The Fault Lies not in the Stars…
From the National Association of Realtors:
The Fault Lies not in the Stars …
Much has been made of how technology has and will affect our lives and chosen vocations. Technology speeds things up. Technology provides instant access. Technology feeds the insatiable demand for more and more meaningful information. Information wants to be free. Technology and ‘change’ are often used interchangeably to remind us that our world tomorrow will be very different than it was yesterday. Then you throw in a healthy dose of ‘who moved my cheese’ and all those other consultant driven mantras about adapting to the new world order and quickly your head is spinning and you just want it all to stop. But it doesn’t and it’s not going to!
The legendary Steve Jobs was described as mercurial, a little crazy, and passionately driven. But one of his favorite quotes tells us everything we need to know about him: “You can’t connect the dots looking forward; you can only connect them looking backward. So you have to trust that the dots will somehow connect in your future. You have to trust in something – your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.”
So what’s all this got to do with you and your participation in organized real estate? Let’s go back and connect the dots. An industry that’s come together for over one hundred years. Inventors of cooperation and compensation. Inventors of self policing through a strict code of ethics and professional standards. Inventors of MLS. Inventors of RPAC, the countries strongest political force. Inventors of yes, Realtor.com®, the first viable real estate portal, the traffic leader in the space for the first 15 years.
Here are a few Realtor.com dots. The business case for Realtor.com®, now 18 years ago, was summarized in the popular “lions coming over the hill” speech which has been repeated many many times. In its’ rawest form it said – if others harness the ability to aggregate data from your listings, and capture the consumer upstream, you will be disintermediated. Therefore, in exchange for using your listing data to make commerce, we will cause to be created a Realtor®-friendly, accurate, time sensitive, site with explicit guarantees not to threaten your commission or disintermediate you. To this day, Realtor.com® has kept its promise and it will continue to do so.
But as in any business, where there is a vacuum, the market will move to fill it. This is a good thing. We need to embrace competitive forces, learn from them and adapt. Competition should strengthen us because of the healthy tension it can create but we must also strengthen our resolve and stand up for ourselves.
As Realtors®, data does not define us; our insights, experience and expertise run much deeper than that. So as the industry moves forward, we have to look at ourselves – and better define our value proposition.
NAR believes that a highly skilled and professional Realtor® is and will always be integral to the process of buying and selling real estate. The association and its leadership is committed to promoting and supporting the Realtor® brand and Realtor® value proposition to consumers. In the internet age, consumers are going to go online for real estate information, but they will continue to rely on local experts when they buy and sell property. NAR is committed to ensuring that Realtors® are those local experts.
So just as data does not define us, nor should we allow service providers to become too comfortable in defining how you conduct your business. In practical, actionable terms – this is what you can do:
Demand the brokers and the listing agents identity be prominently displayed
Demand timely, ‘fresh’ listing display
Do not allow your listings to be modified
Do not allow co-mingling of your listings with FSBO’s
Demand preservation of copyright notices on your listings
Understand the terms of use you agree to for your listings
Demand that your provider highlight and promote the term Realtor®
AND – NEVER, EVER let any provider threaten your commission!
This advice is provided as a way to emphasize that your listings, your data were acquired by you through tremendous work and effort, and a heck of a lot of money is being moved around in the marketplace predicated on you continuing to provide it. It’s seed corn – don’t squander it.Now comes the hard part – we must be brutally honest – you must change and quickly. Your value proposition is not data – it’s YOU! You must be the best and you must be the most professional and ethical. For too long we’ve allowed the term Realtor® to be bandied about as a low ranking career choice. Your future lies in upgrading and elevating our profession to make you absolutely indispensable to the real estate transaction. Do not fall in the trap of thinking if we just regain control of the data that everything will go back to the way it was. It won’t. A quote from the NAR Strategic Plan says it all – “We need to be totally consumer centric – not what we want but what they want – and be able to adapt quickly.”
With over 1 million members it’s time, as Steve Jobs said, to trust in something, and that something is a history and a future of which we all can be proud. Connecting a million plus dots is never easy, change can be excruciating – but if not now, when?
Sincerely,
Steve Brown
2014 NAR PresidentDale Stinton
NAR Chief Executive Officer
A few thoughts…
Saying “NEVER, EVER let any provider threaten your commission!” and “We need to be totally consumer centric – not what we want but what they want – and be able to adapt quickly” in the same letter is a direct contradiction. News flash: the consumer centric thing to do is save them money, which implies lowering commissions (like Redfin did). If you truly want to do “what they want”, I can tell you without a doubt that it’s lowering your commissions.
“Do not allow co-mingling of your listings with FSBO’s” — is NOT consumer friendly.
“NAR is committed to ensuring that Realtors® are those local experts.” — Talk is cheap. Tell us HOW you plan to do that?
“emphasize that your listings, your data were acquired by you through tremendous work and effort, and a heck of a lot of money is being moved around in the marketplace predicated on you continuing to provide it.” — I’m still a little confused. It’s the home owners data, no? (see the middle of this post). Yes, absolutely listing data is valuable. But many seem to forgot, selling agents/brokers are paid to sell homes.
“The association and its leadership is committed to promoting and supporting the Realtor® brand and Realtor® value proposition to consumers.” — After 8 years in the industry, I still don’t exactly know what the “Realtor®” value proposition is to consumers. Does the actual word mean anything to them?
Bryn Kaufman
Posted at 11:01h, 02 August“We need to be totally consumer centric – not what we want but what they want – and be able to adapt quickly.”
Apparently Zillow and Trulia are giving consumers what they want, which is why 137 million users go to their site each month.
“Data does not define us”
True, but it does determine where consumers will shop for Real Estate. Consumers feel Zillow and Trulia have that data they need, as proven by their 137 million monthly visitors.
“For too long we’ve allowed the term Realtor® to be bandied about as a low ranking career choice.”
I have heard this before but honestly don’t totally understand it. Any insight on why would be appreciated.
I do know successful Realtors do a ton of prospecting. Maybe this is why people feel it is a low ranking career choice. Calling thousands of people each month trying to get them to use your services perhaps is not seen as a great career.
Jeff Manson
Posted at 10:14h, 03 AugustThey have all those users because they are dominating the search engines… not because the experience is anything really special.
Drew Meyers
Posted at 10:20h, 03 AugustI have not seen internal numbers for a long, long time – but I can tell you absolutely that early on, most traffic came from “Brand”.. not seo (you can go dig up actual numbers from public quotes from Spencer, Amy back in 2008-2009). I’m sure they have a lot more seo traffic now, but I can also assure you they would not be where they are today without delighting users…which has led to their brand. I would bet brand traffic is still fairly high.
Jeff Manson
Posted at 11:05h, 03 Augustdidn’t say the experience was bad… They get most their NEW traffic from organic and PPC from the search engines. The traffic they get from new users typing in Zillow is minimal compared to the millions of organic and PPC keywords they are getting traffic.
Bryn Kaufman
Posted at 11:12h, 03 AugustI agree with both of you.
The SEO really helps drive a lot of new users their way, but the user experience/brand is perceived as better than just a MLS site.
Consumers feel why use a regular MLS site when you can see over 1,000,000 more listings on Zillow, plus see hidden inventory from Coming Soon and Make Me Move, plus their famous Zestimate.
They also show a rent Zestimate, an interesting map view with assessed values of surrounding properties, and you can contact the listing agent directly (which many buyers like to do) as their contact information is right there.
So essentially you get the MLS listings, but you get a lot more with it, so people keep using them.
If they did not have a good Website even with good SEO their numbers would not be so strong.
Realtors know their data is old at times and their Zestimate can be way off base too, but consumers don’t really know that and perhaps don’t even care.
Sam DeBord
Posted at 09:13h, 03 August“the consumer centric thing to do is save them money”
In many cases, it’s not. Redfin’s popular because its technology is amazing. The more they continue to shrink their discount model, the better their company does. The portals aren’t saving consumers money, they’re delivering a valuable service.
The Realtor value proposition’s goal is delivering a higher quality experience with a subject matter expert. Of course this isn’t always the case, but the trade organization’s goal is to create a higher standard than simply “licensed agents”. By and large, Realtors have more experience, close more sales, have more education, etc. than licensees who are not members. That’s not clear to consumers, which is the organization’s other problem–how to communicate the difference.
That’s where you’re right to say “Tell us HOW you’re going to do that.”
Drew Meyers
Posted at 09:17h, 03 AugustThe term Realtor means absolutely nothing to me. Just a fancy word with a capital letter. NAR has a long, long, long way to go if they truly want that term to mean something special to consumers.
Sam DeBord
Posted at 09:27h, 03 AugustYou’re right here because it’s a discussion we have all the time. The org is constantly trying to make the designation more distinct. It’s difficult.
Drew Meyers
Posted at 09:29h, 03 AugustI know it won’t be a popular strategy, but why not just up the rates considerably? That will instantly weed out the agents who don’t produce and aren’t serious about their profession.
Sam DeBord
Posted at 09:31h, 03 AugustThat’s an ever-present discussion. “Raise the bar” in terms of licensing, education, training, costs, etc. will always be popular with those who want to create a higher standard for the profession. They just don’t have a critical mass of support, and you know why.
Drew Meyers
Posted at 09:35h, 03 AugustIndeed – because the masses would be squeezed out and wouldn’t be able to meet those standards.
Drew Meyers
Posted at 09:38h, 03 AugustI really, really doubt “Realtor” will ever mean anything. in 20 years, it’s going to be the same conversation we’re having now. I still believe the right brokers could make this work and build a network that truly means something: https://geekestateblog.com/how-little-brokerages-can-get-bigger/
Drew Meyers
Posted at 09:19h, 03 AugustI would argue that Redfin used discounts as the hook to build their initial consumer base. I kind of doubt they would be in the position they are now if they launched 10 years ago and all they did was be great at technology while being a traditional brokerage. Maybe I’m wrong.
Sam DeBord
Posted at 09:29h, 03 AugustTrue, it was a hook, but it seems like it’s becoming less important to consumers as they get bigger. Lots of my clients use their tech but not their services even with the discount dangling out there. It’s a bonus for some, but there are lots of ways to make a consumer happy without lowering prices, as Zillow et al have shown.
Drew Meyers
Posted at 09:34h, 03 August“Do what they want” is definitely lower prices. I don’t think there is any doubt if you asked 100 buyers if they’d like the commission lowered, they’d all say yes. But that’s not necessarily the best route to truly give them a better (more consumer friendly) experience, since then the incentives on the agents/brokers part are less.. Same as everyone wants to work with a cheap website vendor, but the less you pay, the shittier your experience generally is.
Sam DeBord
Posted at 10:34h, 03 AugustWell put.
Jeff Manson
Posted at 10:11h, 03 AugustCharging them less money doesn’t mean you are saving them money. Todd Tramonte charges a higher commission rate than most in his market yet gets them higher selling prices… actually netting them more money in their pockets!!!
You can hear how he does it here on this recorded live Hangout:
Malcolm Lewis
Posted at 09:39h, 04 August“the consumer centric thing to do is save them money”
Amen. As a consumer I do not understand the value to me of a flat 6% commission for any agent. And I’ve never met a consumer who has. To my knowledge it has no parallel in related professional services. If I want an accountant or an attorney, I know I can pay a lower hourly rate for less experience/expertise and a higher hourly rate for more experience/expertise. Each professional will make their case and I’ll choose someone that, for me, provides the most attractive blend of cost and experience.
Sam DeBord
Posted at 11:17h, 04 AugustYou could pay your agent an hourly rate upfront or a retainer upfront and they’d be happy to provide you a billing-for-service model like an attorney. I’d send my agents out at $100/hr gladly. Few consumers want to pay their agents upfront, and many pay nothing when they end up not selling or not buying. Their agents works for free in those cases. That’s the risk/reward strategy most choose.
There are plenty of discount listing models available. Consumers know this. The fact that they’re not very popular says that consumers are choosing a higher-rate model for the expertise.
Malcolm Lewis
Posted at 11:46h, 04 AugustI suspect that many consumers, especially those selling $MM homes, would overwhelmingly choose to pay an agent $100/hr to sell their home if the choice were presented to them.
Example. I’m selling a $2M home. The fixed 6% model guarantees I will spend $120,000 in agent fees. Let’s just focus on my agent’s $60,000 since they need to give the buyer’s agent their 3%. At $100/hr I am paying for 600 hours (60 10-hour work days) regardless of how many hours my agent actually puts into the sale. That makes no sense to me and, given the choice, I’d rather take my chances at $100/hr and probably end up spending considerably less.
Maybe I’m missing something, but that’s one consumer’s perspective speaking from personal experience.
Sam DeBord
Posted at 11:56h, 04 AugustIt’s a great perspective. Lots of folks wonder why the commissions don’t scale based on price (although they actually do often at the multi-million dollar level). Luxury home sellers are often looking for the “best” agent in their market. They might be able to get a “better deal” with an hourly upfront rate. Even at $200/hr, they might. I’m sure you could find a good agent to do that. Most sellers just opt for the easier route.
Realtor2005
Posted at 14:25h, 05 AugustMedian home value is about $150K, so lets use that to work your math. $9000 total commission split with another agent, so $4500 net to the listing agent. 45 hours of work at $100 which is selling an experienced professional short, only 22.5 hours at my rate, $200/hr. There are fixed costs with selling a home for Realtors as well, costs that are not covered if the home never sells. The fee is not just for labor, but the professional approach to selling the largest investment most people make in a lifetime. There are too many variables to do-it-yourself although you may get lucky a time or two. Not every transaction is cut and dry.
Malcolm Lewis
Posted at 14:55h, 05 AugustYou also makes the case for an hourly rate, but for the opposite reason. In your example the agent risks making an hourly rate that is too low.
It seems the two basic problems with the flat % model is that compensation doesn’t scale with effort nor does it scale with experience. That doesn’t happen with other service providers like accountants and attorneys where variable hourly rates ensure everyone’s compensation scales directly with effort and experience.
Just my 2c.
John Wake
Posted at 15:05h, 14 August“Your value proposition is not data – it’s YOU!”
I read this tea leaf to mean NAR has reached the capitulation stage in this fight.
I imagine them complaining constantly around the NAR offices about all the muggles complaining about syndication, Zillow, Realtor.com, etc. They’re tried of the complaints so their response it, ‘Get over it and shut up!’
The leadership of NAR has been TERRIBLE with tech issues, from selling the domain name realtor.com in the 1990s to the having the Department of Justice come down on their IDX policy in the 2000s.
People don’t get into NAR leadership for their tech skills. They’re people people, not techies so they often make nuclear, yet obvious blunders.
I think this capitulation is another one.