Archive for July, 2008
I started the discussion about “generational” marketing with the controversial article:
In that article, I discussed why the Baby Boomers represented an under-served market for high-tech real estate agents and lenders. Fascinated by the responses, I started researching more and committed to a series about how to market online to this generation. Greg Swann and I agreed that this will definitely be a session at Unchained Orlando.
The second part of the series is available on Home Gain Blog:
Why did I take a detour to Home Gain? To throw up a big tent.
Here’s an excerpt:
The younger Baby Boomers, or Generation Jones, are a bit different from their older cousins. Born in 1955-1966 and children of “The Silent Generation”, they came of age in the late 70s and early 80s. They were promised a better world, became latch-key kids (from divorce or dual income families), and remember odd and even days at the pump. Live Aid defined this generation.
Barack and Michelle Obama are Jonesers as is Sean Hannity. Their big cultural shift was Carter to Reagan, pension plans to 401-k plans, and Pell Grants to student loans. They listened to KISS, Bruce Springsteen, Tom Petty, and The Beastie Boys; less idealistic, more individualistic. That music represents the feelings of this sub-generation’s view towards life.
The series will be back on BloodhoundBlog and I expect to have 4-5 more installments; we’re just taking a little detour today to invite more people to the party.
Marketing to Baby Boomers:
Part Two: Baby Boomers Were Not Created Equally3 comments
I love the word Irony. Maybe its because Ironman has been my favorite song forever. Or maybe it’s because I thoroughly enjoyed the movie Ironman. Oh, wait. That just takes us back to the song Ironman, which is the theme song of the movie. No, I know why I love irony. It’s because all around us life is full of irony if only we will pause to notice it. Want some examples?
Take the three original learned professions, the priesthood, the law, and medicine.
Priests keep our most private confidences, and priests today are known as violating our most sacred honor. Lawyers, who were originally called to be ambassadors of justice are today known as the greatest of liars and truth is no longer admissible in a courtroom. Doctors, called to save lives and preserve health, practice in hospitals where the American Medical Association claims 300,000 people die every year, the result of doctor negligence.
How about something closer to home, like real estate?
The mortgage industry helped people achieve the American dream, the dream of home ownership. Today because of astonishing levels of greed in the mortgage industry (and lack of adult supervision), the same people who were helped by the mortgage industry are now in foreclosure and losing their dream.
And then there are real estate agents. First you have the word “real.” If agents are real, they why do so many have a reputation for being phony? And you have the word “agent.” An agent represents a client, protecting that client exclusively in every way, including financially. Just like a lawyer who can only represent a plaintiff or a defendant, but not both, an agent represents his client and not the opponent. The next step of irony is to create a system called “dual agency.” Voila! We can represent both. I suggest lawyers create dual representation, too. That way lawyers could practice lying to themselves as they promoted the plaintiff’s version of the facts on one side of the courtroom, and then the defendant’s version on the other side of the courtroom.
I love irony. How about a political and judicial system that ignores the human rights of women for thousands of years, and then in the span of a few decades creates state agencies (aka DSHS) that are given free reign to administratively reverse all of that in favor of women. How history must be laughing!
And finally let’s go back to real estate again. In the beginning (not that beginning) of this great nation’s history, white men destroyed nations of Indians and took their land. Today, Indian tribes are sovereign and immune from our laws in most every respect. That’s ironic, but it gets better. Guess who created the case precedent for such extraordinary law? You’ve got it–white judges. Sorry, but it gets even better yet. That case law was created to resolve a dispute between the oil companies and several Indian tribes in Alaska. The result was an easement from Prudhoe Bay to Valdez across land owned by our Federal government.
Meanwhile, the Indians sell fireworks from China to white men, our toys are made in Taiwan, and American men are finding their wives through online Russian dating services. And who is buying the most U.S. real estate right now? Arabs, Russians, and Chinese, our biggest enemies in decades past.
If irony rules throughout history, can we tell the future by reversing everything we think will happen? Let me take a stab at the future of irony.
Five years from now, the newspaper headlines might read:
Tepees Are Back and Selling Like Hotcakes
All Lawyers in the State of Alabama Rounded Up and Summarily Killed July 4th
Louisiana Passes First State Law Requiring All State Judges Be Women
Class Action Suit Settled, Homeowners In Foreclosure Now Own Homes Free and Clear (and Countrywide)
Alabama Reports No Crime in State Since July 4th, Three years Ago
Washington Stunned by Election Results: America Elects First Canine President–A Bloodhound
Don’t laugh. It could happen. Everything else has. You can follow Chuck’s ironic life at Sequim Real Estate.5 comments
For many buyers’ agents, there are two distinct stages in a real estate transaction. I know, it may seem like there are many, but in the broadest sense there are only two. You might call them the Age of Enlightenment and the Dark Ages.
The first stage is when you do most of the work with your client. From the marketing that first attracts them to the countless showings and all the way to writing an offer and negotiating that last counter before acceptance. This can be called the Age of Enlightenment.
The second stage, the Dark Ages, often begins just about the time you recommend a lender or two and begin the loan process. I have heard agents describe this as akin to pushing the contract, the client, the paperwork AND their commission check into a gaping black hole… of silence… then waiting, hoping and praying a deal will come out the other end.
There are a number of reasons for this, most of them beyond the lender’s control, same as yours. Underwriting guidelines are changing on an almost daily basis. The actual loan options have decreased just a tad. Sort of like Basking Robbins 31 Flavors suddenly going down to two flavors… and raising the price while they were at it. But there is one aspect you have a lot of control over when recommending a lender: the lender themselves.
When it comes to choosing which lenders to keep on your short list, referrals are certainly important and past performance is great, but I also highly recommend you ask a single, all-important question. Whether interviewing a lender for the first time or seeing your regular lender, stand straight and tall, look them in the eyes and ask this question: “Mr/Ms Lender, by recommending you to my client I am also commending my commission to you. In other words, I am handing you $5000, $10,000, $20,000 of my money in hopes of getting it back in a couple of weeks. Why should I do that?”
If they cannot convey to you that they get it… if they cannot immediately give you a valid, even outstanding answer as to why you should trust them with your money… walk away and find someone that can. Enjoy the Age of Enlightenment.26 comments
We’ve picked on and pissed off so many attorneys over the past two years that I’m amazed one actually wants to join the pound. But Chuck Marunde is not just a real estate attorney, he’s also a working real estate broker — not to mention a very talented writer.
Here is the man speaking in his own behalf:
After practicing real estate law for 20 years in Washington, Chuck concentrates on residential sales in Sequim and Port Angeles on the beautiful Olympic Peninsula in Washington. Chuck has personally closed 100’s of transactions and litigated most real estate issues. He founded his first real estate law website in 1995, and is a minority shareholder in an International technology company. Chuck is the author of numerous magazine and Internet articles with a primary focus on real estate. Because he has two sons who became professional athletes (Strongman and Mixed Martial Arts), he has also authored articles on the Strongman sport and has been a freelancer for Ultimate Grappling Magazine. In his spare time, Chuck is a sports photographer. Chuck has combined his love for real estate and technology to create a growing Internet presence in his market. Chuck has degrees in Economics, Law, and Education.
Port Angeles is a quaint New England fishing village accidentally misplaced at the tip the Olympic Peninsula in the Puget Sound. Beautiful country, and a milder climate than any New Englander has a right to expect. The Olympic Peninsula is a rain forrest, and the whole of it is about the most radical tourist experience you can have without leaving the lower 48 states. As much as I love Port Angeles, my favorite spot on the OP is Ruby Beach. Highly recommended. Take the kids.
Meanwhile: Chuck joins us today as the newest hound in the pack. Here’s hoping he doesn’t come to regret running with such a lawless crowd.
In Part 1, I discussed the concept of Disbrokeration; some of its causes and effects. When I originally wrote about Disbrokeration I thought I had a pretty good idea what the next iteration of the industry would be: Super Teams. This type of development is not new and successful Super Teams abound right now. For me it seemed the logical next step in a 2.0 world where the Brokers have lost a great deal of their function. Having said that, I see some flaws with Super Teams. Especially in their ability to transcend a relatively common problem faced by many self-employed entrepreneurs. My purpose here is to discover a model that will not just work, but work for the majority. Let’s look at the pros and cons of the Super Teams and in Part 3 of this three-part series, I will share a model that I think may best serve the future of our industry.
Basic Real Estate Teams
Agents may have more than one reason to create a team in real estate. Some may do so for geographical reasons, some may do so to create multiple streams of income. It can even be done simply for social reasons. But the primary reason to create a team is economies of scale. Simply put, a well managed team can be more efficient through intelligent design and effective division of labor.
Gary Keller, in arguably the best book ever written for real estate success: The Millionaire Real Estate Agent, discusses the team concept as a matter of course. It is simply a requirement for reaching the millionaire level. This is due to the economy of scale mentioned earlier. Mr. Keller’s point is that one person alone cannot see enough clients, list enough homes and work with enough buyers to achieve a million dollars in income. One simply cannot carry the work load necessary for such a goal.
Others have written on the benefits in creating teams. Mike Farmer looked at it from the perspective of geographical and technological symbiosis rather than a purely profit driven necessity. I think I do Mr. Farmer no disservice when I summarize his thoughts as: the sum is greater than the whole of its parts. While I agree with the conclusion of Mr. Farmer’s thesis, I do not agree with its premise. Bringing together various people to create a team for the betterment of everyone involved is lofty to be sure, but not realistic on a grand scale. Communal enhancement is not the biological impetus upon which most of us base our actions. There are a great many examples of people coming together to work as one group for a higher ideal, but there are even more examples of those same groups coming apart under the strain of a more basic drive: greed.
The point is, ladies and gentleman, that greed — for lack of a better word — is good.
Greed is right.
Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.
Greed, in all of its forms — greed for life, for money, for love, knowledge — has marked the upward surge of mankind.
Gordon Geckko in the movie Wall Street
Our Goal Model Defined
Yes, greed must be accounted for if we are to design a blueprint for the industry as a whole. Even more importantly, we must acknowledge the premier ingredient in creating real estate success: lead generation. The broker is no longer germane. The ability to create leads is THE most important factor and defines the primary actors in the model that will take us forward. But we are looking for more. If we wish to create a model for the future, let’s charge it with an even higher level of responsibility. Let’s create a model that also rids the industry of loafers and under performing “shoe salesmen“. Let’s create a model that sustains its growth by success rather than law. Let’s create a model that generates its own need and reward for education. Let’s create a model that allows any to enter, but demands dedication and professionalism for success. Let’s create a model without help from rigged tax laws and a “loose” interpretation of independent contractors. Finally, and most important to universal portability, let’s create a model that is achievable now and with our current skill sets. The Basic Real Estate Team model fails right from the beginning. It takes into account almost none of our needs and few of our desires. What about Super Teams?
They look like this: one or possibly two agents are the Team Leaders; they are the Rain Makers (RMs). Beyond the RMs there may be nothing more than a part time administrator; or there may be multiple buyers’ agents, listing agents, lead coordinators, customer service managers, marketing directors and so on. What makes them unique is the fact that they all work on the RMs’ team and directly for the RMs. They may bring in some business of their own (and the splits on that business may be higher) but the primary responsibility of those that work on the Super Team is to benefit the RMs. The entire team exists to enrich the RMs; to help them in their mayoral marketing – to help them become mayor for life. Super Teams do allow for change. If someone on the team decides they can be an RM too, they are free to start their own team (and well trained for it too). But for a great many, the idea of enjoying the profession of real estate without all the messy marketing and concerns over a commission lifestyle makes the Super Team a cozy home.
This model certainly accounts for the greed aspect and literally defines the importance of lead generation. It also quite adequately rids us of loafers and water cooler whiners (RM’s would have short patience for someone not pulling their weight). After that though, this model begins to fall off.
It rewards education, but only to the degree that the education benefits the RMs. The Super Team model also suffers from our current “loose” interpretation of what an independent contractor is and continues to muddy the waters of accountability. The Super Team is also easily susceptible to internecine battles and requires a tremendous figure head as RM to hold it together. Which leads us to a problem usually overlooked until it is too late. Often referred to as The Peter Principle, it is what can happen when someone moves from their position of success to a position of managing that at which they were successful. Being an RM is a highly skilled and deservedly well paid achievement. But reaching that lofty height in no way ensures you will be successful running a team. The skill set is different. In Mr. Keller’s book he suggests that you hire an administrator who will eventually oversee the employees, do the hiring and firing and basically run the business. This makes sense in a small, one man operation that is expanding. But a well paid assistant is hardly the solution to running a large firm.
At its most basic level: a Rainmaker needs help in handling all of the leads they generate. Yet by taking on the required help they must divert their time and some portion of their rainmaking to management. This is, in the end, still a self-employed entrepreneur… but with a growing staff. Either the model falls under its own weight or the RM morphs into something unintended and unproductive. In either case success leads to more hours and less enjoyment for the Team Leaders that began as Rainmakers. This is an unlikely proposition on which to create a new business philosophy and its success is most probably not exportable beyond a select group of people.
One possible solution for the Super Team model is to refer all of the leads out to other agents. Maintain no overhead and no employees other than a coordinator to track the leads. I submit, however, that the referral fees currently paid are not large enough to justify the work and expense. On top of which, at this point you are a Rainmaker who is coming dangerously close to being simply a lead wholesaler. Our goal was to create a model of success within the real estate industry going forward.
So, our problem continues. The idea of a broker becomes archaic. As information becomes more readily available there is a natural progression: middlemen (brokers) go from providers to gatekeepers to restrictors (chokepoints as Greg Swann calls them) and eventually they just become unnecessary. Yet the sole entrepreneur atop a Super Team still suffers from many of the existing problems and struggles under the weight of their own success. We need a new model.
Next time: An Old Tool for a New Problem41 comments
My buddy Jon Karlen writes on one of my blogs, RealEstateIndustryWatch. Today, he beat me to the punch and posted this.
Yes it is true. The LA Times Sunday Real Estate Section is now gone. Due to space constraints and budget cutbacks, it has printed it’s last issue.
One has to wonder if this will not be the first of many to face a new reality (for them). The online real estate marketplace IS the real estate marketplace. How many more will go? How soon? How many will consolidate into other sections of the paper? Who knows.
A big part of the StarPower curriculum is the DISC system of psychometric analysis. I’ve talked quite a bit about Myers-Briggs and Cathleen is a big fan of the Enneagram. These are useful tools, especially for self-analysis. But INTJs will behave very differently from INTPs — and from each other, for that matter — so having a tight bead on someone in Myers-Briggs terms is not all that preternaturally useful.
The DISC system, on the other hand, is simultaneously very useful in real life and very simple to deploy. Once you understand the four DISC categories of behaviors, you can make reasonable on-the-fly analyses of the people you happen to be working with. High D? Don’t waste time on details, unless you are asked for them — and then don’t stammer. High C? If you don’t volunteer volumes of detail, you must be hiding something.
There is a good deal of academic theory behind the DISC system, and I don’t want to portray myself as an expert. Cathy and I took two short classes on the subject, both taught by serious amateurs. Even so, we learned a ton about what we’re doing right with people, what we’re doing wrong, and what we could be doing better.
There’s more: We set about to do a gut-feelings-based DISC assessment on everyone we know, this for practice. When we finally get around to deploying a CRM solution, we’re going to use DISC to classify our clients. This will be useful at every touch, but one thing we thought of doing was deploying DISC-oriented drip campaigns: Cut to the chase for the D’s, fun and games for the I’s, home and hearth for the S’s, charts and graphs for the C’s.
Brian and I were talking about this on Sunday, and we both thought it would be interesting to DISCify the cut-outs on a landing page. That’s not just fun for marketing geeks, it’s a testable procedure that should result in higher conversion rates.
There’s no end to the value in this system, since it enables you to tailor any presentation to the predictable psychometric style of the person you are presenting to. Instead of annoying D’s with redundant detail and offending S’s with off-putting formality, you can address your clients — and other agents — and their clients — in the style that will be most readily welcomed. This is not about hustling people, it’s about doing unto others as they would be done by.
We want to see if we can recruit someone to come and teach DISC at BloodhoundBlog Unchained in Orlando. In the mean time, if you want to slip your own DISCo in on us, try this quick and easy DISC test.
Here are my scores:
Dominance = 84; Influence = 4; Steadiness = 8; Compliance = 4
In the test I took at StarPower, I scored somewhat higher on I, but I was 100% D. This is the detailed assessment:
Dominance = 84
People who score in the high range:
~ enjoy competition and challenge.
~ are goal orientated and want to be recognised for their efforts.
~ aim high, want authority and are generally resourceful and adaptable.
~ are usually self-sufficient and individualistic.
~ may lose interest in projects once the challenge has gone and they tend to be impatient and dissatisfied with minor detail.
They are usually direct and positive with people, enjoying being the centre of attraction and may take it for granted that people will think highly of them. They may have a tendency to be rather critical of others. Consequently, other people may tend to see them as being rather domineering and overpowering.
Influence = 4
People who score in the low range:
~ are usually socially passive.
~ quite frequently have an affinity for things, machinery and equipment.
~ are generally comfortable working alone.
~ frequently have a tendency to be analytical and once they have sorted the facts out they communicate them in a straightforward direct way.
~ tend to take little at face value.
They may well have learned and developed good social skills but they only bring these into play when logic dictates such tactics.
Steadiness = 8
People who score in the low range:
~ tend to enjoy change and variety in their work and non-work life.
~ are expansive by nature and tend not to like routine and repetitive work/activities.
They enjoy stretching themselves intellectually and physically.
Compliance = 4
People who score in the low range:
~ are independent and uninhibited.
~ resent rules and restrictions.
~ prefer to be measured by results and are always willing to try the untried.
Free in thought, word and deed, they long for freedom and go to great lengths to achieve it.
They feel that repetitive detail and routine work is best ‘delegated’.
This is me to a tectonic fault. This is not just a concise analysis of who I am, it tells you exactly how to deal with me on a day to day basis. This is the benefit of the DISC system in real life.
Take the test, tell us who you are — and then share some ideas about how you can put the DISC system to work in your work.
When it comes to Real Estate I am, I imagine, like many of you. I strive to stay ahead of the curve and learn everything I can. In its purest form, I agree with Greg Swann’s philosophy: I want to be so much better than the competition that listings are mine for the choosing. I want to steamroll over mediocre agents and drive to extinction those that dabble in my profession. The art, the skill and the passion of a great agent – an agent that is advising clients on the biggest investment of their lives – those are the attributes I seek: for myself and my fellow agents. If someone is not up to that standard they should be removed from the business; but not by fiat. They should be driven out on their last breath, gasping and choking on great, heaping spoonfuls of my dust.
Toward that end I am an avid reader, especially of BloodhoundBlog. Technology is the great equalizer and the great slayer within our industry. On BHB we are exposed to the best of the best and I am trying to wrap my non-tech brain around the fire hydrant of information that flows here. I think I am doing alright: I understand how to Twitter people in the Facebook, Share my Mind with Google and constantly talk on miPhone while admiring the Street View out my Zillow window. Last night I even had a tall glass of milk with my Obeo. The Soft Infusion of most of these high-tech ideas has occurred in just the past week alone at BHB. A fire hydrant indeed.
Sometimes though, it relaxes my weary head to go a little Low-Tech. Here’s why: most people – my clients included – think it their hobby if not their outright job to put off till tomorrow almost anything they can. That desire to delay holds true even when what they put off benefits them. Life is busy and the demands are great.
You can see this in almost all walks of life, but it is especially acute in women. My sister is a prime example. I ask her what her plans are for the day. “Kids up and fed, load of laundry started, carpool to school, 8 hours of work, house to keep, husband to keep happy, plays, sports, recitals…” You get the picture. I ask her: “When do you do something for yourself and your sanity?” “On the list of Top Ten Priorities,” she answers “that is number twenty-seven.”
First of all, if you are reading this and thinking to yourself: “hey, that sounds a lot like me”… Stop It! And stop accepting it in your clients. From a business viewpoint, allowing people to exercise their natural tendency to put things off only leads to lost contacts, lost clients and lost business. Realize the tremendous opportunity we have to help others; to contribute to their success in a very meaningful way. Then understand the responsibility that comes with it.
Here is my Decidedly Low-Tech Philosophy for Real Estate Success: every morning I wake up and remind myself that my job is to do EVERYTHING I possibly can to make people take that first step to fitness: physical or financial. Remember, a stress on either one impacts the health of the other. The skill and dedication of being a passionate agent gives you an awesome, joyful power to reduce that stress.
It is said you can take a horse to water but you can’t make ‘em drink. What a defeatist attitude. Take your clients to the water and find a way to make them do what you and they already know is in their best interest. That is your responsibility. That is your key to success. That is your job. (Don’t delay!)4 comments
Ya know – I’ve decided that I want run for Congress – my dilemma: overcoming the paradigm that one aspires to move up and not – um – down. BUT! Just think of all the fun I’d have riding the train under The Capitol – sitting in convertibles waving at my constituents in parades, playing golf with my lobbiest “buddies” – Ahhhh – what a LIFE!
Honestly, though – I think the best part would be sitting in commitees and writing legislation. Imagine sitting in a big room covered in mahogany wainscoting, sitting in a cordovan leather highback chair behind the massive, hand carved desk with my BIG brass name tag in front of me -I might even have a microphone in front of me. My voice would boom while speaking down to the little peop – er – constituents – um – not MY constituents, but constituents nonetheless.
My esteemed colleague would be standing behind me whispering where the guys were going to meet up for drinks after the hearing while the pathetic homeowner in front of me goes on and ON AND ON about how some slick mortgage broker sold him a bill of goods and now he can’t make his mortgage payment. But I feign to listen because it’s only for a few hours and then I get to ride the under ground train with my buds ‘cuz tonight I’m drinkin’ and schmoozing with da bankers!
Just think about it! I’d get to drink single malt scotch while Jimbo Biggidy Big Banker throws his arm around my shoulder, pulls me aside – walks me out on the patio at The Capital Grille, hands me a cigar and tells me that those wacky Wall Street boys – ha ha – you know the type – custom shirts and suits from Hong Kong – well they really blew it. Look at ALL that hell they’ve caused.
Jimbo likes to talk in the third person.
Tommy – Jimbo’s bank is losing money. How was Jimbo supposed to know that people weren’t going to be able to pay for all of those mortgages? I mean housing always goes up – ha ha *slap on the back* right?
I mean – if I have to write down the value of all those assets – well -um – you see Tom, Jimbo and Marge won’t be able to host that ski junket in Vail this year – and we all know how much Tommy LOVES to ski.
Dammit! There is no way in hell I am NOT going skiing in Vail this year.
So Jimbo – let’s just say I get a few of my esteemed colleagues together – write a few rules and regs – make sure my boss covers your ass. You won’t lose a penny more on those declining assets – I mean, if you have to write them down to say – 85%, will that keep Vail in the running? Let’s face it – you can always foreclose – I mean who wouldn’t want to find a bargain?9 comments
We got to go to StarPower this year as guests of Russell and Wendy Shaw, which was very gracious on their part and positively dispositive on ours: We could not have made the trip without them. I’ll write more on our StarPower experience, because we came away with some very interesting ideas to play with.
For now, I want to talk a bit about Orlando. It was my first time there, and I might have passed on StarPower if I hadn’t had the secondary objective of getting the lay of the land in the Magic Kingdom. In fact, we didn’t even see anything of Disney — other than Disney-dazed kids, that is — but we got a very good feel for the area around the Orange County Convention Center where BloodhoundBlog Unchained in Orlando will be held.
Here are some photos, just for fun:
This is the North/South building of the Convention Center. It’s immense, but, even so, it’s much smaller than the West building.
This is just the main entrance to the West building. This is where you will find the trade show floor of the NAR Convention. The NAR has also reserved all of the available meeting space in the nearby hotels, to what end I do not know.
Everything you’re seeing here is along International Drive, a fun, walkable commercial district lined with hotels, restaurants, shops and other attractions.
Here’s a little bit of International Drive’s whimsy. StarPower was held at a huge Ritz Carlton/JW Mariott golf resort, but we stayed in a hotel off of International Drive. We had a rented car, and I can navigate with some confidence in this Southwest quadrant of greater Orlando.
We’re Realtors, and we never go anywhere without looking at the real estate. Friday night while I was negotiating the sale of one of our listings, Cathy was in a state of complete rapture as we drove very slowly along South Bay Drive. If you’re looking for a place to play Google StreetView games, this is it.
Orlando in July was surprisingly pleasant. In November, it should be simply heavenly.
On the radio over the weekend, they discussed a survey that had come out about gas prices and people’s habits. It was reported that 20% of those responding said they would drive 10 miles out of their way to save 5 cents per gallon on gas…
For those of us that are mathematically disinclined, the average car would require an 80 gallon tank just to make that little investment break even.
For me, that survey response is not the scary part. The scary part is… how many of these people vote?8 comments
The Real Estate industry is going through some pretty rapid changes lately. We have everything from Apple’s iPhone to Zillow’s Zestimates. There is a lot of conflict too. Your local Board of Realtors is most likely still trying to throw a fence around listing information, while a wired world questions the nature and even purpose of a real estate agent. The RE.net is creating opportunities and shifting the nature of the game. The world is 2.0 and it communicates differently. A 2.0 world markets differently and rewards differently too. Throw in the most destructive credit crunch since the Great Depression and you have a recipe for… WHAT? Only one sure answer: change. But the question is this: change into what? What does the future of the real estate industry look like? Will there be agents? Will there be brokers? Will there be a real estate industry? This is the first of a three-part series that will attempt to answer some of these questions.
Back in March I wrote a post on Disbrokeration and the coming changes in the real estate industry. I suggested that Brokers, more than agents, were going to see their positions and their livelihood challenged. I still believe that to be true. In part two of this series I will run through the first evolution I saw for our industry: The Super Team. Not an uncommon idea, the Super Team already exists and the refinement of it is discussed in many areas. Mike Farmer has written about it in great fashion. I will discuss why it may work for some, but in general it simply does not solve enough problems. Worse yet, it adds new ones. In the final installment, part three, I suggest a new model for the real estate industry. A model that is easily copied, well developed and most suited to solving the issues in our industry. But first, we must understand why the current model will not last.
Disbrokeration: The End of the Current Model
The existing Broker model is actually a pretty old one, found in almost any industry that is focused around the act or process of sales. From large Wall Street securities firms to small water purifier companies going door to door, we see the same basic structure: a principal surrounded by representatives. It goes back to the earliest days of retail. One person has an idea, a store, or a product/service that they wish to sell: a shoe store for example. They can only see so many prospects at one time or in one day so to increase overall sales, the principal brings others on-board. For a reduction in profits per pair of shoes sold, the principal hopes to see a lot more shoes sold. In this sense a store clerk, a stock broker and a real estate agent all serve the same purpose: help sell something that belongs to someone else in return for a piece of the profits in wages or commission. (Important Note: to sell something that belongs to someone else in real estate has nothing to do with who owns a piece of property. Agents are selling a listing or purchasing service that belongs to the broker. The broker is the store owner and the agents are the clerks. They help the broker sell more shoes by assisting clients in finding the proper style and fit.)
This made good sense for a long time and even worked as an incentive within the industry: work hard as an agent and eventually, if you have the desire and the money and the wherewithal, you will create or purchase your own real estate shop. You are then the Broker and you hire agents to represent you in dealing with clients who wish to buy or sell a home. In many ways it was a grand retirement plan. New agents counted on the Broker for everything from an office to phones; from training to accounting and from organization to guidance. In return the broker kept a hefty portion of the commission. It was rare for an agent to even reach 50% as it was the Broker who had taken all the risk, fronted all the bills and established him or herself as successful enough to own a brokerage in the first place.
Over time, the real estate industry expanded and grew, as any living organism will. Under the pressure of this growth, weaknesses are exposed and even exploited. The industry grew a very strong lobby and laws began to benefit the principals even more. Licensing standards were put in place, protection and confidence of the consumer being the objective. But the bar to entry was set so low as to be beyond meaningless. Some have argued it merely gives consumers a false sense of confidence. Tax laws were changed to minimize the cost of bringing a new agent on board. This may have made more sense at a time when there were substantial costs involved in hiring on a new agent, but times change. The internet has given agents unfettered access to buyers, sellers and available inventory. The fluid nature of the business dictates that agents brand themselves now, making the need for a big name obsolete. Pricing structures and commission splits have driven training out of the picture at most of the brokerages. Few agents receive anything for free and those that do are likely “loss leaders”: top producing agents there not to make the brokerage money (quite the contrary), but rather serve as a beacon for recruitment and a marketing tool for the rest of the agents. Most Brokers now engage the business philosophy of the lowest common denominator (also known as “putting butts in seats”). Thanks to the tax laws, the brokerage looks to profit on the one or two deals a new agent might stumble across from family and friends before the revolving door swings another agent through. I am not judging this. As long as everyone knows up front what they are getting it is a legitimate model of business… just not a very good one.
The Problem Defined
With the changes in tax laws and the power shift brought about by the internet, we have ended up with a very different kind of shoe store. The owner now hires as many clerks as possible (which is made easier by the low standards to entry) and puts them on the floor right away (which is not a liability due to the beneficial tax laws). The clerks want the lion’s share of the profits so the owner forsakes any type of training or mentoring. Why take the time and expense to move someone from apprentice to journeyman to master when the expectation is two to three sales of shoes to family and friends, followed by a quick exit and the next batch of shoe salesmen coming through? Of course, if the store is physically large enough or the brokerage has enough desks, the principal can just keep hiring without letting others go – why risk losing an extra sale they may trip over? In the end one finds three distinct levels within the store: those that have found true success through self-education, luck or experience from a previous job, those that are in the midst of their revolving door spin and finally, in those larger firms, those who “used to make a lot of good sales” (their family/friend stage) and are now filling seats, known simply as “water cooler whiners”.
The result is a number of detrimental outcomes:
- the knowledge and training possessed by the average agent is lower
- the collective wisdom of the industry is necessarily reduced
- professional standards are lowered, as is professionalism itself
- inclusion of the “water cooler whiners” in statistical studies lowers the perception of aptitude and success within the industry
The current brokerage system has devolved from a shoe store in which the principal hired on new representatives, trained them to know shoes as well as he did and increased profits by sharing profits and increasing revenue; to a shoe store that is overcrowded with underperforming reps. A store where the principal’s primary focus is making sure the lights come on, the plants are watered and there are enough desks to accommodate available butts
Next time: Super Teams: A Solution for the Few27 comments
Many of the Bloodhound writers and readers are rather disdainful of the entire Realtor® organization – all three levels (local, state and national). Greg Swann, in particular, has a penchant for wishing for the demise of the organization that keeps him on a leash. In fact, Greg, I’d suggest you stop reading this post now. Not because I will be defending the organization, but because you are already beyond any discussion of what a local association could/should be for members.
For those who are still reading, I will assume you have a least a passing interest in why you are a member of the Realtor® organization and some hope that it can serve you in some way. The fundamental question I’m exploring is the role of the local association in helping members to be successful. There are many different sizes and shapes of local associations out there, so I’m going to attempt to stay at the philosophical level. I will be using my local association, the Charlottesville Area Association of Realtors® (CAAR), as an example, so for clarity we have 1100 members in a small but sophisticated real estate market. That makes us a mid-sized local, but to be honest, we act like we are big.
CAAR is currently debating this issue of the association’s role. At each Board of Directors meeting we start off with what we call a “Strategic Discussion” that involves an issue that is important, but not urgent (Covey’s Quadrant 2). Next week the Strategic Discussion on the agenda is as follows:
What is CAAR’s Role on the Internet? When do we compete with members and when do we provide a common service that is in the best interest of most of our members? If we provide valuable public information, do we compete with members who could be providing that same information? Was the NGIC website a valuable service to members and the community, or an interference with our member’s business?
The NGIC website mentioned in this agenda item is a special site we created to help with a major relocation of much of the military intelligence personnel to our area – about 750 new jobs. The site we created displays the distance away from the NGIC headquarters of each house in the MLS. Now this isn’t rocket science and any of our members could have used an IDX feed and Google Maps to set this up. Should the association have even considered this project, or should we have left our members to their own limitations of creativity?
The fundamental question to me is what is the playing field that members are or should be playing on? Is the playing field founded on competition of who can create the best web site? Is the playing field based on data distribution as I discussed in To Z or not to Z? Is the playing field based on who can provide the best customer service, data interpretation, and marketing?
I tend to believe the later, but then again I’m just a pin-headed association weasel and not a Realtor®. I’d love to hear some feedback from others on the association models below. Which one of these associations would you join?
Limited Model ($50 to $120 dues) – There are a few minimum services that NAR requires association to offer. All of these required services such as dues collection and enforcement of the REALTOR® Code of Ethics can be outsourced. A savvy group of members could run an association with little effort and lots of outsourcing for minimal money. Of course you get what you pay for, but for some (e.g., Greg Swan) this is a good option.
Basic Model ($120 to $180 dues) – MLS, lockboxes, and a little education are the services you might expect in this model in addition to the minimum services. That means you’ll have volunteer and networking opportunities and need a few committees and an active governing Board. Minimal staff is required depending on the number of members because the volunteers lead the way. Most Realtor® associations fall in this category.
Hybrid Model ($150 to $225 dues) – Unlike a hybrid car, this model is not designed to get good gas mileage. A hybrid association, as you might guess, is a combination of the basic model and the corporate model. Many Realtor® associations fall in this category. Typically, hybrids do not have a significant enough number of members to justify a corporate model, but too many to satisfy the service expectation of members under the basic scheme. This model requires a balance between a strong governing board and a strong professional staff. That balance is hard to achieve and egos often clash causing turmoil and discontent in the membership.
Corporate Model ($200 to $300 dues) – As the name indicates, this model features a corporate-like structure – CEO, senior staff and a Board that sets the direction and gets out of the way. Committees and task forces work with staff to get the work accomplished. The association becomes an extension of the members’ business and provides services that could not be provided as efficiently by a member or even a large firm.
In my case, CAAR is somewhere between the Hybrid and the Corporate model. We have always been careful not to compete with our member firms, but that becomes harder and harder as volunteer leaders embrace new technologies and innovative opportunities. The lines between member service and member interference have become blurred especially with national franchises and large independent firms.
We have an association Blog, but is it competing with member Blogs? We have the most popular real estate website in the area, but isn’t that taking traffic away from member’s web sites? We issue extensive market reports and data, but couldn’t members do that? We have partnerships with media outlets, economic development organizations, and non-profits, but is that the type of thing that is best left to members?
Although I hate the cliché “leveling the playing field,” it seems to be uttered more and more around CAAR these days. The problem is that there is no agreement on what field members are playing on. Some are playing on the Internet field, some on the franchise field, some on the marketing field, etc., etc., etc. In a real sense, no mater what the association does it potentially competes with members. So what do we do? Disband like Greg wants, or plow ahead with the battle cry, “a rising tide lifts all boats?”
What do you think?27 comments
Search Engine Land compares Knol to Wikipedia and gives you step by step instruction on setting up your own Knols. I love the ability to have a collaboration but be able to moderate and control content edits. I have an ongoing feud on Wikipedia with someone who does not feel that a link to a hyper local blog full of community information belongs on Wikipedia – I put it on – he takes it off – one year later – 15 edits and I get incredible traffic to my local blog from Wikipedia. I just have to check it every few weeks!
For me it Knol is another tool in my arsenal of online marketing. I’ve got my start and am committing to adding fresh information at least weekly. Currently I’m ranked number 3 for the search “Real Estate” and the only one for “Athens, Georgia” who wants to join me? What content do you think will be most applicable and how do you plan to leverage this new tool?7 comments
Just when you thought Microsoft Internet Explorer couldn’t possibly suck any worse, it finds a way to suck with WordPress 2.6
Did you ever wonder why Bill Gates doesn’t have any children? It’s because he found a secret incantation by which, having named his company after his pet name for his most private appendage, he succeeded in making schmucks of us all. Top that, Steve Jobs!
Just when you thought you were about to escape into the cloud, Bill Gates has his revenge: There is a bug in Microsoft Internet Explorer that causes it to issue juicy error messages to some users of WordPress 2.6.
No fix but Firefox, so far — or a Macintosh, of course. Your mileage may vary, but if you see the words “Operation Aborted,” you might issue a little incantation of your own…