 — 2:38 pm
Jeff Brown says:
Jeff – Disagreeing with an idea in and of itself doesn’t, as Greg said, make anyone a reactionary.
This particular subject and the approach taken with its stated and implied assumptions were not new. In fact, the idea itself hasn’t had to be killed because it’s been stillborn every time it’s been tried. Discount real estate brokerage as a concept has failed every time out, generally speaking.
I keep referring to I Pay One here in San Diego. Pay? As I’ve said over and over, now that the market is not what it was, they can’t ‘pay’ attention.
February 2, 2007 — 4:22 pm
Brian Brady says:
“I Pay One here in San Diego”
Don’t get me started on this one, Jeff. I can write for months about that place (having intimate knowledge of the model and investors)
February 2, 2007 — 4:56 pm
Jeff Turner says:
The impetus for this post was a comment made by another REALTOR? (who will remain nameless) on Sarah Cooper’s post over at AR. An email exchange with yet another AR member is what encouraged the writing. Greg’s comment in one of his posts about disintermediation being a non-starter only solidified my decision to post it here. It wasn’t the impetus.
(I have since read every one of Greg’s Bloodhound posts on the topic of buyer representation, and I now understand his non-starter comment. Those were powerful posts.)
I can understand how this has been seen as a veiled desire to see conversations about disintermediation move forward. It’s not. They simply triggered the desire to share a method for exploring ideas that allows those ideas to live or die on their own merits.
Read the post again without the reference to the other posts and see how it reads for you.
Example: the repeated failure of the “discount real estate brokerages” does not mean that the concept has failed, it means that those specific executions failed. This is typical of ideas that have the potential to create significant impact on the status quo.
That’s not to argue that a future execution of the discount brokerage concept will ultimately succeed, just that their past failure is not necessarily a result of a flawed idea, but just as likely bad decisions around an idea. Big difference.
February 2, 2007 — 5:41 pm
Jeff Brown says:
Jeff – Let’s pretend the T Formation hadn’t been invented for offensive football until last year. On paper a few head coaches love it. How successful do you think it would be against today’s sophisticated defenses? It could be executed to perfection and would fail miserably every time.
Some ideas are flawed.
You might be right about discount brokerage as a concept Jeff, it may work some day. The problem every time it’s been tried so far, is that those damn operational expenses, (you know, agents, office overhead, basic infrastructure) seem to get in the way.
Every time the market booms and my dead Uncle Fred could sell homes, they tend to thrive. No surprise there. However, 80% of the time the market isn’t booming. You can’t ski at Big Bear in August either, but you certainly can in December.
It will work when someone comes up with a way to literally rewrite the business model. Less commission in return for way less service and expertise hasn’t been a winner since it was first tried in the early ’70’s.
February 2, 2007 — 6:44 pm
ardell dellaloggia says:
Maybe it will work when someone figures out that agents don’t go to the office, don’t need to go to the office, and that 30 to 40 desk overhead is not needed anymore 🙂
February 2, 2007 — 7:47 pm
Jeff Turner says:
“Let’s pretend the T Formation hadn’t been invented for offensive football until last year.”
OK. Lets do that. That would necessarily mean that it had never been invented, which would mean that none of the sophisticated modern offensive innovations that owe their origin to it (like taking a snap under center) would exist either. Therefore, none of the modern defenses, which were built as a reaction to those offenses would exist. There would have been no need.
So, if it were introduced last year we would probably see scoring like we haven’t seen since the mid-20th century. Why? Because that’s what happened when it was first introduced.
“It will work when someone comes up with a way to literally rewrite the business model.”
My point exactly. It’s not the idea. It’s the execution.
February 2, 2007 — 10:01 pm
Brian Brady says:
Ardell,
You’re correct but someone has to tell the agents that. I’m astounded how agents give up split for “name”. Frankly a group of agents (say ten?) sharing an executive suite can keep overhead at less than $300/month for a bitchin’ address, sweet conference room, and all the required amenities
February 2, 2007 — 11:14 pm
Jeff Brown says:
Jeff – That would necessarily mean that it had never been invented, which would mean that none of the sophisticated modern offensive innovations that owe their origin to it (like taking a snap under center) would exist either.
That’s an absolutely false assumption, made without basis.
An example would be when the auto was being invented here, it was also being invented in France, nearly simultaneously. Snapping from under the center wouldn’t have been thought of over the last several decades? Really? It just wouldn’t have come from the T formation, that’s all.
Does that also mean Jake Peavy wouldn’t be throwing a cut fastball if the exact pitcher who first tried hadn’t been the one to create the pitch? I’m sorry, but I think the argument is specious because the premise is fallacious on its face.
The fact is discount brokerage of several makes and models have been tried and have failed, most not even memorably.
I have to think many of the better capitalized attempts used professional marketing firms to advance their chances for success. They still fail, and it’s almost always ugly.
The smartest marketing genius in the country can’t make people buy Big Macs when they’re looking for steak. At least they haven’t been able to yet.
February 3, 2007 — 2:19 pm
Jeff Turner says:
Jeff, really? Well, perhaps your right, the other innovations could have come from some other way. That was my attempt not to cut your idea short. You set up a straw man. In keeping with letting an idea live or die on it’s own, I tried to knock it down. But “absolutely false?” I don’t think so.
I don’t think it’s made without basis. I think it’s a very reasonable assumption. Your premise was that the T-Formation was not thought of over the last several decades! If it’s fallacious on it’s face for me to assume the snap, which obviously came from it wouldn’t have been thought of either, then both our arguments are fallacious?
Your argument is flawed, because you went to the conclusion upon presentation. The argument you set up is like saying, “Here’s an idea that is obviously bad and shouldn’t be pursued: What if the steam engine hadn’t been invented and someone said let’s use steam to generate the power? If someone were to present that idea now, it would never stand a chance in the market against the internal combustion engine.”
True. Very true. And you, having NEVER seen it before, might even feel certain of that upon first hearing. But you still would never have seen it. You would never have heard of it before. Right? You’d need to build some model, even if it were virtual, even if it were in your head, to test it out. At the end of that process, which is the process of letting the idea live until it dies, you would come to the conclusion that it was not going to work as well as the current engine. But you would need to let it live first.
That’s my ONLY point.
The same is true of the T-Formation. If it had never existed and someone said, “Hey, how about we line up three backs behind the quarter back?” Of course, one response might be, “That’s stupid. That will never work against the sophisticated defenses of today.” But a more healthy response would be, “Hmm… sounds silly, but let’s explore that a bit.” Why? Because it never existed. It’s certainly reasonable (unless you think it isn’t) for SOME kind of new twist to emerge from simply TRYING it!
Again, my ONLY point is that killing an idea at it’s conception never provides ANY value. Letting it live gives it the chance of providing SOME value.
If you want disruptive, it’s a good way to proceed. If you don’t, and all you’re interested in is sustaining, then kill any idea that doesn’t fit your current understanding of what is possible. You will achieve your goal.
As for the discount brokerage, I want to make very clear, I am not arguing for or against their existence. It wasn’t even the point of my post. But now that this comment string has headed that way, I’m simply arguing that it’s possible someone MAY find a way. The fact that some have failed is NOT proof positive that any variation on the idea is also destined to fail. That’s just your opinion. It aint fact.
By the way, I like steak, quite a bit, but there are times when a Big Mac will do the job. 🙂
February 3, 2007 — 5:13 pm
ardell dellaloggia says:
Turner,
A Big Mac may in fact do, but consider this:
You go to the doctor and he says you need a quadruple bypass and tells you that will cost $200,000. You say, you know what doc, thanks, but I want to spend no more than $25,000 so you keep the steak…I’m buying the Big Mac. Give me one of those four bypasses.
You go to a lawyer and he says that to defend you in the murder trial will cost $75,000. You say, you know what, I’m innocent, so I’ll just defend myself. Here’s $100 bucks for your opinion, but I don’t need no stinkin steak.
When you get sued after you sell house, because there was a crack in the sewer pipe at the time you sold it and no one discovered it. Two months later there is sewage backed up all over your lawn and three lawns down. A $100,000 problem, you might wish you had the steak, or at least offered the buyer a steak and you keep the Big Mac. The buyer not doing their due diligence with agent assistance, can come back to bite you in the ass.
When the minority buyer has no choices in purchasing a home, becasue all the for sale by owners have the right to discriminate, the sellers are very happy with their Big Macs and the buyers are renting where they can. The seller says I don’t need no stinkin agent and neither does the buyer. Well does the seller really get to make that choice for all of the buyers of the world?
Buyers by and large absolutely need an agent and they need the seller to include that agent’s fee in the sale price. That is the system that exists.
As long as the seller goes out for HIS options recognizing that in doing so he is affecting the BUYER’S options at the same time, it could work. But only if the seller chooses a Big Mac and leaves a steak on the table for the buyer to decided if he wants a steak or a Big Mac.
February 4, 2007 — 12:03 pm
Jeff Turner says:
ARDELL!!! I’m still trying to understand how a post about letting ideas live turned into folks trying to convince me of something I already believe. The smiley at the end of my comment was intended to show I was joking. Should I have used two?
But I guess that’s what this comment string is meant to be about, so…
Neither of your examples are examples of a Big Mac doing the job. Both are straw man examples where clearly only a steak will do the job. I can’t play unless you bring better examples.
I’ll use your first analogy. If I go to the doctor with a cold and the doctor says, “give me $250,000 and I’ll tell you whether you do or not.” I’m going to say, “No thank you, I’ll go down the street to another doctor who’ll take my $15 co-pay.” In this example the Big Mac will do. Is there a CHANCE that doctor might find something worth $250,000 in fees? Sure.
I agree with you on this point. The buyer needs representation, if for nothing else than to protect them from easily concealed lies that a pro should be able to detect. This is a new understanding for me and I’m still growing into my understanding of it, but it make perfect sense.
February 4, 2007 — 3:07 pm
ardell dellaloggia says:
Turner,
That’s part of the problem. Your view is different from the outside. It is a steak job, you just choose to see the part you can see, and not the part that we see. Just like a doctor who knows you need a triple by-pass, we know that the average consumer doesn’t have a clue and thinks it’s a big mac job.
Partly because of the big mac agents…but is the answer to come up with the big mac option, or get rid of the big mac agents??
Turner you can’t pick “no steak” if steak is needed and no one knows on day one of “I want to buy” or “I want to sell” if it is a steak job or a big mac job. That is why I say settle up at the end.
You think anyone knew about the cracked and broken sewer pipe on the day the seller asked me to sell the house? We don’t know it’s a steak job until we close. Then we look back and say, well, that turned out to be a big mac job so here’s your change.
Would that work for you Turner?
February 4, 2007 — 6:09 pm
ardell dellaloggia says:
Trust me…the innovative models who started at big mac prices are finding out fast that they can’t pre-determine that Oh NO! It’s a steak job!
Your view is like theirs…a bit naive.
The doctor and lawyer do not include the consumer in the entire process, but somehow you know “it is worth it”. Why so different in real estate?
For me it isn’t. My clients never feel they overpaid. You just hired the wrong agent as do many. Maybe we just get rid of those wrong agents. Would you have felt the same way if you had a great agent and you felt they did a bang up job for you, Turner?
February 4, 2007 — 7:19 pm
Jeff Turner says:
I get it. I don’t think disintermediation is the way to go. Wasn’t the point of my post.
I wasn’t arguing for disintermediation. I said that. So, I’m not being naive. I just thought your analogy was flawed. So I made an attempt to show you a different analogy, using your same model.
And how can you say I can’t EVER tell when it’s a Big Mac? I may be naive about many aspects of your business, and certainly I am, but I’m not an idiot. I knew when I sold my last house that a Big Mac would have done the trick. But I paid for steak anyway, just in case – A $57,000 steak, that ended up being more like a Happy Meal, only without the happy.
I’ll also agree that every discount model so far has been flawed. But I will not say that it will never happen and neither should you. Never? Hmmm… that seems like an awfully long time to me.
February 4, 2007 — 9:53 pm
Jeff Turner says:
To specifically answer your last question… assuming they didn’t take both sides of the deal? Only advocated for me? All things being equal, probably not. But you, based on your previous posts, still feel I was overcharged, great agent or not.
February 4, 2007 — 10:01 pm