Why the Consumer Will Benefit from a New Real Estate Industry

I remember when NAR first started to get extremely active about blocking banks from participating in the ownership of real estate brokerages. A couple of agents (who interestingly now own their own big real estate company locally) laughed in the break room and said “when the banks own real estate companies, we’ll just go to work for them.” Their thoughts WERE NOT “ooh, this is bad for business, bad for the industry, bad-bad-bad!” It was more complacent. It was, “so what? Banks come in and start running things, they’re just the new boss. Same business, different owner. nothing really changes this industry.”

NAR now believes that the credit meltdown is a great reason to block banks from the ownership of real estate brokerages, and there is some juice to that argument. But the reality is that it’s like blaming the cow for tipping the lantern in a barn full of hay.

Much more adroit was (I can’t believe I’m saying this) Glenn Kelman in May, 2007 in his interview with Leslie Stall on “60 Minutes”. Mr. Kelman said “The real estate industry is the most screwed up industry in America. By far.” That knee-jerk part of me wanted to throttle him on the spot. Didn’t he know he was blaspheming his own profession? Couldn’t someone slap remedial ethics training on him for saying this in front of millions of Sweeps-Month Viewers?

A year and a half later, I agree with Mr. Kelman far more than NAR. The real estate industry was operating well beyond critical mass in terms of

Glenn Kelman

agents during the booming heyday of 2005. More members continued to pour in through early 2007 when membership ballooned to just under 1.4 million members. A trade organization of that many members only makes sense when the population of the US is around 420 million, and as affluent as ever. Since it is about 110 million light of that number, the simple laws of supply and demand dictate a Darwinian die-off. What is now effecting the real estate industry is something tragic and sad, a lot like chronic wasting disease decimating a herd of elk, or ips beetle eating a pinon pine from the inside out. It is organic and fast moving, it is opportunistic when drought sets in, and like environmental pandemics, it is creating a helluva population crash.

Where Mr. Kelman and I agree is that the modern REALTOR must be positioned to produce far more transactions that in the past. Where we disagree is why. Mr. Kelman would offer the low-fee model as the reason, the only way someone stays in business is by being able to do dozens of transactions a quarter, if not a month. I offer that the reason a producing agent ought to do 40 to 60 transaction sides a year is competence. Far and away the number one quality a consumer is looking for in a REALTOR is trust. You can call it ethics, accountability, competency, respectability or even honesty, they are simple answers to a complicated problem: buying and selling a home. When the business was “easy”, it had to do simply with which one and could you write an offer of higher value than the other three clammoring for the property. It really doesn’t take brains to right a one-way, seller-friendly offer, or drive over to the golf club to deliver it to the exalted listing agent. I did it. My offers usually won. What does take brains is getting a seller out from underneath $40,000 in debt they obtained due to a bad re-finance. It does take brains to get two sellers who are divorcing to agree on a price, inclusions/exclusions, terms and contingencies before ever listing the home. It does take brains to put back together a deal that has gone south on inspection issues. It does take brains to forecast how much further below appraisable value one must drop a house in 80921 if it backs to Baptist Road.

No one sets out at the age of 16 to be in real estate. The best people in this business that I know came to it from other career paths. REALTORs truly are not born; they are made. One doesn’t inherit  good REALTOR genes. You have to exercise your gray matter via experience.

This year I have learned more than any year previous. I feel like I’m on my fifth set of teeth from having them kicked in so often. Never have I had a buyer walk from a closing at the walk-through. Never have I had a listing get three offers in the first 30 days, and all of them were crap. Never have I had a property with mold (I’ve had 2 this quarter). Never have I had so many listings. Never had I had so many people I know lose their jobs. Never have I had buyers pick up such great buys. Never have I had deals fall on lender issues after contract. Never have I had so many sewers scoped before closing. Never have I sold a home next door to an abandoned cemetery.

Never have I seen so many people buying and selling what this industry sells, crying. Never have I seen so many people working the buys and the sales of this industry, crying.

I will finish this year with 34 transactions and $7.9 million in closed sales. It’s almost an identical year to 2003, when my overhead was about $35,000 less than it was this year, and we only had a single child and not three.  Yet what I learned in 2003 was to treat real estate like a job, which is hardly anything more than an arrogant jerk getting his comeuppance, and “breaking out” due to the pending burdens of fatherhood. I did the business I did in 2003 on accident. I busted my butt to do what I did this year. I’ve never been better at what I do, but that’s because I’ve never been more experienced. It sounds obvious. But the variety of experiences I’ve had in the last calendar year have been remarkable in their scope.

Plumford The Magnificent

In the process of busting my butt, I learned how unbelievably true purple cows are. As I wind down 2008 and begin revving up 2009, The Competence Factor I will provide my customers is the ability to make their product (sellers) or experience (buyers) REMARKABLE. There is no longer room for the mediocore in this profession. Brown cows, indeed, are boring.

The real estate industry has for years been an organization that flocked to labels to describe competency. A good example is the Council of Residential Specialists, or the Graduate REALTOR Institute. The CRS and GRI desginations frequently follow a REALTOR’s name on a business card, or maybe their listing input in the MLS. I don’t know of a consumer alive who knows what these letters mean. I’ve been around for a decade now and no longer aspire to get my CRS “like I’m supposed to.” The reason is it means as much to a consumer as QSC or E-Pro, which could both be banged out in a week and neither of which make me more competent, personable, nicer, or in flow with my client. Yes, the CRS course quality is outstanding. Yes, CRS still makes you a better agent. But the lie real estate has lived with for two decades is that labels make you something in the eyes of the consumer. They don’t. It’s internal-industry posturing, and that’s all.

What the consumer will receive in the huge shake-out of 2008 to 2011 will be an industry that is freed of it’s dead weight. There are thousands of agents who should retire that aren’t. There are unfortunately thousands of agents that can’t retire, and won’t. I know what the first group will do. As evidence of the CRS education being REALTOR-friendly, their 2009 Directory is a good 1.5 inches slimmer than the 2008 edition. They obviously could retire. The have-nots? I don’t know what they will do. But as a consumer, do you want someone with the very real conflict of interest of “I haven’t had a closing in 90 days and I need you to buy this house tonight?” working with you? Or do you want Mr. Kelman’s option, an individual who may have never set foot in your neighborhood, but at least did the paperwork on a deal last night, did three last week, is ahead on their own mortgage and is setting up their retirement? Or do you want someone who is several months ahead on their mortgage, who was referred to you by your best friend, who has worked at your pace, who allows you to speak 3/4 of the time, who offers advice when asked and operates with respect and professionalism in every course of action?

It’s my opinion that the real estate industry is moving from a “price is the only differentiation” marketplace, to a vastly different one characterized by either high conformity (and low fee) or high skill (and higher fee). The consumer will actually have a choice.

For the practitioner, the place not to be: is anywhere in between.