Knuckleheads beware: Real estate is changing
In real estate, stupid scales.
Excellence lives in small pockets.
That’s how it’s always been. And it will be this way until, someday soon, a rising tide of technology and consumer frustration reaches flood stage, breaches the levee, and sweeps forty years of toxic sediment out to sea.
Smile, it’s Thursday!
This is a happy post. Really. It’s just that I’ve come to believe that change in our industry – throttled for years by industry intransigence, backwards incentives and extended periods of economic inebriation – is likely to come in a manner more cataclysmic than evolutionary. And that involves some unpleasant stuff.
I’ve thought this for a while now. Because looking back over my thirteen years in this industry, it’s hard to identify fundamental change.
Think about it: has the Zestimate, the social Web, the iPhone, online mapping or the Internet itself, changed the fact that:
- There are still over a million Realtors, half of whom could not survive the professional rigors of employee training week at Chuck E Cheese’s?
- The seller still pays for most all transactions, plain-as-day conflicts be damned?
- Commissions have remain largely unchanged?
All the innovation has been great, but it hasn’t, in the end, changed a heck of a lot.
Which seems odd. And, I think, unsustainable.
The road to riches has been paved with knuckleheads
This is on my mind again because I just came back from a couple days with smart people who have spent a long time in real estate but have managed to escape its usual prejudices. They are planning big things, and I learned a lot.
After dinner one night, I listened to one of these folks explain the tried and true path to rapid growth in this business. It was a nuanced story, but boiled down to something like this: sell stupid things to stupid people.
He and his colleagues – hard-bitten realists all – were trying to grow by doing it differently. A commendable goal, but the trying alone is telling. It’s a signal of change.
I’m seeing more of these lately.
It’s getting easier to be great and harder to be lame
It’s hard to scale a brokerage when you establish and enforce standards. Just ask Redfin.
It’s hard to get big and profitable when you invest real money in technology and mess with the pricing model. Just ask ZipRealty.
It’s hard for a good agent to win when they are crowded by a thousand competitors whose only means of winning business is to tell the client exactly what they want to hear, truth be damned.
But I’m starting to see that change. It’s becoming more difficult to get away with unleashing a inexperienced, under-trained sales force onto the marketplace when consumers are facing cold realities.
It is getting more difficult to run a brokerage with Clinton-era technology and pre-Baywatch marketing.
And is also seems that consumer attitudes are becoming less favorable to lame agents: The California Association of Realtors Buyer Survey noted a more than 20% drop in consumer satisfaction with agents last year. Over 80% of those dissatisfied chose “Agent did not negotiate aggressively on my behalf” as their reason (and remember, these are buyers, in a buyer’s market). Seems it’s getting harder to pretend that under-qualified recruits can negotiate high-dollar, emotion-laden transactions in a complex market.
Darn!
Who cares?
I know, this post is a little fuzzy. That’s usually a bad thing, but I wanted to share this sentiment with you: I’m feeling that I may live to see a better real estate industry.
You care about that, right?
Brian,
I cannot recall a blog post I’ve read in recent memory that resonated more deeply and accurately than this one. You have your finger on the pulse, my friend. Keep it there…and keep reporting what you see, hear and feel.
See me, hear me, feel me…you can see for miles and miles.
How much does it cost a company to babysit the knuckleheads they accumulate just because they want the numbers of agents? I’d like to see a study on that. Maybe it really outweighs the benefits… how many of those knuckleheads will ever really become productive salespeople – or just not a liability?
Great post! I can’t wait to see the levy break! I think it will open the doors for a new group of leaders which is very exciting.
I get it Brian. Not fuzzy at all. But I do think a lot about which drivers will cause meaningful and sustainable change. Any thoughts?
a little fuzzy, but I like “fuzzy” posts. They come from the gut and that’s where the best stuff is.
If you truly excel, It’s easier than every to win…and win BIG.
Kevin(s) -
I appreciate your indulgence of my fuzziness.
Brian
Brian, this is an absolute brilliant post.
But do you really think consumers are that engaged? There is lots of conversation from the industry but little conversation from the consumer about what is wrong.
Do you think big brokers have really learned any lessons, or will they just continue to hire more agents and just not give them an office space with a coffee maker?
Is it really Agenthousing Armageddon?
http://www.sandiegolifestyle.info/2009/07/is-this-agenthousing-armageddon/
I just wrote a post today – there is 1 agent in California for every 25 homes.
Yet listing agents don’t post professional pictures, complete specification, or accurate information in the MLS. Dual agency is ever more encourage with technology, while agents standards and professional ethics plummet. Just look around the Internet for the total regard of most brokerages and agents to list their Department of Real Estate license number.
The consumer continues to seek out the top producing agent with a phone on her (his) ear the whole time there are being shown a home. They continue to hire Aunt Suzie, or Shirley Busybody as the neighborhood specialist.
More and more Brokers will no knowledge of “standard of care” are launching virtual agencies with teams of wet behind the ears agents with no over site.
It’s the wild wild west buddy, and I’m not sure it’s changing any time too soon.
Sorry, but as you can see your post got me pretty excited, thanks….
Anti Trust laws prohibit price fixing… or… for that matter, an assembled group of CEO’s discussing ‘fees’ or ‘fee structure’… so forget about collaborative change from insiders.
If this economic environment continues the Real Estate industry (and others) will be forced to reconcile / retool their models mainly to survive this down market… this time period will offer (force) an opportunity to change… and change will come by affirmative , progressive OOB thinking or by default, change will occur all around and the weak will not survive… change will happen.. it’s a matter of time…
I hear, see and feel what you’re sharing.
Over the past 30 years, our tools have changed beyond imagination, but the how has generally stayed the same.
We’ve new broker business models, methods to market, business development strategies & tactics, communication methods & mediums, new media, follow-up, broadcast, promotions and transaction management, but it seems, as you’ve shared, the fundamental business has remained unchanged.
I think over time, the top performers (not top producers necessarily) will attract a larger and larger share of the business. Perhaps a killer public agent rating system will accelerate this evolution and wash the poor performers out of the business? Perhaps the GooleIndexAfication of everything will drive opportunity to the truly qualified agent. I’m not sure if the business will radically change or it suddenly shift to the people who truly earn and deserve it.
As a Sales Manager responsible for training, one of the things that strikes me, almost without exception, no matter how whip-smart or professionally skilled or connected a new agent is, the response is generally the same, they are shocked at the amount of detail, the breath of knowledge, the spectrum of situations and number of opportunities to screw things up there are in a single real estate transaction. I don’t see how significant numbers of average or above averaged IQ’d consumers can navigate the selling and buying waters alone or primarily on line. Of course, just because I can’t see it, doesn’t mean it’s not there or won’t happen. A blind spot is called a blind spot for a reason.
In the mean time, I’ll focus on being the best we can be, where we are, with what we have…and I’ll keep soaking up all the perspective I can. Thanks for yours.
@Jeffrey
Yes, I think consumers are that engaged. They have always held the real estate profession in low esteem, but now have the tools, the wider view, to sift the good from the bad.
You can either shine or stink in the light of day, and it’s getting brighter out all the time.
Brian, Excellent point.
Interesting post, lot’s of excellent points, I remember hearing back in the 90′s how the internet was going to wipe out the ranks of agents. My BF real estate buddy and I are always trying to figure out what is coming so we can be there when it arrives, although don’t know how good a job I am doing.
Comment on this:
“And is also seems that consumer attitudes are becoming less favorable to lame agents: The California Association of Realtors Buyer Survey noted a more than 20% drop in consumer satisfaction with agents last year. Over 80% of those dissatisfied chose “Agent did not negotiate aggressively on my behalf” as their reason (and remember, these are buyers, in a buyer’s market). Seems it’s getting harder to pretend that under-qualified recruits can negotiate high-dollar, emotion-laden transactions in a complex market.”
I am not an agent in CA and our market is very different, but just wondering, is it possible the buyers felt this because the sellers still had a little blood left?
Brian you aren’t fuzzy at all. The world is changing and real estate needs to change, too. I can’t say the Redfin model is the way to go, nor the Zip Realty model, either. One still relies on an agent who knows and understands the nuances of their local community and who is known by the other agents as being an ethical agent to work with on any deal.
Working in California, where it’s too damn easy to get, and keep a license, and where our DRE has their heads in the sand, I see why people have a negative attitude. But, last year was the year when the market was in the tank and when people were bottom fishing, and expecting to catch a whale. When they didn’t, they were angry and took it out on their agent. I work on the San Francisco Peninsula and sure there were some great deals, but not what was happening in other parts of the state. Greedy? Yes, these people were greedy and wanted more, more, more and didn’t want to understand the area.
Those of us trying to work ethically, and utilizing technology, are working hard to help our clients win. This is an education process and the best sales people educate first, advocate second, and negotiate in the end. If you do it that way, you win, but only if your clients listen to your advice.
We all have experience with clients who don’t listen, or think that they understand real estate because their Aunt Sally tells them how to do things. It matters not that those people aren’t in our market and don’t understand how things are done here. Real estate is local and until that model changes, our jobs will be here. The big boys still need us more then the minions of newbies they hire. We produce. They don’t.
Brian, Great Post!
Nature has a great way of dealing with the weak to allow the strong to thrive, adapt and change. Real estate is interfering with this principle at its peril.
Didn’t Jack Welsh chop off the bottom 5% every 6 months at GE? I wonder if he would encourage RE to embrace Redfin and Zip rather than fight against them.
As Ebay discovered in its early days, I think consumer driven ratings will shake up this industry.
Average….be gone…
Brian-
I like to think that social proof will soon start rewarding those who stay above-board and approach real estate from a more modern direction.
The explosion and diffusion of information and the tools we use to deal with it allow us to choose our niches and style of business, rather than simply falling into something for want of more options.
Do something well, perhaps a bit differently, and you’ll be recognized for it, paid for it, and live a more fulfilling professional life.
Brian,
As a long time reader and I always enjoy your point of view.
“It is getting more difficult to run a brokerage with Clinton-era technology and pre-Baywatch marketing.”
This quote sums up so many of the issues with real estate marketing and technology. Change is needed. Change in how agents and brokers operate their business is hindered by the lack of understanding that the buyers and/or sellers have about real estate. The brokers or agents that want to lead the changes they have to educate the consumer. That will open the eyes of the sellers and buyers, open their minds, and create opportunity for the innovators.
In real estate, stupid scales. What a great comment, and so true. Real estate is the only service industry where the highest fee a great sgent can charge is set by the lowest any agent is willing to accept. Why? Because sellers and buyers only purchase real estate service every 7-10 years on average. NAR stats show that over two thirds of customers work with the FIRST agent they meet! Plus there is no industry wide, independent system like “Yelp” to rate agents on their performance. Until the consumers demand change the industrywill look just like it does now. or I could just be stupid.
Brian, great post. Not fuzzy at all. This is something I have been saying to customers and clients for years. There are way too many real estate agents who have no clue as to what they are doing in this business. It is way too easy today to have and keep a real estate license and many do this business as a hobby. Mediocrity is almost accepted in our industry and it is tiring to those of us who are truly trying to serve our clients.
As a 20+ year broker associate on Long Island, I personally look forward to a thinning of the herd.
“Average”.be gone”" I can’t wait.
Brian,
I loved the fuzz! I couldn’t agree with you more. This market has already weeded out some of the knuckleheads. I’m looking forward to the day when there is a Yelp for Real Estate.
@angela/lenore – you are right about buyers, but I think it’s probably a wash: they could have been just as frustrated with their agent for writing ten offers and coming up with nothing back in 2005.
@robert – I agree that any consumer who chooses a knucklehead agent these days deserves what they get. It’s just that it’s becoming harder to make that mistake.
Big changes happen slowly. Big corporations can’t handle big changes because they have too much invested in the status quo and existing people are too invested in keeping things they way they are to protect their own jobs.
Instead, big changes come from OUTSIDE the industry and start small.
Look at Redfin. Their whole model would never have worked if the idea was launched inside an existing big firm.
I am excited for the future.
Fuzzy is what happens when there is a gut feeling expressed. It’s harder to articulate, but it’s meaningful coming from someone that’s close to the pulse of change. Forgive me this one time if I don’t read the comments and just say this…I’m counting on it.
“It’s hard for a good agent to win when they are crowded by a thousand competitors whose only means of winning business is to tell the client exactly what they want to hear, truth be damned.”
This statement IMO really hits the nail on the head and has been a big reasons for the decline in the general brokerage side of my business over the last 3 years.
I have been following both Redfin and Ziprealty for years. Redfin really does get it and is poised for growth once consumers start changing their view of the industry (assuming they adapt to any future changes in real estate industry regulations and customs). Zip on the other hand tried to go their own way only to adopt too many characteristics of a large traditional brokerage.
@brian & @robert
NAR’s own studies show that 57% of *sellers* are more concerned with the reputation, honesty and integrity of the agent, than any other factors…(NAR 2009 Profile of Home Buyers and Sellers: Exhibit 7-7)
I’d wager dollars to donuts that percentage has been steadily increasing over the most recent years.
Maybe we do need to adopt the training strategies of Chuck E Cheese! After all, it would be something not done in RE before…
Reminds me of a post recently written about doing things because that’s the way it’s always been done:
http://p1fran.com/2010/01/stop-me-if-youve-heard-this-one-before/
Great Post! I think in this day and age the goal of every sales person whether selling homes or widgets should be transparency. I am the same person IRL (In Real Life) as I am when going to bat for someone. I feel way to many agents hide from being themselves and have multiple persona’s. I don’t understand that? People want to do business with someone the know, like, and can trust. But, like you said about change, most agents don’t want to change the way they used to do business in the 1990′s. There are some Realtor’s that are so technically savy, it makes you feel good to be among them. BUT, there are also some agents that are so far in left field it makes you wonder if they really should be classified as a Realtor!
Great post, I completely agree. Buyers and sellers won’t settle for average agents whose big resource is the MLS. We need to be one step ahead of everything. Thanks for sharing your thoughts.
Brian ~ Right On!
Consumers are definitely understanding the difference! I am a very direct, no BS, RE Agent and have been for 16 years. New clients who have never spoken to me before make the comment all the time “Thank you for being honest and upfront” Because they have been used to the vague responses they get from un-educated, non-caring agents who are in RE for only one reason….they think it’s easy money! hahahaha
Can’t wait for your prediction to come true…Survival of the fittest and the finest!
Thanks:)
It’s easier to stand out in a field of knuckle heads. Go BIG or go home.
Brian – you are right to be encouraged. I think there are many agents that would not threaten their reputation to grab a commission. There are many agents building a professional practice that are not afraid to tell the truth and not afraid of discussing their value for money. I would not rely on brokers to lead the way here – any real change comes from the ground up.
Best,
Don Stewart
There’s something very wrong with a training model which has not changed appreciably for multiple decades. Especially when this has occurred within an environment of massive upheaval.
In most other professions, this would qualify for the status of ‘malpractice’….inexperienced, untrained professionals being largely un-monitored while operating a delicate and highly complex transaction. Change cannot come soon enough the real estate profession IMHO.
Don’t miss the point here – it will always be all about the Realtor/Client relationship – transactions become increasingly complex, good Realtors know the market better than ANY online source “it’s said a few Realtors know their micro markets better than God”
What has transformed for good – is how people get their information and ultimately how they find a realtor (referrals are NOT DEAD) their’s just more pressure on making sure they call you “I know I should call Mike but Angie seems so smart on Facebook maybe I’ll give her a shot” – (too much) old school will kill ya’ I promise – the big issue for Realtors is how are we going to keep up with our clients – we all now have the the MLS book – that horse is so far out of the barn that the farmer sold the barn and bought a condo in Boca!
Here’s the deal. The technolgy is getting in the way of the method. You are hanging around with the wrong people. You’re selling something to a group who want to buy it. They want a quick business model that will generate leads 24/7.
It does happen in small purchase businesses. It did destroy the travel industry, but hey let’s not focus on how much money a pillow and blanket costs during a flight.
The consumers, as you have pointed out, are the ones who pay people to do nothing for them. We have the GRIs, ePros, CRS, ABs and DBs with the MBs who will continue to do nothing for the consumer for a fee.
The good news is that the internet is full of very pretty pictures. The consumer can now, from the privacy of the home, no need to see the neighborhood, shop for a $250K, $500K, or $750K purchase. They can get a mortgage from the same web site. It has pictures, so it must be good.
Isn’t this how we got into this mess in the first place? Is eTrade remotely responsible?
How much money has the consumer lost? How many trillions of dollars have been squandered?
Thoughtful post, Brian. “And is also seems that consumer attitudes are becoming less favorable to lame agents: The California Association of Realtors Buyer Survey noted a more than 20% drop in consumer satisfaction with agents last year. Over 80% of those dissatisfied chose “Agent did not negotiate aggressively on my behalf” as their reason…”
Consumers have the right to feel dissatisfied if agents just go through the motion wanting to collect their commission. Agents need to add value, if not through “aggressive negotiation,” through thorough research on behalf of their client: background on the property and sellers, time on market, etc. I believe consumers need better ways to choose their agents to begin with, not just be pushed to an agent the brokerage or lead gen company chooses. And agent reviews would also be nice.
I think agent reviews (which are coming slowly) will be one of the biggest impacts on real estate over the next few years. Part time agents will simply find the effort / reward equation is out of sync and quit as more consumers gravitate to the qualified and professional. I am sure it will result in fewer agents in the USA but I don’t necessarily feel that is a bad thing.
I love it. It is “getting easier to be great” because of all the knuckleheads in this profession. I am a former Attorney and entered Real Estate just as it was crashing. Everyone thought I was insane to give up a high dollar guaranteed income. Well I should be doubling that by the end of this calendar year. Like you say, there are just so many knuckleheads it is easy to excel. I am competing against people with no sense of professionalism or work ethic.
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