Is Your Firm Engaging The New Status Quo?

Like many business, cultural, sporting, academic, and social activities there is a season for real estate industry update and status conferences. During the disclosure season each of these events adds just a bit more clarity to the ultimate question; what is new regarding real estate brokerage and marketing operations?

Screen Shot 2015-05-19 at 2.49.25 PMWith the adjournment of last week’s National Association of REALTORS® Legislative Meetings & Trade Expo (AKA Midyear Meetings) in Washington, D.C. the industry’s 2015 update season came to a close. During the past 90 days a plethora of meetings including, but not limited to Inman Connect, T3, Gathering of Eagles and last week’s NAR meetings provided the industry with a glimpse into the current status of a brokerage business and operations environment that has found itself mightily impacted by a wide range of trends, directions, and forces.

There can be no doubt that each of the hundreds of observers, who participated, attended and/or evaluated these events, came away with a slightly different impression. The industry media, over the next ninety days, will be awash with impressions and opinions. Be that as it may, there are a number of conclusions that are high enough up the intellectual pole to be universal. The objective of this piece is to attempt to present these new foundational realities.

The following five statements are nominated to head the “most impactive” list.

  • Various presentations by senior industry (as opposed to organized real estate) leaders contributed to an overall understanding that moving forward brokerage operations in many ways will end up farther afield from the traditional model that previously imagined. This in turn leaves a sense that current efforts are in the nature of “getting ready” for the ultimate rather than being the ultimate.
  • There is an increased understanding at the highest levels that the industry is not maximizing its profit potentials.
  • The current record level of public ownership of industry infrastructure and its demands and expectations regarding profitability is impacting virtually every aspect of the industry.
  • Increased levels of direct and intense consumer interaction are forcing the industry to meet new levels of interactive and experiential demands and expectations.
  • The value propositions of the franchise, brokerage and agent sectors are loosing traction in the eyes of their respective customers.

How then are these four factors influencing the current industry environment? First of all it is important to note that while in some cases they are operating severally or individually, in the majority of cases they are converging with each other to impact jointly or in combination with one another or lessor factors.

Screen Shot 2015-05-19 at 2.52.01 PMThe traditional brokerage business model has evolved to focus on profitability. This transformation is driven by a growing sense that if it doesn’t get its profitability act together two probable results will occur. The first is that Wall Street will withdraw its support of the current business model, and the second is that forces currently outside the industry will introduce a new business model that will combine new factors and functionalities that will render the current business model irrelevant and even more ineffectual.

The industry appears to have gained a more complete understanding relative to the effective use of agents. The industry is shifting its focus away from the traditional idea of sending thousands of misdirected and underprepared agents out to fish by themselves every morning, and hoping for the best. In its place are a number of new strategies that call for maximizing agent effectiveness through agent teams, standards, best practices, accountability and metrics driven management.

The industry is developing a whole new approach to the concept of the “lead.” Gone are the days when firms view leads as agent generated business opportunities that may or may not be pursued based upon an agent’s mood or attitude on any particular day. In this new brokerage world every lead is presumed to have profit potential if it is being engaged by appropriate and timely attention. One major firm provides agents with five minutes in which to respond to a lead before other options and company resources come into play with a maximum of seven minutes to direct contact.

The role of agent teams is shifting from gang-like entities to very sophisticated and highly managed groups of agents operating in close coordination with other brokerage assets and resources under the terms of carefully designed and negotiated written agreements. Agent teams are transitioning from profit wasters to profit generators.

The two developments cited above have come together to require much more sophisticated agent recruiting procedures. Profiling and other psychology based procedures are providing a much higher probability of success not just from a productivity or financial perspective but even more importantly relative to the would be agent’s ability to engage brokerage standards and best practices, respond to brokerage supervision and collaborate with other members of the brokerage team. These developments clearly signal the end of the agent centric era.

As the brokerage environment has moved forward to incorporate these new factors a parallel understanding has emerged regarding the need for classic leadership skillsets and competencies on the brokerage’s management team. Here again the traditional “keep agents happy” at any cost philosophy is transitioning into a sense that brokerage management systems, not agent attitudes, must set the brokerage’s pace, tone and impact.

One of the most interesting developments of this new brokerage Screen Shot 2015-05-19 at 2.47.30 PMbusiness model has been the discovery that the brokerage’s corporate culture may be one of its most valuable assets. More and more firms are now incorporating the ideas originated by Patrick Lencioni that creating a “smart” company (One that uses strategies, marketing, finance and technologies to drive success) is good, but nowhere near as effective as also creating a “healthy” company designation (adding minimal politics, minimal confusion, high morale, high productivity and low turnover to the “Smart” mix.

All of these factors come together to merge with what appears to be the most challenging issue facing today’s real estate industry. This of course is meeting the needs, expectations and demands of the contemporary real estate consumer. Perhaps more than any other operational statistic, the fact that 44% of consumers are currently finding the property they ultimately purchase without agent assistance, set the tone here. Today’s consumer is nearing a point of believing they can do the deal without agent assistance.

Whether this is true or not isn’t really an issue for the brokerage. The point of conflict occurs during the discussion of service pricing. Even those consumers who recognize the need to use an agent (still the vast majority) are not clear relative to the value proposition. From the brokerage perspective if the consumer doesn’t believe there is value in the agent, they are highly unlikely to find value in the brokerage. There is a growing understanding that the agent sector is basically unwilling or unable to carry their part of the value proposition argument. Thus it becomes increasingly clear that the brokerage may have to carry both.

These observations leave us at the edge of where the conversations of the past few months have dared to extend.

There is a new brokerage business status quo out there. But wait, there is more! Even before industry travelers had a chance to pack their tents and head home, Move.com had already announced a new REALTOR.com promotional campaign that appears to have the potential of stimulating a whole new round of change and transition within the portal sector.

Track industry developments closely. This new future has your name written all over it.

Experiencing the Real Estate Master’s Event

The “Master’s” golf tournament held each year in early April is, without doubt, the premier golfing event of the year. Its legacy and traditions in many ways define the very game of golf.

RealTrends Gathering of EaglesThe American residential real estate industry also sponsors a defining “Master’s” level event. It is known as the “Gathering of Eagles” (Sometimes just the “Gathering”). The responsibility for hosting this event belongs to the now twenty-nine year old Real Trends organization that hosted the 2015 edition of the Gathering Eagles event in mid April at the Four Seasons Hotel in Denver.

Over the past few years the rate of change and transition within the American residential real estate industry has been nothing short of historic. Virtually every element of the industry, the marketplace, its demographic and its transaction has been or are being recast and repositioned. Accordingly, perhaps more than every before, the task and challenge of defining the parameters of the contemporary industry through the eyes of the “Gathering” event approached herculean.

Without question Steve Murray and his impressive Real Trends cast of thousands (actually just 14 in number) rose to the challenge. The 2015 edition of the Gathering of the Eagles event did indeed provide attendees with a finely tuned and spectacularly accurate portrait of the leading edge of today’s industry environment.

The event was launched with a presentation by national award winning Director of Marketing for Coldwell Banker International, Sean Blankenship, who established the fact that defining the industry in 2015 meant taking another look at the configuration of the housing inventory, especially as it relates to the ideas of the “smart” or (for the cool set) the conscious structure. Sean’s comments set the stage for a Coldwell Banker produced seminar on that same subject that took place later that day.

The Gathering next delivered an excellent panel on the subject of recruiting competent people to manage the new real estate enterprise. The panel included a number of participants who can take credit for having invented the new brokerage business model: Jeremy Lambert from Your Castle Real Estate, Larry Matos from Century 21 M&M Associates, David Osborn from Keller Williams Realty and Thad Wong from @Properties in Chicago. These are the “young Turks” of today’s industry and in an amazing number of ways they have redefined the art of recruiting and managing sales associates in a manner that ensures the long-term success of the enterprise.

Much of what this group was sharing had to do with adding substance and strength to the brokerage value proposition. Techniques for adding spirit and viability to the firm in the eyes of its agents were another value point. Issues regarding space allocation were given priority. The panel spent a great deal of time articulating the attributes of a great recruiter but in the final analysis it seemed to be all about “making the calls” over and over again.

Once again demonstrating his inordinate skill for creating the “big picture,” Steve’s interview of RE/MAX founder Dave Liniger probed 40 years of innovation, competitiveness and courage to establish the point that some elements of greatness never change. Mr. Liniger’s comments and recollections not only provided a connection of relevance between tradition and the leading edge but also reminded everyone that there aren’t many classic pioneers left in the industry culture.

The appearance and presentation of prolific business author and innovator Patrick Lencioni was another of the Gathering’s high points. Mr. Lencioni’s expertise revolves around the benefits of developing, encouraging and promoting great company cultures. In Patrick’s world, company cultures are the foundations of effective value propositions. His comments served to frame the definition and value of the “healthy” company. He prioritized the four disciplines of a healthy organization. He spent considerable time talking about how to create a cohesive management team fueled by trust. If the Gathering provided an opportunity for its participants to think at an MBA level this was that opportunity. Amazing substance and an impressive learning experience.

The Gathering program next tapped into another asset of leading real estate firms, “Building Great Agent Teams.” For many attendees this panel provided the answer regarding why agent teams are such a “big deal” and how they can contribute to both overall productivity and profitability. Participants included such agent team super stars as Lisa Burridge of Burridge and Associates, Mike McCann of BHHS Fox and Roach and Mark Spain from Keller Williams.

The agent team segment was especially interesting in terms of its point of reference with the brokerage. It established that an agent team does not operate free of management control or influence. The critical point that was made during this program element was that, yes, agent teams can be very effective and can contribute to the overall success, productivity and profitability of the brokerage. However, only if they exist and operate under the terms of very clear brokerage policies and practices. If the right agreements are in place agent teams are in everyone’s best interests. This is all about using new management techniques to meet the expectations and needs of all involved.

The Gathering’s continuing exploration of the contemporary brokerage business model next explored the role of leadership in the new environment. This panel featured some of the most effective executive leaders in the industry. Sherry Chris from Better Homes and Gardens, Brian Fair from Keller Williams Atlanta Partners, Todd Hetherington from Century 21 New Millennium and Merle Whitehead from RealtyUSA brought to the Gathering an amazing level of knowledge and experience regarding how to make leadership an effective and differentiating force within the brokerage.

Among the Gathering attendees there was near universal agreement that leadership is the single most important factor in determining the value of a brokerage. It is similarly agreed that leadership is more than a feeling or an effect. It must be a measurable and focused quality and value. Each of the above experts had developed within their respective companies unique leadership identification, development and integration practices. Each spoke in concise and easy to understand terms how they use leadership applications and practices to move their firms forward. Most have adopted basic leadership qualities from a third party expert such as Patrick Lencioni or John Maxwell.

The appearance of Peyton Manning at this year’s Gathering can only be described as a gift. This gentleman is an athlete and is obviously involved in professional sports. But to use either of these points of reference to define him would be foolhardy. Peyton Manning presents himself more like a Fortune 500 CEO than a sports hero. He was articulate and visionary in his comments and observations regarding an impressive range of contemporary leadership environments and issues. Most impressive was how the audience responded to both his presence and his contributions. If one had known absolutely nothing about him from the onset, the initial impression would nevertheless have been overwhelming. On behalf of all of those who were present for this amazing experience; Thanks Steve.

From the Manning appearance the program morphed into the art-of-the-possible, thanks to the generosity of Coldwell Banker who had imported a panel of young experts to talk about the idea of “conscious” structures (They are no longer called smart houses). This program provided insider knowledge about enhancing one’s life and career success with the modern magic of Tesla automobiles, LG appliances, Lutron switches, CNET magazine and Sengled smart lighting switches. Each of these items has the capacity to fundamentally expand the quality of life. Together they demonstrated an ability to create a whole new life style. Imagine this, all of these features can be added without impacting or modifying the actual structure.

For the last morning of the conference the Real Trends team provided an absolute treat. Scheduled at a time that one would have thought would limit participation, the expanded Real Trends team provided ninety minutes of pure unadulterated knowledge regarding the current state of valuations, mergers and acquisitions. If limited attendance was part of the scheduling strategy it failed. Even at an early hour the room filled long before the program started and spilled out into the hallway. Everyone knew that this would be the “Gold of the Gathering.” This was the opportunity to share the expertise that has always been at the foundation of the Real Trend’s power and influence. No one was disappointed and more than just a few would be nursing their sprained hands from note taking. More than just information, this program element was made even more impressive by the cool and professional way in which the Real Trends team delivered their expertise through a complex series of questions and challenges. They were terrific. Steve has created the ultimate team here.

Fact: The real estate industry does support a “Masters” level tournament of knowledge, management skills and productive excellence. It is called the Gathering of Eagles and once again, for 2015, it delivered on its promise to be the premiere industry brokerage event of the year. This impressive achievement left all who participated much more prepared to meet the challenges of the coming year.

T-3 Summit: Another Swanepoel Masterpiece

Screen Shot 2015-04-17 at 1.03.41 PMAs everyone knows there is a plethora of industry conferences these days. Some serve as open markets for industry programs, products and services, while others serve as cultural gatherings for specific industry communities and yet others serve as destinations for those whose annual budgets provide for a wide range of discretionary travel. Each services the needs of a specific industry constituency.

Over the past three years Stefan Swanepoel has become the Michelangelo of the real estate Screen Shot 2015-04-17 at 1.05.08 PMconference circuit and his T3 Summit has become its Sistine Chapel ceiling event. Swanepoel has achieved this status through innovative program design, quality production, the right attendance mix and attention to detail.

This author has had an opportunity to be involved in the production of all three T3 events and is in an excellent position to share the wonderment of the “inside track” that makes T3 an astounding experience.

Anyone who has ever experienced a Swanepoel presentation, publication or analysis can testify to the thoroughness and expertise that goes into its design and substance. The T3 Summit is the flagship of this standard. Swanepoel and his team spend months designing the T3 experience. By way of example, going into the initial planning for the 2015 event last fall the Swanepoel team was tracking 23 specific and unique game changing issues. Over the three days of the 2015 T3 Summit at the Four Seasons Hotel and Resort in Las Vegas participants and attendees had an opportunity to gain in-depth knowledge about the historic basis of each of these issues, plus another five that didn’t even exist six months ago, their up-to-the-minute status and their likely destination over the next year. Each of these discussions incorporated the expertise of its own “recognized” industry thought leader(s), from a cast of 29 such experts, as well as the benefits of a superb facilitator who was responsible for the full range of each subject being developed.

But it is not the mere substance of the program that is the centerpiece of the T3 Summit but, rather, the insights of its participants. The 2015 experience was shared with 288 registrants, the vast majority of which were both recognized industry thought leaders as well as leading industry “C” level executives. The T3 experience is commercial free, without the pressures of sales pitches. The CEOs invited to participate don’t tell stories about what they have heard about specific events or give their canned speeches you hear everywhere else. Rather they share their actual personal views because they were there, they were the decision makers and they caused the events to happen. No format, short of sitting in these executives’ offices and conference rooms, could duplicate the quality and depth of the knowledge and information imparted during the conference. A few more examples;

  • Screen Shot 2015-04-17 at 1.06.54 PMZillow is, at this moment in time, arguably the most impactive force in the North American real estate marketplace. Stefan’s interview of Zillow CEO Spencer Rascoff provided a treasure trove of invaluable information for those who will be sharing a market and/or competing with Zillow over the next year. How does it matter that Spencer’s father spent his career as the CPA for the Rolling Stones? What is the relationship between Ivy League schools like Harvard and the Wall Street institutions? What is a “Wiggle” and what does that have to do with Zillow? The interview started with Spencer as a disrupter and ended with him as a genuinely nice guy. Only Stefan can do that. Perhaps most important of all, what will it mean to the industry when consumers have the ability to “triage” listings. Stefan got Spencer to tell us how Zillow will impact the future role of the real estate agent.
  • Screen Shot 2015-04-17 at 1.09.21 PMAlex Perriello, CEO of the Realogy Franchise Group, shared a very recent and horrifying story about a head-on crash with an ammunition filled truck being chased by police including being in exploding vehicles, experiencing live ammunition “cooking off” and a hospital confrontation. That was only the first ten minutes! Then things settled down and the discussion ranged from his grandfather the barber who always wore a three-piece suit and taught him about customer service, to what current events are shaping the future of the residential real estate brokerage. Stefan is then able to masterfully bring relevancy to these stories and show how Alex’s work is shaping the future role of the real estate agents. Most interesting was Alex’s discussion regarding the similarities between Zillow and Realogy, go figure! How will NRT and its upcoming Zap store impact the industry? What three cycles does he see as being responsible for the industry’s future? Alex’s comments about the immediate future of the real estate brokerage were an experience in and of themselves.
  • Screen Shot 2015-04-17 at 1.10.57 PMBudge Huskey, CEO of Coldwell Banker International gave a Stanford Business School quality presentation about the realities of the current real estate franchise world. He discussed the changing world of the real estate brokerage and the challenges of operating within a global frame of reference. Budge’s comments were nothing short of amazing as he identified the current status and future challenges of the real estate franchise sector.
  • Screen Shot 2015-04-17 at 1.11.51 PMNAR President and CEO, Dale Stinton, brought the audience to the edge of both their seats and collective consciousness with his discussion about NAR’s soon to be released A.N.G.E.R Report (Definitive Analysis of Negative Game Changers Emerging in Real Estate). Imagine retaining, without restraints, industry chronicler and custodian Stefan Swanepoel to candidly interview some 100 contemporary industry leaders about what they see as the significant risks, threats and dangers facing the residential real estate industry moving forward? Imagine putting all of these comments regarding agents, brokerages, MLSs and associations (Yes, even NAR) into a detailed 160-page report that will be presented later this spring, with no censorship. It is the closest the industry has ever come to an industry audit of itself. Stinton also made a number of very pointed comments about NAR’s Core Standards program and the very real possibilities that “failure to comply” could result in REALTOR® associations losing their charters.
  • Screen Shot 2015-04-17 at 1.13.23 PMPam O’Conner, CEO of Leading Real Estate Companies of the World, provided an in-depth view of the realities of the independent real estate brokerage operation including insight into the probability of a new order of roles regarding brokers, management and agents. Always the insightful leader and executive, Pam brought to the attendees a much need “reality” gained from the lessons her members have learned over the last few years. It is not our parent’s real estate marketplace and it will not be a parental solution that takes it to its next level.

On and on it went. Hour after hour of amazing substance and new industry realities.

  • Glenn Kelman, the new business model innovator and emerging genius of the Redfin model, talked about agents as employees.
  • The battle scared wisdom and new insights of Errol Samuelson.
  • Marvin Stone and Jared Conaway prepared the attendees for the upcoming and probable “epic” struggle with the CFPB.
  • Matt Krebsbach, Director and Analyst at Bazaarvoice, brought agent rating and ranking alive with information regarding what it really means and how to use it effectively.
  • Move’s new CEO Ryan O’Hara discussed his first 100 days in office and set the stage for how he will bring REALTOR.com to the forefront.
  • A brilliant panel of “under 40” industry CEO’s demonstrated how they not only think differently, but lead differently.

Screen Shot 2015-04-17 at 1.14.26 PMStefan Swanepoel was in Las Vegas last week to meet with 288 of the real estate industry’s highest leaders. It was CEO nirvana and he has become the industry’s de facto facilitator and diplomat. Even by Las Vegas standards, T3 was astounding. For those who were there, real estate wisdom now has a new definition.

What’s in a Portmanteau?

It has been 90 days or so since Spencer Rascoff and Stan Humphries of the Zillow Group released their Screen Shot 2015-03-10 at 10.02.14 AMbook; Zillow Talk. Published by Grand Central Publishing, the volume carries the subtitle The New Rules of Real Estate. One cannot help but observe that there has been a lack of buzz and discussion across the industry regarding the book’s unique and highly relevant contents. This compelling collection of knowledge, discovery and insight should have the potential to change how the industry thinks about the new realities of its various markets and how it judges properties as being appropriate for consideration for purchases or rental. Moreover, it might also drive industry reconsideration relative to the role of respect in its interactions with the consumer.

As a starting point the book offers the proverbial 100,000-foot view of the changed (and changing) role of research, statistics and information across the entirety of our culture including the real estate sector. The authors talk in reasonably humble terms about having created a collection of technologies that use a million valuation models to process 3.2 terabytes of data each day. They don’t suggest that is the ultimate technology. For Zillow Talk technology is a mere supporting actor. This is not a book about technology or mining gold. This is a book about what one, anyone, can do with the crown jewels of an expanded, innovative and creative real estate related information system. That’s all.

While it is difficult to nail down which of book’s many salient points are the most compelling, a particularly strong argument can be made for the concept of replacing myths with facts. The authors gently point out that for much of the past fifty years real estate related decisions by consumers, and even institutions and investors, have been made on the basis of cultural myths, many of which were created and propagated by real estate service providers.

Here again, avoiding a more conflictive and combative approach, the authors generously don’t suggest that these myths never had a basis in fact. Rather they choose to suggest that if the myths were true fifty years ago there is data available today that proves they are no longer true. The only question is whether real estate service providers have enough respect for their clients to make such information the basis of their value proposition.

A bit of advice for would be readers. If you don’t believe that virtually every aspect of your life, profession and business have, over the past nine years, changed in some significant manner then by all means don’t read Zillow Talk, it will just confuse you.

If you don’t believe that over the past nine years virtually every aspect of the real estate industry and marketplace has changed then don’t read Zillow Talk, just continue to confuse your clients and customers with myths and misconceptions.

Finally, if you don’t believe that the significance, ramifications and evidentiary value of information, data and documented experience is the single most important determinant of your value and survival proposition as an agent, a broker and even a consumer then don’t read Zillow Talk. Better you spend your time considering another industry or occupation, because it is increasingly clear that the world has discovered your intransigence and is in the process of acting on it to your detriment.

This is not to suggest that Zillow Talk represents any manner of ultimate truth or Holy Grail, because it clearly doesn’t. It represents a change of direction relative to how we, as a culture, think about real estate. It is the beginning of a new road that will offer many new directions over the next several years.

Zillow Talk is an excellent read. My sense is that the subtitle title won’t do the book any favors, especially given Zillow’s still controversial role in the current real estate industry. Interestingly enough the book has little to do with Zillow other than providing an opportunity for the author’s to share their story (the very purpose of books) and to highlight the intellectual and statistical import and relevance of research and the consumer real estate experience. Had Harvard University published the same book it might have been entitled “The History of the Future of the Real Estate Marketplace” or “The Story of Real Estate Moving Forward.” Declaring one’s work as being the “new rules of real estate” isn’t exactly the path to popularity, but then again power is as power does.

Screen Shot 2015-03-10 at 10.11.50 AMSpeaking of rules it does seem that Zillow Talk might establish one new rule. For the past decade the decision leaders of the industry have waged a historic battle over the ownership and control of data not unlike the California miner of the 1800’s relationship with gold, lots of activity but little or no end user functionality. Zillow Talk takes a giant step forward by talking about information as the key commodity of the transaction, and by driving the discussion of what one can do with it in the context of a real estate experience.

Zillow Talk is a must read book for anyone who considers themself a true student of the industry rather than a utility outfielder in the marketplace. There is little doubt that it will become mandatory reading for any individual who aspires to be a serious participant in the real estate industry.

The authors have been exceedingly kind in their treatment and lack of judgment regarding the traditional real estate service provider. There were many points along the way that criticism regarding traditional practices could have been extended. No such treatment was given.

Zillow Talk will likely also serve to define the difference between the two agent groups in today’s Screen Shot 2015-03-10 at 10.13.36 AMmarketplace. The traditional real estate service provider’s efforts are all too often focus on controlling and processing the consumer or client. The more contemporary service provider moving forward will support a value proposition focused on the facts and circumstances of the inventory and marketplace. This second provider will emphasize that market behaviors and statistics actually have a lot to say about determining what manner of experience and outcome the consumer will garner out of their real estate experience.

Before concluding we return to the title of this article. What’s in a Portmanteau? The Merriam-Webster dictionary defines portmanteau as a word or morpheme whose form and meaning are derived from a blending of two or more distinct forms (as smog from smoke and fog). The term Zillow is such a creation drawn from the word “zillions” and the word “pillow.” So now you know. It’s a Harvard thing.

Screen Shot 2015-03-10 at 10.16.43 AMThe rules of discourse have also changed. Those who read Zillow Talk for the purpose of being a critic, offering criticism or sustaining the status quo should know from the start that merely rolling one’s jaundiced eyes, shrugging one’s wimpy shoulders or waving one’s arrogant arms will not suffice here. Through Zillow Talk Rascoff and Humphries have laid down a serious piece of research. Any critical response with less intellectual authority will simply make the respondent a fool by comparison.

Ownership and control of data is no longer the essence of greatness. Moving forward that distinction will belong to those who understand how to use data to make excellent real estate related decisions and drive profitability.

Warren Buffet is a Great Read

The explosive developments within the American real estate industry over the past several years have produced remarkable opportunities, some significant threats, exciting new directions, astounding knowledge, and some really impressive insights. These developments have been brought into the industry by some remarkably competent minds that have, to our everlasting benefit, undertaken to share their experiences, inspirations and efforts through a number of especially impressive publications and presentations.

History is certainly one of the treasures that make life rewarding. However, being able to observe current events by accessing the thoughts of those who are actually creating them takes the power to observe to an even more exciting level. One of the things that makes being part of our industry during this “high impact” era so exciting is the opportunity to share the knowledge and experiences of key industry thought leaders while they are still engaged in their achievements. Over the past several weeks three of these unique experiences have presented themselves and deserve special notice. They will be the subject of this and next month’s column.

The industry leaders whose thoughts have contributed to the following observations are Warren Buffet of Berkshire Hathaway, Mo Anderson of Keller Williams and Spencer Rascoff (along with Stan Humphries) of the Zillow Group.

Mo has chronicled her experiences and wisdom in a volume entitled A Joy Filled Life. As one of the primary architects and advocates of the powerful corporate culture created for the company that currently leads the industry with the most agents, Keller Williams, her thoughts are especially relevant as the industry continues its journey from being a “people business” to an automated and “Wall Street” driven business model. Mo’s thoughts will be discussed in next month’s article.

Spencer Rascoff and Stan Humphries have encapsulated their thoughts and experiences into a volume called The New Rules of Real Estate. Given the significant impact that portals are currently having on the entire industry, this work is not only highly relevant but also highly insightful. Spencer’s thoughts and efforts will be discussed next month.

Screen Shot 2015-03-06 at 1.53.00 PMThat leaves us with Warren Buffet who is the subject of this month’s observations and comments. Mr. Buffet’s thoughts as reported here where not taken from a leather bound collectors volume, but rather from the very recently issued (last week) 2014 Annual Report of Berkshire Hathaway, Inc; his iconic corporate masterpiece. Perhaps no greater compliment could be paid to any business leader than to recommend his annual report (such documents are famous for being mind numbing and irrelevant) as a source of knowledge, insight and, yes, entertainment.

So, yes, I am actually recommending that readers download the Berkshire Hathaway, Inc. annual report (http://www.berkshirehathaway.com/2014ar/2014ar.pdf) and spend a couple of hours (actually 3.5) hours learning about a unique business model, a phenomenally successful mindset and a quality individual with whom we should be proud to share an industry.

Special attention should be given to the following elements.

  • Unless you are fortunate enough to own Berkshire Hathaway stock don’t feel compelled to read the financial and accounting information in the report. The universal value proposition inherent in the document can be found in discussions relating to leadership, management and just plain respect.
  • This is not a document solely prepared by a CPA to broadcast financial details to shareholders or regulators. Very quickly into this read one is captured by the spell cast by a man who is writing about something that he loves, something that he has created, almost an art form and something that he believes makes the world a better place.
  • Page 19: The story of the annual shareholder meeting, AKA “the Capitalist Woodstock.” May all of you be this gracious with your business partners.
  • Page 19: The story of Carrie Sova reminds us that everyone on a great team makes a contribution.
  • Page 24: “Berkshire – Past, Present and Future” – An amazing story of mistakes, more mistakes and lessons learned. Keep this one on your desk as a lasting example of the true test of experience and partnership.
  • Page 30: Lessons learned about those who have been on the ground for too long. Highly relevant to our industry’s current challenges.
  • Page 34: The value and function of cash.
  • Page 36: The importance of recognizing and taking care of one’s stakeholders. Something we forget on occasion.
  • Page 36: The attributes of a great CEO and the transition process. With hundreds of senior real estate industry executives poised for retirement or replacement these are lessons best learned vicariously.
  • Page 45: Berkshire’s business activities. Imagine the innovation and creativity that was required to put this conglomerate together.
  • Page 117: a statement of business values that has lasted since the company founding. Some things in business do not change regardless of personalities, economic times or business cycles.

Ordinarily it would be considered bad form to share the outcome of a novel one is reviewing. However, in this case, nothing could provide as appropriate a closing comment as Mr. Buffet’s own words. Near the end of the report and after a very inspirational discussion of the future he offers the following insight.

            Lest we end on a morbid note, I also want to assure you that I have never            

felt better. I love running Berkshire, and if enjoying life promotes           

longevity, Methuselah’s record is in jeopardy.

May each of you be able to say the same.

Your Business Plan Should Be A Strategic Spring Board, Not a Dynamic Anchor

Today’s real estate industry is awash in new strategies. Franchises, brokerages, Multiple Listing Services and professional associations are all using “strategic’ as their new magic word. Some of these strategies represent bold and innovative steps into a new and exciting future. Others unfortunately are just updates and recasts of what their sponsoring organization has always done in the past.

Fortunately more and more of these organizations are opting to seek outside expertise with their strategic plan document. The key differentiating factor here is the difference between acquiring assistance (an amateur commodity) and acquiring expertise, the commodity that is really needed. Not so fortunately, many brokerage executives are electing to align their future potentials with individuals who have little or no experience with the concepts of strategy or are already aligned with a larger philosophical entity (e.g. a franchise) to which them have already pledged their allegiance.

Many of these plan documents suffer from substance abuse. This is what occurs when the individual selected by the organization or company to facilitate their planning experience (rather than process), casually asks everyone in the organization what they think should happen, then gathers the leaders and executives together for a more intimate view, and then moves the organizational pieces forward in incremental steps so that, when executed, the organization will look exactly like it has always looked, just a year or two older. In other words, Substance Abuse in planning is what happens when the plan document reflects where the company or organization has been rather than where it wants to go. Substance Abuse is what happens when a strategic plan becomes a task list rather than an expression of strategic intent.

But interestingly enough as great a hardship as identifying an appropriate planning professional, creating an effective planning process and giving birth to an innovative business plan has become the ultimate challenge accomplishing a successful implementation process.

What are the most common oversights that brokerages and other entities make when attempting to implement their business plan? There are seven deadly crises that will terminate an effective business planning process:

  • The first implementation crisis comes when the plan document itself is a task list rather than a statement of strategic intent. Task lists by their very nature do not encourage collaboration nor require synergy within the organizational team. In fact quite the opposite. Tasks lists end up being personal performances between two or three individuals on a team with little or no thought being given to the efforts or objectives of others in the process. Strategic intent driven business plans require collaboration between a wide range of implementers, leaders, executives and staff.
  • The second implementation crisis comes when the company or organization hasn’t prioritized the implementation function. If the governing board doesn’t care enough about the plan to sponsor it, the decision regarding its success has already been made. When an un-prioritized business plan arrives at a CEO’s desk with no credentials, priorities or credible sponsorship the real message is received and it is immediately placed at the bottom of the pile.
  • The third implementation crisis comes when the company or organization hasn’t funded the implementation function or coordinated it with the annual budget. When this occurs the same response happens. The plan goes to the bottom of the pile.
  • The fourth implementation crisis occurs when the planning process hasn’t included sufficient time for the implementation process to mature to completion. The reason many companies and organizations are not successful with their implementation processes is that an implementation dream without funding, sponsorship or sufficient time, will always be DOA. This scenario often pleases the senior team players because all the boxes are checked, the organization can brag that it is progressive, yet nothing will change.
  • The fifth implementation crisis occurs when those involved at one level of implementation or another equate implementation with absolute obedience to the specifics of the plan. The fact is that the business plan sets a direction not a course. In today’s fast moving real estate industry, firms and organizations must have and exercise the freedom to execute tactics that may not appear to be consistent with those set forth in the plan. The plan brings a strategic intent and direction to the table. What is actually being served may well vary depending upon a wide range of factors and circumstances.
  • The sixth implementation crisis occurs when those in charge of the process fail to capture the difference between the act of communicating the organization’s strategic intent throughout the company, and the challenge of effectively implanting an understanding of the strategic intent in the minds of a company’s important executive and staff players. Implementation must be more than merely pushing the firm in a new direction. It must effectively capture the minds, imaginations and innovative spirits of all involved. Anything else is just a rote memory exercise with only the ability to evoke short-term change.
  • The seventh implementation crisis occurs when a new Chief Elected Officer, Chief Executive Officer, or officer in charge of planning comes into power with no requirement or commitment to the Company’s strategic intent as reflected in the plan. This is a very common and highly damaging planning mistake. It immediately severs the commitments of all who have been involved in the planning and/or implementation process. Those who didn’t like the strategic intent adopted by the organization can now align with the new personality. Those who have worked hard to make implementation happen are now at risk from both an emotional and a career perspective.

The seven implementation crises discussed above occur with a level of frequency that makes them almost inevitable but not avoidable. That being the case why aren’t strategic business plans being replaced with less toxic options. The fact is that the procedures which give rise to the best practices in strategic intent driven business planning are still among the most effective available to the average brokerage or organization. They still generate far more positive than negative results.

In its best iteration business plan implementation is all about marching an army towards a predetermined objective while, at the same time, taking advantage of opportunities that appear along the way to feed the troops and make the journey either less exhausting or more rewarding. The optimum success of implementation comes when everyone involved in the process understands, and at least appreciates, if not respects, the objectives and is driven to share in their success. We can do this.

Driving Management Collaboration

As the industry continues though its winter and spring conference season a number of evolving concepts have become increasingly clear. For those who have been tracking industry acceptance of change and adaptation it would appear that a point of universal acceptance has finally been reached relative to the fact that the traditional brokerage business model is neither functional in today’s real estate industry and market environment nor appropriate in terms of profitability and return on investment.

With very few exceptions the coaching, presentations, articles, blog posts and editorials delivering this enlightenment have carried the message that, moving forward, brokerage management will have to be a matter of neutralizing agent centricity, focusing on customer experiences and installing metrics driven management practices that are surrounded by and driven through standards, best practices, accountability and organizational transparency.

Of course it will come as no surprise that those industry executives who are less than excited about this impending transitional experience (And the prospect of spending the last years of their careers engaged in a total reengineering of their life’s work) are reporting to company decision makers that moves in these directions will cause massive disruption within the agent panel. What is of even greater concern is that these announcements are, in many cases, not issued to assist top brokerage executives to anticipate danger ahead as much as to ward off the decision itself and allow these veteran and vested managers to skate to retirement. All of which is to say that there is growing evidence that it is senior managers that may be the ultimate impediment to brokerage change rather than the more traditional scapegoat, the agent.

A part of this evidence can be found in the migrations that agents themselves have made over the past few years. Tens of thousands of agents have become affiliated with, and subject to, advanced (however subtle) management relationships with portals and third parties like Zillow. Consider the overall reality of the massive agent team movement. Finally think about the impact of the industry’s growing coaching movement like the MAP program offered by industry giant Keller Williams. All of these programs demonstrate that many agents, especially those that want to be among the now famous 15% that do 90% of the deals, are looking to create a new working environment. It has become increasingly clear that at the core of this new environment is a rejection of much of the traditional agent “I don’t need no stinking boss” attitude and an acceptance of the fact that the best option for today’s successful agent is a more synergistic and structured relationship. If this is the case it certainly opens the door for a much more productive and collaborative working relationships between the contemporary agent and the progressive brokerage.

But the subject of this comment is not the agent’s transitioning attitude position but rather the fact that the most significant challenge to the brokerage’s attempts to transition to the new relationship may come from the management team itself and not the agent panel.

Many long time brokers will respond to this possibility with heartfelt annoyance and even anger declaring that such is nonsense. “Why John and Judy have been with me for twenty-five years. I trust them implicitly. We have been through so much together.” While it is certainly possible that this declaration of assumed loyalty is possible, the situation nevertheless requires a closer review and measurement before the brokerage undertakes a significant transition of management style and operational format under the assumption that long time management staff will be the cornerstone of the leadership required to take the journey.

No small part of this issue can be a realization that while brokers who realize on 30 years of hard work are on their way to tropical climes those who feel they were responsible for that success must now face an uncertain future in the company of a Wall Street driven minion.

The recent experiences of clients within the industry and studies conducted outside the industry suggests that while long years of management service does create a certain loyalty it also frequently results in the creation of management spheres of influence or as they are better known “empires.” Efforts to effect substantial change with respect to these spheres can unleash responses and counter campaigns that are both dangerous to firm stability and lethal to efforts to move the firm in new directions.

Firms engaged in management and operational transitions might give some thought to incorporating the following points into their process.

  • Recognize that while traditional business models generally emphasized individual performance many of the new business strategies place a high priority upon team environments and tactics. Individuals who have spent their careers being rewarded for managing individual performance are going to require training and motivation to become team managers and players.
  • While many traditional models promoted and encouraged general practice as the key element, moving forward firm’s will discover the necessity of specialization. They will soon seek to drive client collaboration by creating multi-specialty teams that can address the increasingly complex and sophisticated demands of real estate clients, customers and consumers. Most importantly, the revenues generated from specialty service teams is always higher than that generated by the generalists. Obviously managing this manner of group and process will be a significantly different experience. It will be a challenging but necessary objective.
  • The company’s commitment to any new programs must be readily and completely apparent from the beginning. While the value proposition of being positive is always important it must be equally clear that there will be consequences in the event of failure.
  • The commitment of top company management must also be clear from the beginning. This cannot be a “cause of the day” situation. Managers who have worked for the company for years will be watching to see if this is just another “flash in the pan.” They will delay their attitudinal implementation in anticipation of top management failing to follow through.
  • Moving forward collaboration will become a key dynamic on the brokerage landscape. Collaboration doesn’t just happen it is a learned behavior.
  • Brokerage management programs must integrate management and transactional technologies that can monitor, track and respond quickly to energies and directions that run counter to the new company direction. These systems must create near real time reports that can be used to direct the team’s activities. These reports will be the foundation of the company’s new transparency.
  • Management compensation must be tied to collaboration and team production.
  • The new programs must be instituted evenly across the board. Demonstrating favoritism by allowing more “sainted” managers or departments to work outside the new program will quickly bring the whole program to a halt.
  • There must be immediate and meaningful consequences for non-compliance. Counseling, corporal measures and ultimate consequences must all be clear and concise from the start.
  • The company must “stay the course.” Failure to follow through and demonstrate cohesiveness’ and commitment will create havoc on efforts to join subsequent movements for years to come. Such a mistake will also negatively impact the company’s external reputation moving forward

It is obvious that the majority of firms regardless of size and scope will be either moving to capture or, avoid being captured, by the amazing opportunities being generated by the current industry environment. Not everyone engaged by the industry at the present time will be excited about these opportunities and indeed there is no duty to be so. However there is a moral, ethical and, in some cases, a legal duty to either join the movement or remove oneself from the game. As is always the case it will be the broker’s responsibility to ensure that the team moving forward has done everything possible to ensure victory and success.

Are You Prepared to Launch Your Flight to Quality?

It is at best a bizarre situation. As this article is being prepared the American residential real estate industry is but 213 days from an event that many experts believe may be the industry’s seminal moment for the decade. The centerpiece and stimulus for all of this activity is the Consumer Financial Protection Bureau (CFPB). The 1,888-page RESPA-TILA (Truth in Lending Act) Integrated Mortgage Disclosures Rule issued in 2014 by the Consumer Financial Protection Bureau will probably not end the residential real estate business as we know it, but it will certainly change the way it currently operates.

When the RESPA-TILA rule takes effect (currently slated to take effect in August of 2015) it will integrate information currently provided to consumers in four separate documents to satisfy the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA), boiling it down to two documents: a loan estimate and closing disclosure.

As most of our readers already know, the Dodd Frank Wall Street Reform and Consumer Protection Act created the CFPB during the 2010 congressional session. The agency began operations in 2011. It hit the ground running with a campaign directed at debugging the national student loan act.

Its noteworthy and unfettered staff includes an unusual number of young “go getters,” many fresh out of college, without the “industry” baggage that has crippled so many prior efforts to “make a regulatory difference.” During those first few years it managed to find the time to draft, approve and implement thousands of pages of new procedures, rules and regulatory edicts. Even when assaulted by constant political attacks regarding the Bureau’s purpose and methodologies, it quickly became an effective regulator and attacked some of the countries most outrageous consumer traps. The agency next went after the credit card, automobile loan and mortgage industries. One of its current targets is the residential real estate industry.

The Bureau has collected tens of thousands of consumer complaints relative to the above subjects, including real estate related transactions. From its very beginning it has taken the time and effort to form a very solid relationship with the American consumer. Pursuant to its charter, consumer education and assisting the recovery of consumers who have been harmed by predatory practices have been at the top of its “to do” list. With respect to its efforts aimed at the residential real estate experience it currently offers a 90-page document comprised of such complaints and experiences.

Screen Shot 2015-01-20 at 4.26.03 PMWhen the Bureau’s RESPA-TILA rule takes effect in August, it will integrate information currently provided to consumers in four separate documents (including the famous HUD #1 accounting document) to satisfy the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA), into two documents: a loan estimate and closing disclosure. While this is easy to say it is, in fact “a giant step forward” for real estate industry regulation.

By and large organized real estate (ORE) has ignored the bureau’s current intuitive approach, apparently relying on Dodd Frank provisions that suggest nothing in the act can impact state licensees working within the scope of their license. The Bureau’s regulatory activities over the past year would seem to cast doubt over ORE’s position.

First of all, the act transferred RESPA jurisdiction from HUD to the Bureau. There are few brokerages in the country that could escape even the most cursory RESPA audit without fault. Secondly the simple fact is that it is quite common for licensees to wander outside of the provisions of state licensure statutes. Only the almost complete lack of state level non-complaint driven enforcement has allowed this situation to go unnoticed.

Those who doubt the potential impact of the current RESPA – TILA initiative on state licensees would do well to examine how other real estate related industries have responded to the upcoming event.

  • The American Land Title Industry has invested significant time and in energy into creating a document entitled Title ALTA_Logo_11Insurance and Settlement Company Best Practices. Through these new guidelines it has addressed licensing, escrow accounts, privacy and security, settlement procedures, insurance coverage issues, and a new consumer complaint process.
  • The Signing Professionals Workgroup representing notaries has also established a new set of standards that address significant issues raised by the Bureau.

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  • The Appraisal Institute has adopted a new uniform standard of Professional Appraisal Practice that addresses requirements for the development and reporting of a real estate appraisal.
  • The Escrow Institute of California has adopted EIC Model Policies and Procedures that address similar matters within the scope of its member’s real estate transaction related responsibilities.
  • The Mortgage Bankers Association has adopted new standards in the form of a uniform closing dataset requirement intended to work in tandem with the CFPB’s Closing Disclosure program.

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Prudent brokers ought to consider the following actions:

  • Learn about the new integrated disclosures. Even if the broker believes that neither the brokerage or its agents have liability, the fact remains that effective August 15th their clients are going to be subjected to a closing experience that neither the broker nor the agent can explain. Many consumers are going to find that such convenient ignorance may not be consistent with the consumer value proposition they are expecting.
  • Within the new concept there is a requirement that the consumer must receive full disclosure documents a number of days before the scheduled closing. If, during this period there is a substantial change in the number (and when isn’t there) the closing must be cancelled and rescheduled. One might think this provision may require some brokerage or agent involvement.
  • Brokers should discuss the upcoming events with the mortgage, title and escrow companies with which they commonly work. How do these players anticipate collaborating with the real estate services side (perhaps they don’t)?
  • Get prepared for what the Bureau refers to as a “flight to quality” through standards. Your success with a Bureau audit might depend on how well you can demonstrate efforts made to install standards and best practices within your firm.

It is nonsensical on its face for brokers to assume that August 15th will not be a seminal event with respect to their operations and consumer relationships. Get prepared there will be no invitation!

Two Contemporary Trends Converge to Contribute to the New Real Estate Industry

After years of pushback and denial from some elements of the industry media with respect to stories regarding industryScreen Shot 2014-12-05 at 3.06.06 PM change, it would now appear from the past three months of publication that both the print and electronic media now agree that the North American real estate industry is in a state of almost complete disruption. With this historic moment behind us one might surmise that the industry has now given itself permission to universally get on with the tasks of innovation and creativity that will be so critical if either the existing brokerage or agent communities are to assume a leadership position in the new configuration of all things real estate.

While many brokers and agents might suggest that such a succession is virtually guaranteed (and thus not worth discussing) the fact is that a review of the current industry environment does not allow any rational person to make any such assumption. In fact, to the contrary, there is every evidence that the convergence of one or more of the current trends, directions and forces impacting the industry may well be the turning point that creates the perfect opportunity for outside forces to gain control of both the marketplace and the transaction.

Most of our readers are more than familiar with the plethora of trends that are currently impacting the traditional industry. From regulatory forces to the growing number of internal and external portals, from the Realty Alliance’s “Upstream” project to its cousin the Broker Public Portal project and from NAR’s organizational realignment manifesto to the growing focus on broker profitability there is no shortage of potential game changers to monitor and prepare for.

With the current industry also comes the time to stop sweating bricks and to start taking meaningful action. For many brokerages the opportunity to respond to external change will be trumped by the record number of industry and brokerage executives who are now expected to cash in their chips and head for a hopefully happy retirement.

No one should be surprised by this industry trend. How many 65-year-old men or women brokers are going to be willing or able to ring the bell and announce that at such an age they are prepared to undertake the challenge of reinventing themselves and renovating their firms? For most of this group the challenges simple exceed the amount of energy and passion available to meet such opportunities. Accordingly the industry should assume that either sooner (as in now) or later (when the bullets start flying) many seasoned veterans will collect whatever hard earned chips they have set aside and be off.

Given the secondary fact that most brokerages are “light on the management bench” many firms will be forced to either turn the helm over to a well meaning senior manager who will attempt to push the traditional model for a few more years (thus exhausting institutional capital) or employing a new age executive who is likely to have some capital but no practical experience running a brokerage. From this later group the choice is likely to be between a young technologically fused person with little or no sense of management dynamics or a 40 plus year old member of the X Generation who has already been living with technology and digital disruption for over twenty years. This is the digitally native CEO. Easily stated, but difficult to implement, many brokerages will opt for this second option

Screen Shot 2014-12-05 at 3.10.20 PMHaving made the decision to fashion the future of their brokerage on a strategic relationship with an individual who may look and act nothing like the departing owners, the ultimate challenge begins. By the way, both this article and the situation it speaks to assume that the legacy owners have been unable to find a suitably financed buyer for their precious business asset and thus will be carrying a lion’s share of the unpaid balance themselves. The further presumption is that they will, in all likelihood find themselves, at least for a several year period, in some manner of a weird partnership with this new executive.

The next thing that we know is that, moving forward, most brokerage firms will have to go through a period of high impact innovation. It simply has to be done. If the current owner submits to the idea, generally sponsored by their legal counsel, that no significant changes can be made, in all likelihood they will condemn both the firm and the its new principle to certain failure.

So if the determining factor regarding the success of this succession plan is going to revolve around innovation, the solution is to selectively head into an innovation experiment. The objective here is to see whether or not the new recruit has the essential talent necessary to take the firm through what lies ahead and, perhaps of equal importance, whether or not the parties can work through the process without sinking the ship.

The following steps might just solve the problem and create a working resolution for all. The first step is to carefully study the firm’s current business model, become familiar with the trends, directions and forces currently impact the marketplace or industry and prepare a list of likely changes that will have to be made moving forward if the brokerage is to survive the new market environment.

The second step is to identify from the above list which of the potential objects of change the parties will use to test the needs Screen Shot 2014-12-05 at 3.12.57 PMof their new working relationship. The selected issue doesn’t have to be a doomsday event, but it does need to have sufficient weight and importance to establish the key points.

The third step is to set about developing a solution. There are several benefits to this step. It allows the new executive to fashion the solution and allows the retiring broker to use the wisdom of his or her experience to make a judgment regarding the feasibility of the intended steps. Those who would suggest that such a process would unfairly limit the new person’s options may not be familiar with the terms of today’s commercial loan where no prior business history exists. Commercial lenders are not in the business to stand by while cavalier behaviors endanger their security.

The final step is to implement the plan by creating a new business model that incorporates the operational and financial realities of the new operational program, process or service.

The benefits of this program are several. Through this process the brokerage is availing both the creative and innovative competencies of the buyer and the wisdom and experience of the previous owners. Such an arrangement can be a “win-win” proposition.

Moving forward innovation will not be an option. However, success will remain optional. Protect yourself and your success by surrounding your innovation process with the perfect collaborative protection.

Are You Ready to Become a Predictive Farmer?

The 2015 NAR Annual Meeting in New Orleans was, at many levels, a far different experience than any of its century of predecessors. There was a clear and consistent vibe that after all of the years of talking about transition and disruption that the long predicted tsunami of change had indeed arrived to create something “far different.” Moreover, that this far different thing was going to be “broker centric with a strong consumer flavor rather than consumer centric with a strong broker flavor.

You could hear it in the presentations and programs. You could sense it in conversations and hallway huddles. You could feel it in the demeanor of the late night gatherings. Interestingly enough one came to understand that those who were not receiving this vibe were also those who were probably never going to get it.

Perhaps it was the specter of the recent News Corp related purchase of Move.com. The realization that the industry demographic had expanded to included yet another team of powerful global experts for whom the industry’s traditions and legacies paled in comparison to its long denied financial potential. One could not help but feel the gaze of Rupert Murdock looking down on the trade show floor working a checklist of what was relevant and what was fluff.

At the same time the vast expanse of brilliant white and generally unoccupied carpet that comprised the massive Berkshire Hathaway exhibit area served as another reminder that the industry dynamic also includes a major player for whom the annual meeting might be seen as more of a cultural event than a business opportunity. The Berkshire booth reminded one of the presence of a king’s massive yacht at the Cannes film festival; Hauntingly beautiful yet mysteriously vacant.   There was work being taken care of elsewhere.

There is no doubt that the vibe was being driven by the influence of the NAR’s association Core Standards program that has thousands of association junkies at the edge of their seat. It has become increasingly obvious that, like so many other powerful players, NAR vision of the future of the REALTOR has moved significantly from its classic position. At the end of the meeting the vibe was literally shot into the sky by the decision of the nearly 850-member NAR board of directors that approved policy recommendations directing NAR’s leadership team to create a new “Code of Excellence” educational requirement and make the current requirement to complete Realtor Code of Ethics training biennial instead of quadrennial. The yet-to-be developed “Code of Excellence” appears to be the trade group’s latest effort to “raise the bar” of professionalism in the industry. These actions seemed to support the growing sense that the current role of the agent is not working for anyone.

Interestingly enough, in the middle of this confusion, Trey Garrison, writing for Housing Wire, published an article entitled Prediction: Realtors Almost Totally Unnecessary by 2025. The article centered on the continuing world of digital disruption. One of the article’s more interesting quotes suggested that the gap between real estate services and market demands would continue to expand creating a vacuum that would demand to be filled. “Real estate traditionally changes slowly but these new emerging aggregators could revolutionize the market,”

Somehow this article generated a new round of the now decade old discussion regarding agent “disintermediation.” Politically motivated industry players once again rushed to the forefront to insist that real estate agents would always exist as it to say “don’t sweat the changes,” you are irreplaceable. Yes, there will probably always be humans involved in the real estate transaction. The real question is how far they will fall from the “center of the transaction to an administrative runner.

Continuing the search for the origins of the “vibe” one cannot underestimate the impact of the ongoing buzz within the large brokerage sector regarding the flawed conceptualization that is the Realty Alliance’s “downstream” project.  How can it be that we refuse to recognize that the MLS challenge is not about technology? The act of melding over seventy of the most magnificent corporate cultures every created by man will require an almost biblical act of leadership when it comes time for each to sacrifice individual uniqueness in favor of the common good. Is Solomon really waiting in the wings?

Continuing with the MLS theme, some observers might suggest that the vibe was impacted by the constant background buzz regarding the rapidly deteriorating MLS situation.  Another round of seasonal MLS leadership meetings has, with the exception of the really well done CMLS Best Practices program, expended significant resources yet netted little or no substantial progress. In the meantime the large brokerage sector has given transparency to a growing realization that far too many MLSs are little more than vigilantes manning strategic roadblocks designed to protect local village markets. It is clear that the industry will not allow this situation to continue. It is now just a matter of who will rescue the industry from this unacceptable behavior.

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In the final analysis if one were to convert this stream of consciousness into a “Vibe Causer” beauty contest the clear winners might be two organizations, one called Realogy and one called Smartzip

During the meetings Realogy announced its new Ascend program. While only time will tell whether this program has the potential of making a major contribution to both the mindset and procedures involved in the long standing dilemma of succession planning within the real estate brokerage industry but the initial design looks promising.

The fact is that despite the major role that the “having the kids take over” fantasy has played in the industry over the years has not, by and large, been a successful play. The Realogy press release quotes the Family Business Institute as suggesting that only about 30% of family businesses made it through the second generation in 2012. Experience over the past two years will probably find that even this number has dropped due in part to the massive changes that are taking place in all industries. Daughters and son’s who might have found their parent’s traditional business model attractive will probably not find the task of reinventing it and/or rehabilitating its dysfunctions equally attractive. The problem will clearly not be improved by the fact that an ever aging brokerage population will increasingly be seeking an escape from an invading technology sector, increased competition from new business models, a consumer who is now some thirty years younger and, most importantly of all, seeking a well deserved retirement.

This program is a brilliant idea. A real “Hail Mary” strategy. Realogy is to be congratulated for addressing this major industry issue. Hopefully they will be rewarded with many high quality relationships with the next generation of brokers that they will help to create through the Ascend program.

The second “Vibe” winner has to be Smartzip and its SmartTargeting product. This is actually not a new product but perhaps rather a product whose time has arrived. The product places the extensive powers of “big data” and “predictive marketing” in the hands of the brokerage to deliver a farming system that few if any agents could even dream of.

Brokers can purchase a marketing “farm” comprised on some 2000 contiguous residential properties. Once this farm has been established Smartzip will target its impressive big data resources on the residents living on the “farm.” Using a very sophisticated logarithm Smartzip is able to correlate certain of these residents with behaviors or actions that have been found to be consistent with a decision to buy or sell property. One can only imagine how many Rotary Club meetings would be required to match such a system’s momentary sweep. Smartzip’s product is but one of a number of examples of how the agent function is being systematized and automated.

The National Association of REALTORS® held their annual business meeting in New Orleans. The city performed well and a good time was had by most. There was a tension in the air and a powerful vibe in the wind. Lurking between the drumbeat of progress and the laughter of celebration were a number of clear signals that the industry has now fully engaged with a new era.

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