Industry

Knuckleheads beware: Real estate is changing

Author
Brian Boero
No.
443
Date
02/04/10

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?