A recent edition of this publication focused on a number of industry current trends and forces that, taken together, strongly support the idea that moving forward brokerages are going to have to take a much more activist position regarding the activities of their agents, most especially with respect to the quality and nature of the services and consumer experiences they are delivering.
The industry disrupters driving this issue were identified as highly motivated consumers, national portal premium agent programs, the high probability of definitive “independent contractors” litigation, potential CFPB regulatory initiatives and the increasingly dissatisfied “counselor” agent sector. Taken together they deliver a clear message that is best represented by the CFPB motto, Flight into Quality.
Given the potential seriousness of this situation it has become critically important that brokers, executives and managers began the process of understanding where the objectives of these disruptors come together in the marketplace and what sources are impacting the opinions and impressions of today’s consumer.
Consumer Reports is a publication that has been published and distributed monthly by the Consumer Reports organization since 1936. The organization currently has over 7.3 million subscribers and a twenty-one million dollar annual testing and evaluation budget. The organization and its publication are considered to be one of the leading consumer influences in the country.
The March edition of Consumer Reports featured an in-depth piece on the real estate marketplace entitled The Real Estate of Real Estate. The subtitle spoke to its contents; new population patterns, lending practices and housing preferences are changing the rules, whether you are buying, selling, renting or remodeling.
Every broker should read Consumer Report’s twelve-page hyper-real estate focused piece. The rational behind this suggestion is not that the piece offers the final truth of the matter; the fact is that accuracy remains an illusive concept in most real estate publications. The benefit to be derived is that the millions of Consumer Reports subscribers that do read it will believe that is the gospel truth (“there are no lies on the Internet or in Consumer Reports”). They will quote it in conversations with their peers and with real estate agents who (1) will not have read it and (2) often draw their comments, assessments and opinions with 1990’s era myths and misconceptions. Even worse these agents are also likely to take the opportunity to establish their intellectual superiority by disputing what the article has to say in favor of the hundred of myths and misconceptions that all to often make up real estate knowledge for the “facilitator” agent.
This takes us to one of the most critical points in today’s consumer/agent relationship. For most of the past three decades consumers have had a high level of vulnerability to the opinions and knowledge of so called “experts” and professionals. This is simply not the case today. Millennial Generation consumers undertake a level of education and orientation that previous generations would never have dreamed of. The first undertaking of these consumers when approaching a significant transaction is to establish the credibility and voracity of their service vendor. Real estate agents who are discovered to be “BSing” a consumer will suffer grave and immediate consequences including dismissal. Of even greater consequence is the fact that this consumer will share this information with their peer group and will include the brokerage in their summation. This is just another reason why brokerage firms must avoid this situation by gaining a higher level of control over their agents.
So, by way of example, what information gained from reading the Consumer Report (CR) pieces might lead to consumer discord. Consider the following:
- Here again Zillow, Trulia and Redfin come off as being the experts. The most prominent NAR quote is by Lawrence Young who suggests, “the tiny house movement is tiny.”
- Real estate is a good investment. CR cites Robert Shiller who says that U.S. home prices have barely appreciated over the past 120 years.
- Millennials as a group don’t want to own homes. CR reports on a survey of 1500 millennial consumers who overwhelmingly report that they want to own. The articles quotes that “Millennials are sick and tired of rent increases.” The article cites the number reason for millennial non-ownership as their inability to save up a down payment.
- The number one thing Millennials want in a home is to be amidst restaurants and entertainment. CR suggests that the number one factor is to be near friends and family.
- Only couples are searching for homes. CR reports that over the past two years 21% of buyers have been single women and nine percent have been single men. These statistics are expected to increase.
- Millennials are ideal candidates for fixer uppers. Wrong, while Millennials are interested in “personalizing” their properties they are deathly opposed to renovations and big projects.
- Home buying is easy. CR goes to great lengths to establish the fact that home buying is a very complex process that is filled with loopholes and ambushes. CR compares it with learning to play chess.
- All brokerage firms charge six percent. CR quotes Zillow data that suggests that this isn’t even close with 63% of agents having lowered their commissions and that over half charged commissions of 4 percent or less.
- Photos in the listing aren’t important. CR quotes Zillow data that suggests that listings with less than nine photos were twenty percent less likely to sell within 60 days than listings with 22 to 27 photos.
- Decluttering, depersonalizing and staging can add up to 3% additional value to the home according to Redfin.
- The article provides a fairly credible analysis of Realtor.com, Redfin, Trulia and Zillow as consumer friendly real estate tools.
- CR gave big credit to Zillow’s new “price this property” feature that provides consumers with the ability to conduct their own “CMAs” including the incorporation of hyper local information that agent CMS’s may have missed. The importance of this feature to brokers is not its accuracy but rather its potential to provide consumers with a false sense of expertise that they may use to de-value agent expertise.
The point of these observations remains the same. The traditional real estate industry are experiencing sustained digital disruption. Brokers, executives and managers must keep current with what their consumers are learning, thinking and opining. Consumer “realities” are becoming more important in determining the success and value of professional real estate services especially in the face of alternative programs being provided new entities such as Redfin and the national portals. In the same vein brokerages must be sure that their agents are not lessening their (or the brokerage’s) service value proposition by unnecessarily relying on legacy-based information that has not had the benefits of having been updated.