Nuclear Options: Changing the Real Estate Industry

Welcome to my final post on Typepad. I begin my migration to Wordpress next week where this same post will be modified and likely expanded.

This industry must change.

As usual, Seth Godin is right. Today, he's talking about Detroit. I think the same model ought to apply to the real estate profession.

America needs cars.

America needs this industry.

America doesn't need stagnation.

America needs innovation.

Those are Seth's words on cars. They could be about REALTORS. They could be about dozens of professions.

I stand before you and say: "I accept the challenge. Blow up my industry."

The most explosive innovation in the automotive industry was the first decade of the 20th century when almost 1000 manufacturers competed with one another. Out of that intense competition came the American giants we know today. They kind of remind me of my friend GOB.
But when you consider that something like the Toyota Prius, a "cutting-edge" automotive hybrid is a distillation of technology essentially created a century ago... it shows how ridiculously unimaginative this industry has become.

Ditto Real Estate's Dinosaur Act. The broker-owner-industrial complex needs to come to grips with the fact that the Jurassic age of the Owner is over. The Cretaceous Age of the Agent is also over. It is the Consumer's age, the post-modern world of real estate. The anticipation for the market to turn is really a masquerade hoping that the old rules of the accidental and not on-purpose REALTOR will return. No market in any industry ever sinks and rises as a familiar phoenix. I'm not counting on it in real estate.

Inman News this morning has an editorial that makes some bold, heretical ideas look promising. I think it still falls short. Five of the six ideas are core and basic to the future of real estate and need exploration. Social Darwinism is at play in every American industry right now. Real Estate helped create this economic malaise. Get the Spotlights ready and shine them here:

1.) People: This past week the Colorado Dept. of Regulatory Agencies raised new real estate license fees from $150 to $500. There was fear and outrage in the real estate community. A sure sign DORA did the right thing. The Colorado Springs consumer is grossly under-served by an over-population of REALTORS, a city that will have less than 18,000 total residential real estate sides and a population of REALTORS that peaked at 3700 this calendar year (now at 3300 after renewals). How on earth can the consumer be properly advised by an industry that is so over-saturated with members that has on average a practitioner closing one transaction every 10 weeks? The head count needs to be reduced in half. For broker-owners who put a requirement on no-BS, highly skilled knowledge-workers who are innovating their profession, they will actually greatly increase their income and reduce their expenditures.
2.) Expensive Applications: Here is a TwitPic I took with my iPhone yesterday, a great meshing of this idea. On the left is the 2009 Directory for the Council of Residential Specialists (CRS) a highly regarded credential in the residential real estate world. The directory on the right, that is at least a full inch thicker is the directory of membership from 2008. See the difference? People are getting out. In this case, I would assume some smart people decided to retire. A CRS is more likely to be a true adviser. They know how to run their business like a business. They also are likely to have real estate investments and assets that pay them a monthly dividend. They ain't dummies. They decided to walk away. Good for them. But the reality is that increasingly, attaching a professional moniker or legacy to your name means next to nothing to the consumer. When Coldwell Banker advertised throughout 2006 that they were celebrating their 100th year and were the oldest real estate company in America it did absolutely zero to build their trust with the consumer in a what-have-you-done-for-me-lately culture. By comparison, a TwitPic of a real-time home preview of a home in Peregrine is a real-live interface that creates real human contact and real human interaction. I resisted getting the iPhone until I knew I was really going to use all of it's toys. I couldn't get MobileMe to work with an Exchange environment. So I quit. I quit MobileMe. I used Exchange. My email began to work beautifully again. When I previewed neighborhoods in Rio Rancho, NM last week, I realized then that my text only Twitter tweets would be so much better with real photos. That is when I committed to the $300 technology upgrade because I knew I would use it with passion. I am so glad I wasn't paying for something I wasn't using until I knew how to actually use it. It became something where the system worked for me, not me working for the system. Kroll Factual Data released a report in 2006 that said "after digitization, the only ones left will be REALTORS. But only the ones with sufficient skill." You don't have to have fancy design galleries and stealth-marketing and fancy signs to sell real estate. ESPECIALLY IF YOU'RE PAYING FOR THEM BUT NOT USING THEM. But you have to have a tool bag of things you can deploy. And if you're going to deploy them, USE THE SUCKERS. Here's my favorite photo from an inspection on Wednesday... Yes, that's a dish towel used as a filter in a 30 year old furnace humidifer. Here's the asbestos that was missed in the fresh air return. As the consumer experience in everything is increasingly becoming customized, the real estate brokerage experience with agents must (fortunately or unfortunately) become increasingly a la carte.
3.) Websites: Google just went wiki giving the consumer a radical and ridiculous interface throwing SEO on it's ear. The best web-based real estate companies at generating inbound business need 19,000 leads to convert to a closing. Personal referrals are 3:2. So what to quit? I thought maybe my blog. Until a person I know, like and trust told me how they loved my blog on Sunday, and that they regularly forward my posts to their peers. Maybe those same peers are now reading this and thinking of what  they can nuke in their own profession? Real Estate websites are among the most static and consistently banal out there. They often operate like 4.) Advertising in print media or pay-per-click. They do nothing to engage relationship. My biggest web problem? Google my name. There was a 19th century American Printer named Benjamin Day who is all over Wikipedia and a consulting company in Boston at www.BenDay.com. All I want my website to be is the hot or cold first impression filter for a client referred to me. I barely show up on page one of Google right now. When they get there, they get static (I stand guilty as accused). That's why I am slowly re-engineering my website to be a consumer experience. My twitter feeds on one side. My wife's on the other (previews, inspections, thoughts... kid life, the Cheyenne Mtn. Zoo, playgroup on the other side). Testimonials with photographs of the people who made them. Clean. Elegant. Easy to use. Easy to find. The Black Vault of Search has been busted open. The new frontier is allowing the consumer to engage with an actual survived-the-crunch pro demonstrating appropriate skil, with whom they can begin to trust from their first site visit. Overhwleming, NAR and REALTrends surveys showing this consumer plea that they badly want to trust their REALTOR. Yet only 11% work with their REALTOR again. Advertising and web for real estate are presently going the same direction: pushing individual listings or letting the consumer drive a rudderless ship. Creating a framework for trust would be a far better expenditure. Sites and advertising that promote our profession as enablers of a process where the consumer has supreme control over the outcome: that's the revolution that needs to happen now.
5. & 6.) Desk fees are an antiquated idea that put a conflict of interest between the consumer and the REALTOR. Paradoxically, working with high skill for a high wage does not make a Starbucks Gold Card membership the equivalent of office space. The consumer doesn't need the gilding and marble of Wall Street to appreciate trust. But a professional greeting, a warm beverage, a clean and quiet environment to make important business decisions... consumers require this and deserve this. There is a huge migration to home offices because agent's can't afford their physical space and when they have up to a $2000 office bill just for space lease due each month. A home office may make them lean and mean, but does it make the consumer more at ease? Are they more apt to trust someone in an office or out of their basement/wi-fi-coffee joint? The old-fashioned split structure doesn't make much sense either because it invariably relies on agents who are producing a transaction per month and give $0.30 of every dollar to the company. This breeds an ugly mutual resentment: the broker would prefer 2 to 4 more transactions per year from this individual to justify and cover the excessive expenses they still encounter brokering and administering this business and the practitioner is surly about "their income" given away on things they don't use. Needed: a new split structure designed around 85 to 90% splits with the services provided a la carte. Run your business like a business, and a la carte starts to make a lot of sense.

That leads me to my additions:
7.) The a la carte brokerage: Space concerns should be radically mitigated, and those that want accountability and want to deliver an exceptionally high client experience will undoubtedly pay for the benefit of surrounding themselves with a tribe of like-minded peers (me). They will refuse, question and distance themselves from accidental members of the profession that are playing Powerball with webleads and floorcalls (in my dreams). There is almost no other profession that is as egalitarian in it's approach to spreading the wealth among the producers and accidentals. It isn't fair to the producers who build the image of the company and generate the inbound calls. It isn't fair to the accidentals because it is always prodding them along with a carrot promising them that one big hit. Willy Loman and Ricky Roma can not inhabit the same space.
8.) The professional future: I sat in last night on a presentation from Edward Jones and American Funds at Biaggi's in Northern Colorado Springs. The program was built around calming investor fears over the tumultuous and unprecedented carnage on Wall Street. I will say that I was not sold on the company as the future of my money. I didn't hear what fund offerings they had that promised future growth soon. But that was the point. I was sold on their client care. They hosted a free dinner, with four courses. It was in a nice environment. The suit-from-out-of-town was both impressive and humble, and admitted his own financial crises. He was very human. He presented big picture carnage and big picture opportunity. He wanted to spend most of his time answering investor questions. As a casual equities investor but an insanely self-examining real estate agent, I see both of our industries, equities and real estate, at key crossroads. Do you think that the client experience was enough in the boom times in real estate that the consumer is ready to trust what we, the REALTORS, have to say today? We said it was a great time to buy in 2005, didn't we? So how can this present bloodbath also be a good time? The reality is that now is a much better time to buy. We just spent our trust on unsustainable results three years ago. Ditto equities. Do you think the consumer trust would be higher right now if people actually felt like they could trust their advisors? No one saw this coming, sure. But really, name for me the growth in equities that really happened in the last 5 years that wasn't some derivative of the subprime nightmare? America was corrupted by subprime thinking. It wasn't exclusive to real estate. Detroit and the SUV. Congress and tax breaks to depreciate those SUV's of over 5000 pounds in 2 years. Consumers and their Home Equity Lines used to buy those SUV's, tapping out their equity right before the market turned (yours truly, again). Vision traded for short-term profit. In a savage way, it makes a lot of sense that the DOW today is where it was five years ago. We are no more inventive. We are no more industrious. We are just bigger consumers of stuff we don't need. As a card-carrying REALTOR, that last statement really resonates with me. If there was a doubling or tripling of professional standards, a Code of Ethics refreshed and modernized that put the REALTOR in the role of the PROACTIVE, TRUSTED ADVISOR, an individual who didn't work with any old consumer shot-gunned at him or her, but instead chose to add quality of life to those they engaged with on a daily basis... I think our industry's words today would go great lengths to restoring trust. Since we lack that trust, and probably for good reason, unifiying professional standards designed to deliver a high-value, high-touch process with the consumer in charge of the outcome, must be universally adopted by those that wish to survive the downturn. The reality is that those that survive will thrive.

The only way they will survive is if they are in flow with their consumer.

The quadrennial national intelligence briefing is presently under construction diagnosing global life in the year 2025. America's own national intelligence agency, in a radical departure from the last report in 2004, is characterizing America in 2025 as no longer the lone world superpower, and possibly not as the premier superpower. Every American industry needs to re-examine itself for efficiency right now. But far more critically, the citizenry of America need to re-examine themselves as to what makes them quintessentially American: prosperous, yes, but industrious first. Capitalist, yes, but innovative first. Kind of hair-brained, fly-to-the-moon nutty, yes, but willing to take risks to make the world a better place, first. The future of real estate requires change. Big change.

Comments

[Mariana]

Nice perspective and insight, Benjamin. Good is the enemy of great ... and I am all for "those who survive will thrive" .. Bring it on!!!

[Hannah Parsons]

I couldn't agree more. I look forward to the on-going conversation.

[c-lo]

Amen. As I was driving in this morning listening to a discussion on NPR regarding the postion of the US in 2025, my thoughts rolled over my children's schools and my industry (real estate). Why have we been satisfied with mediocrity? Mediocrity leads to average performance and average performance doesn't generate anything great. the current economic situation will force average out of business...and that's okay. We have control over our collective destinies.