Off MLS Marketing: From Pocket Listing To Industry Tsunami

Screen Shot 2013-06-14 at 11.20.01 AMA seller retains an agent to sell a property and a listing agreement is executed. If it is a classic “Exclusive Right to Sell Agreement”, the broker has already executed a MLS subscriber document specifying that, unless certain conditions are met, the listing will be entered into the MLS within 48 hours, the agent will share information (cooperation) with other MLS subscribers and will share a portion of the total real estate commission (compensation) paid by the seller to the agent who brings forth a buyer (collaboration). This marketing standard, which has been the centerpiece of the American real estate market for almost fifty years, is approaching extinction in the face of a rapidly expanding market segment known as the “off MLS listing.”

 

The Changing Scope of Pocket Listings

 

Screen Shot 2013-06-14 at 11.22.59 AMThe “pocket listing”, which is a listing that is kept off the MLS for a variety of reasons, has had a lengthy and illustrious history, though it has been a rare exception to ‘normal’ practice, and has been, almost universally, questionable. From a listing agent’s perspective the rationale for a pocket listing might range from the client’s legitimate desire for privacy or secrecy, to constructive discrimination, to an effort to net “both sides.”  Indeed, some sellers may have their own reasons for not listing on the MLS, including wanting to sell to only certain “types” of people, not wanting the wrong strangers touring their property, or the completion of construction-related activities.

Historically, select agents have had “inside” knowledge of pocket listings in their own offices, yet most agents were left in the dark. It is unclear what knowledge brokers have had regarding these practices over the years.

The historic relationship between the MLS and the pocket listing is also unclear. Some MLS systems have attempted to regulate this type of activity by requiring the execution of a written exception by the seller, the agent and even the broker. Other MLSs and REALTOR® organizations actively discourage members from taking pocket listings and/or require execution of a notice regarding the benefits of MLS publicity. The current California Association of REALTORS® consumer education program definitely represents the ultimate activism. Possibly many MLSs have either felt helpless in the face of the problem or simply looked the other way.

Recently, an increasing number of high production agents are using their power and influence with sellers to generate listings that are exempt from the accepted practice of cooperation, compensation and collaboration. Sellers involved in this type of transaction are executing an exception that states that the property shall not be exposed to buyers through the MLS, (generally for a time certain or until a specific event occurs). Many of these listings never make it to the MLS before the sale is completed.

The precise number of non-MLS sales within any market is not determinate of the crisis. Rather, it is the existence of a set of practices that are rapidly gaining ground and which are seen by some of the most ethical practitioners in the industry as being legitimate that have the potential to rapidly and negatively impact the stability of the new real estate marketplace.

 

The Current Situation

 

The impact of past pocket listings is minor compared to what is happening in today’s marketplace. Informal research and interviews conducted over the past several weeks have revealed the following with respect to what is now referred to as “off MLS” marketing activities:

 

  • Individuals and entities from a wide range of financial, marketing, brokerage and regulatory elements are dedicating significant efforts, resources and energies to ensure that this new market demonstrates specific characteristics deemed to be advantageous to their specific interests.

 

  • Some companies are routinely listing properties as pocket listings (with executed exceptions) before entering the property into the MLS. The most obvious benefit of this arrangement is to allow the company to try to obtain both the listing side and the “selling” side of the commission.

 

  • There are a growing number of agents and agent networks that are more or less openly advising sellers to execute MLS exception documents for the sole purpose of effecting a sale that is to the clear benefit of the seller. The names attached to this growing practice include: “off MLS”, “off market”, “created sales,” “listing networks” and “listing parties.” Many of these groups go beyond brokerage boundaries.

 

  • 15% of homes are sold “off MLS” across the country. It appears that few MLSs are tracking such statistics. Some MLSs report rates approaching 26% with a smaller number reporting near 35%.

 

The Probable Causes Of This Shift

  • The traditional real estate marketing system is making a significant effort to accommodate the emerging influence and interests of a more powerful consumer, the enhanced role of the Internet, new applied technologies, expanded regulation, new Internet based players and new brokerage business models.

 

  • All though many of the practitioners of “off MLS” listings are suggesting consumer self-election, miscellaneous reasons and frequently manufactured consumer benefits, the fact is that the primary driver of this trend are real estate professionals themselves. There are at least two primary strategies at work here:

 

1)   Arguably the most powerful strategy is being employed by “off MLS” real estate professionals who are totally focused on maximizing their incomes. Nothing can reach this objective as quickly as “scoring both sides” and “rewarding one’s friends that will return the favor in the future.”

2)   The second strategy appears to be coming from those real estate professionals who have lost their confidence in organized real estate’s and/or the industry’s willingness or ability to cleanse itself of practitioners and practices which are inconsistent with the creation, legitimization and practice of ethical standards in the marketplace. There may be nothing that will achieve this result as effectively as denying marginal, unprofessional and unethical practitioners the listings they need to protract their incompetence.

 

  • Unfortunately however, whatever their financial motivations, or however noble their efforts may be, it seems clear that neither of these groups have taken the time to either project or anticipate the “unintended” consequences of their activities.

 

The Unintended Consequences

The possible ramifications of “off MLS” marketing activities are both far-reaching and ominous for the future of the market. Consider the following:

  • The loss of the MLS’s credibility as a data source in the home search process

 

  • The loss of the MLS’s credibility within the appraisal process

 

  • The deterioration of the credibility of the REALTOR® in the eyes of the American consumer.

 

  • The overall REALTOR® value proposition in the eyes of anyone and everyone in the real estate space. After all, less work might mean less compensation.

 

  • Screen Shot 2013-06-14 at 11.30.43 AMPotential anti-trust violations. The new listing networks are, in fact, groups of competitors that, it can be argued, are attempting to impact pricing, competition and market conditions.

 

  • Screen Shot 2013-06-14 at 11.26.53 AMPotential Fair Housing violations. Any time there is a process that undertakes to unilaterally decide who are the “right people” to make a housing purchase, the potential for a fair housing violation cannot be far behind.

 

  • Screen Shot 2013-06-14 at 11.36.49 AMPotential civil liability issues. Sooner or later suits will be filed by consumers who allege that they would have benefited from rising prices had their property been listed in the MLS.

 

  • The potential of government regulation or even a governmental takeover of the MLS as a critical national economic system.

 

In the final analysis perhaps no outcome will be as critical as the impact of the “off MLS” situation on organized real estate and the REALTOR® culture:

  • As an agent driven condition, massive “off MLS” Listings will dramatically affect the way REALTORS® interact with each other and their clients.

 

  • Relationships between REALTORS will be strained by eliminating the come-one-come-all exposure currently being practiced.

 

  • The practice of not exposing a seller’s home to the entire REALTOR community changes the legal balance and thus the relative liability of both agents and brokers.

 

  • One of the key elements of the current REALTOR interactive community is the sharing of information in a manner that benefits both buyers and sellers. Creating a parallel “off market” environment cannot help but create a process that undermines what the public gets to see or know about properties, neighborhoods, and conditions related to the sale.

 

  • Traditional REALTOR® MLS practices have been subject to at least minimal levels of transparency and rule making. It is readily apparent that the new “off MLS” practices will, to a great extent, be developed on a transaction-by-transaction basis.

 

  • Some experts suggest that the current agent/broker relationship lacks the fundamental universal accountability, and that the creation of listing parties, networks or “created sales” will further erode the situation, potentially to a point of total dysfunction.

 

  • The very nature of current “off MLS” practices suggests that they will quickly come under review by errors and omissions carriers, especially if consumer lawsuits are generated. It seems likely that such a review would generate a rate increase for all REALTORS®.

 

  • The current “off MLS” situation is, for the most part, being practiced by REALTORS® who represent the most professional and productive of REALTOR® ranks in most markets. These are the top agents. One can only imagine what will occur when these practice are undertaken by the legions of agents who fall far below this status. The term “wild west” comes to mind.

 

The utilization of “off MLS” practices has the potential of threatening the security and safety of every American. This is a situation that must be immediately addressed and solved by the very highest levels of authority and expertise within our industry. Thanks to those who are already on the front lines of this critical battle.

The Eagles Gather, Learn, Share and Adapt

It was the 26th iteration of the Gathering of Eagles. The conference, a Real Trends ‘by invitation only’ conclave, is generally recognized as the premiere learning and networkingScreen Shot 2013-05-14 at 4.21.19 PM event for those within the top 250 North American real estate brokerages. Real Trends entrepreneur and “Gathering” impresario Steve Murray set the tone during his opening. “We are here to learn and share together.”

Sherry ChrisSherry Chris, CEO of Better Homes and Gardens Real Estate (BHG), followed up and built on that theme with a creative facilitation of a panel of brokers from Atlanta, Houston, Boulder and Austin on the “New Generation Brokerage Business Model.” The room was packed as Sherry, using the “Are You an Alpha or a Beta Brokerage?” title, carefully wove the comments of both the panel members and a number of brokers in the audience into a profile of what the new business model was going to look like. The discussion provided information regarding cultures that work in the new era, space allocations, the use of new media, branch staffing levels, emerging technologies, orchestrating company growth and leading edge customer service practices. The panel included both BHG brokers and non-BHG brokers. The industry should appreciate the fact that Sherry and BHG uses sponsorship resources to bring valuable information and learning experiences to everyone in the industry regardless of franchise or brand.

The program next journeyed into what might best be called the uncharted waters of today’s mortgage industry. Representatives from Wells Fargo, CitiBank, and Shelter Mortgage painted a picture of a mortgage industry caught between legislative imperatives and regulatory unknowns. The situation is simple but its ramifications are complex. The marketplace is still in the process of responding the mortgage crisis of 2007 and 2008. Congress has responded with what it believes is an acceptable solution in the Dodd-Frank Act. But, as is the fate of all legislation, the implementation of the new law through a regulatory scheme is now in the hands of a bureaucracy known as the Consumer Financial Protection Bureau (CFPB). History tells us that, in all likelihood, the CFPB will swing the regulatory pendulum too far in its initial efforts and that, at some undetermined point in the future, these initial response steps will be ameliorated by experience, at which time a more realistic regulatory process will emerge. In the meantime two undesirable results could and might well occur. If the initial mortgage eligibility rules are too strenuous, the consumer’s current lack of comfort in the housing market will be validated and the housing situation could, once again, stall the greater economy. The second dilemma arises from the fact that during the interim period many mortgage firms, brokerages, loan officers and/or agents could be using policies, procedures and practices that will be ultimately found illegal under the new law or regulations.

The advice of the panel members was clear. At the present time there are adequate mortgage funds available for properly qualified borrowers. However, the current lack of clarity regarding what is a legitimate procedure under the Dodd-Frank Act results in an information vacuum. All involved in this situation should default to very conservative practices. Compliance will be the ultimate skill set over the near term future. Beware of the regulators need to pursue high profile cases in order to make their point and establish their reputation. You don’t want to be the poster child for the new mortgage reality.

Screen Shot 2013-05-14 at 4.28.00 PMTommy Spaulding a renowned speaker, New York Times bestselling author, executive coach, entrepreneur, and leadership consultant shared with the attendees the value of building lasting, genuine business (and personal) relationships through his motivational and real world experiences.

John Ikard, President of FirstBank Holding Company shared with the attendees the amazing details of what may well be the ultimate corporate culture. The bank, one of the most successful in the country, is owned by a combination of 46 officers and directors each of whom has spent virtually their entire career in the banking sector, working their way up organizations from one position to another. The insight he offered provided a glimpse into the unique role that a fully developed culture can play in determining a business’s strengths and weaknesses.

Dr. Eric Belsky, Managing Director of the Joint Center for Housing Studies at Harvard was clearly the most prolific of the “Gathering” Screen Shot 2013-05-14 at 4.30.57 PMpresenters. He unselfishly shared volumes from his encyclopedic memory on various housing issues.

He first spoke to the difficulties currently surrounding the mortgage process, previously discussed above. He then went on to report that the Center’s research has established that American’s are just as committed to homeownership as they have ever been. Contrary to a number of well-circulated stories, he reported that Americans have not adopted a fondness for rental lifestyles. In any event the housing market has heated up and will stay there absent a disaster. “People really want to pursue homeownership.” The will is clearly there; the question is whether there is a way?

He addressed the issue of housing supply. “We are actually in an under supply market.” Look at how much housing starts went down. 800,000 is the median and acceptable annual level. We have been below that on several years recently. Lots more households, if they occur, should require more starts. Real Trends provided the attendees with a copy of Dr. Belsky’s slides that offer a virtual goldmine of information.

A panel of high performance agents from Florida, Minneapolis, Houston and Fort Collins provided valuable insight into the thoughts and motivations of their peers relative to their broker and brokerage relationships. Why have they not gone into the brokerage business? What do they look forward in the market ahead? They talked about lifetime learning and the importance of focus. Issues regarding the support of core services and growing role of third party Internet-based services were discussed.

Screen Shot 2013-05-14 at 4.32.26 PMBehavior psychologist Dr. Michael Staver made a presentation taken from his current book Leadership is not for Cowards. He made a number of excellent points including the fact that leadership problems tend to come from the need to be in control, the need to be right and the need to be all things to all people

An especially timely presentation came from the data integration panel. Jay Gaskill, Ian Morris, Lorne Wallace and Jim Zellmer made this subject come alive in an interesting and relevant manner. As the discussion evolved, it became increasingly obvious that virtually every lesson learned during the Gathering up to this moment was, in some way, dependent upon the broker’s ability to access and evaluate data against established standards of reporting, performance and accountability. Certainly the good news is that beta brokerages are improving on their use of data integrated into the firm’s management system.

One of the most eagerly anticipated program segments was the session dedicated to the future of real estate portals. Pete Flint of Trulia, Errol Samuelson of REALTOR.com, Greg Swartz of Zillow and Andy Woolley of Homes.com did a terrific job of presenting what is clearly one of the most contested subjects in today’s North American marketplace. One of the first subjects discussed was the amazing capitalization level that some of the portals have reached and the relatively short time it has taken to create them.

Predictably the discussion quickly arrived at its most contested point. Are the portals practicing or preparing to enter the brokerage business? It is this question that ignites the ongoing discussion. The portals take the position that they have no interest in being in the brokerage business. They counter by suggesting that there are five steps in the consumer experience that must be addressed (dreaming, gathering, initiating, transacting and owning). The portals point out that the large brokerage community has focused all of its attention on the transacting phase, thus leaving the other four phases open. They further contend that they are investing millions of dollars, and hiring the best people in the country, to meet these consumer needs. They conclude by suggesting that unless the brokerages want to spend millions of dollars to duplicate their efforts, brokerages should partner with portals to meet consumer demands and expectations.

The brokerage community on the other hand points to certain relationships and competencies that the portals are developing and suggests that these efforts don’t appear to be a ‘baby food factory’. The discussion continues.

In 2013, for the 26th consecutive year, the eagles soared, the eagles learned and the eagles shared their unique perspectives with the eaglets. This year’s program demonstrated that the Eagles of our industry are a tenacious group, capable of transition and adaptation. They are a marvelous group and this was an awesome program. Hats off to Steve Murray for having the ability to keep this tireless flock in the air and on their course.

Because Mr. Wynn Doesn’t Want You to Smell Smoke

Las Vegas signParticipating in a recent industry conference in Las Vegas brought with it the requirement to take the semi annual walking tour of the famous Las Vegas strip. The center piece of this amazing architectural, cultural, and, OK, tacky, destination is a mile or so of astounding structures, blazing lights along with hundreds of men and woman each of whom seems to have ordained themselves “sexy,” no matter what. Something about the environment draws many, including this non-drinking, non-gambling tourist at least into the periphery of many of two dozen casinos, each one clogged with tobacco smoke and strangely dressed folks that have their own system to beat the game.

At the east end of the “strip” lays a property that is generally recognized as one of the finest examples of a Las Vegas casino. Approaching thisSteve Wynnproperty from the street provides a subtle notice that this not just another casino. Responding to the cues I made my way into the interior of this grand palace and into the casino area. I immediately observed some was wrong. There was absolutely no scent of smoke in the casino.

Habitually the curious one I approached a well dressed young fellow and ask the big stupid question that, like similar questions have so often, turned out to be the portal to great knowledge. “Why is there no smoke in this casino,” I asked. His answer was brief and to the point. He said, “Because Mr. Wynn doesn’t want you to smell smoke.” Well how about that.

Well, I quickly learned that Mr. Wynn is Steve Wynn, a virtual global legion in the casino world with ownership of properties from Europe to China. However, what I also learned is that Mr. Wynn personally exercises continuing and exacting care relative to virtually hundreds of details within his operations from sleeping room arrangements and decor, to food and beverage selections and even the birds that sing in his hallways. Apparently it is this appreciation for the details of the perfect guest experience that has made him an icon in his industry and a billionaire a few times over.

Screen Shot 2013-05-28 at 8.56.55 AMWhat does this have to do with our real estate industry? Well, actually, everything. In the March 2013 edition of the Harvard Business Review writer Jeffrey Rayport published an exceptionally informative article entitled Advertising’s New Medium: the Human Experience. Mr. Rayport’s article makes the point that in a media saturated world (like ours), persuading consumers through interruption and repetition is increasingly and almost completely ineffective. What today’s consumer is responding to is the “experience.” The challenge is for business entities, including real estate brokerages, to understand where and when the consumer will be receptive to having an experience and how to deliver that experience.

Rayport goes on to identify four zones in which this experience receptiveness occurs. He cites public, social, tribal and psychological as key locations. By way of definition the public sphere is where we interact with one another in mass settings. Not much of an experience here. The social sphere is where we interact with one another on person-to-person basis to fulfill our social needs. Not much of an opportunity to create a real estate service experience here unless that friend is a raving fan of your brokerage. The tribal sphere is where we interact for the purposes of establishing our common interests or unique identities. Now this sounds like an opportunity. Finally the psychological sphere is that place in our brain where we associate specific language “slang” with specific situations. This is a long shot with some definite possibilities.

Recognizing that the last paragraph may have taken us too far off the beaten path of real estate, let’s return to the question on each readers’ mind. What does this have to do with the marketing of real estate? Simply put, it is all about the experience. It is about investing our marketing message where the rubber meets the road, where your brokerage actually touches the consumer. Where that isn’t is in a print or Internet ad, a beauty shop restroom, the side of a bus or a yard sign.

Start looking for those places and circumstances where your brokerage actually comes into human and articulated contact with the consumer. The closer you look, the more you will realize that by virtue of both specific events and gross statistics, the primary sphere that you should be focused on is measuring the experience that your firm is delivering when and where your agents have direct personal or conversational contact with the consumer followed by those interactions in which your office staff interacts with consumers.

The first realization at which a brokerage executive might arrive is that, intentionally or not, the prime opportunities to create consumer experiences may have been inadvertently delegated. While there are still a few old fashion practitioners who drop in on closings or make an effort to touch bases with their customers such has become increasingly rare. Executives in larger firms would suggest that it has become impossible. (Not according to Mr. Wynn apparently).

Given this reality, the next question that broker’s should ask is whether or not they have provided those to whom the consumer experience has been delegated, adequate instructions relative to how they want the consumer experience handled. Our research suggests that by and large this isn’t happening that often. In fact quite the opposite. While some front office representative training is being delivered, it appears that few brokers are working with their agents to reach some agreement relative to the consumer experience with which the firm will be associated. Moreover there is evidence that suggests that many brokers consider it inappropriate to even raise the issue, let along negotiate a common agreement.

This situation becomes even more difficult in firms that have taken the position that their customer is the agent and the agent’s customer is the consumer. Although, given the situation that many agents have negotiated for themselves, one would surmise that brokers are really good at creating experiences.

What Mr. Wynn and Mr. Rayport are saying carries the exact same message. In today’s marketplace, firms that are not controlling, or at least negotiating for and monitoring, the consumer experience for quality and efficacy, are simply not advertising. What then is that awesome figure that appears in the monthly financial statement under marketing costs? Perhaps it would be better to book it under contributions to non-profit entities.

It’s a new world out there we can meet this challenge too.

Are Leaders and Managers Different?

Screen Shot 2013-04-10 at 7.26.51 AMYesterday I had an intense telephone call with a client who had recently come to realize that his cable, wireless and telephone company, financially flush from the mobile communications boom of the past few years, was about to become a major competitor. Assuming he was just being his usual high energy animated self I made light of the very thought of such an event and made something less than a credible intellectual contribution to the conversation. His response was sobering; “they have joined every REALTOR association in the country.”

Last weekend the print media was alive with stories about Warren Buffett’s Berkshire Hathaway organization having agreed to convert its Goldman Sachs warrants into 43.5 million shares when the contracts expire in October, thus potentially becoming the bank’s largest stockholder.Screen Shot 2013-04-10 at 7.08.27 AM

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According to one expert, in this one transaction, profits of $1.3 billion dollars will be generated. Is it possible to consider this reality without also considering the fact that Mr. Buffet has recently increased his company’s stake in our industry including allowing the iconic Berkshire Hathaway name to used by a real estate company?

In some industry circles the current torrential pace of disruption and change is a stated objective, in some it is a source of anxiety, in still others it is an opportunity while for others it seems to not exist at all. Some readers will say that disruption is their objective, another group will spend their days attempting to avoid or micro-managing it, still others will roll their eyes and suggest that this is the best market they have ever experienced and nothing can go wrong.Screen Shot 2013-04-10 at 7.20.11 AM

So perhaps the current industry environment is very much like that described in the early chapters of No Ordinary Times, the exceptional novel of the early days of World II by Doris Kearns Godwin. The book provides a finely detailed chronicle of the historic events that occurred during that period of time. It is relevant to the current real estate industry situation because it also discusses the levels of threat and disruption that were required before many of the major business players of that day, like the automobile industry, agreed that an immediate threat of war existed and that things had to be done differently.

Screen Shot 2013-04-10 at 7.38.18 AMWhile a DEFCON 1 analogy may not accurately reflect the current industry atmosphere a strong argument can be made for the fact that it is close enough. There are currently enough critical and crucial events and circumstances within the real estate industry environment to declare a DEFCON 3 or perhaps even level 2 status.

Given this situation it is incumbent upon every real estate industry participant to undertake his or her own personal, professional and/or business response to the current circumstances. The question now becomes whether or not there is a single initiative that might be appropriate for all involved.Screen Shot 2013-04-10 at 7.51.10 AM

The search for this magic solution returns us to history and to both No Ordinary Times and, interestingly enough, to another book by Doris Stearns Godwin, Team of Rivals, a book that chronicles the early events of the American Civil War. In both of these stories the ultimate solution to the conflicts and the complexities of the era was leadership.

Screen Shot 2013-04-10 at 7.58.00 AMThe search next continued to any number of business books and papers that address the current business environment. Included in this sweep would be the Harvard Business Review’s Leadership Insights volume of 2011 and the Real Trends 2012 publication entitled Against All Odds.

All four of these learned studies come to the same conclusion. In times of opportunity, change, disruption, and destruction the single resource that most often leads to resolution, satisfaction and/or victory is applied leadership.

Despite the broad diversity of individual, business and corporate responses to today’s industry challenges, the final solutions will ultimately occur along a finite range of response. Over the next twelve to eighteen months’ industry leaders will respond to the transitioning industry environment by investing their time and resources into a phenomenal number of organizational, relationship, procedural, transactional and financial reviews, modifications, upgrades and course changes.

History and research are not the only criterion that point to leadership as the key first step to meeting the industry’s current challenges. Leadership development enjoys the distinctions of being affordable and having universal applicability to individual roles and functions across the entire real estate business spectrum, from agents to managers to consumer. There are easily accessible resources to develop and promote quality leadership and, perhaps most important of all, quality leadership is a process that can demonstrate rapid results and success.Screen Shot 2013-04-10 at 8.32.02 AM

However, these factors aside, there exist a number of factors that will stand in the way of bringing leadership to the forefront of the industry stage. Perhaps the most salient factor was that which Abraham Zaleznik wrote about in his classic 1992 piece entitled Managers and Leaders: Are They Different?

Over twenty years ago Dr. Zaleznik, speaking to a whole different issue audience on a far different plain, raised many of the issues that will dominate the real estate industry’s attempts to integrate leadership into its current situation.

The challenge will come into focus almost immediately upon any real estate organization’s focus on the question; do we have leadership now? Most firms and entities will respond in the affirmative by pointing how successful they are at the current time and how skillfully they negotiated the recent period of economic crisis and market instability. The conversation will continue until everyone at the table is satisfied that yes, their organization is brimming with leadership.

Actually the discussion will have addressed and answered a significantly different question. As Dr. Zaleznik established so long ago, these organizations are really measuring their management talent not their leadership resources. These assets, which were worlds apart twenty years ago, are, in today’s business environment, light years apart. Yet most firms and organizations will continue to claim that management acumen is leadership, which is simple not the case. While both are critically important to success, the skills and competencies they represent could not be further apart and the journey that they will take without one another could not be more irrelevant.

  • Managers represent a triumph of power within a complex organizational system. Leadership reflects the courage to go against the flow and do what must be done regardless of the status quo.
  • Management is the skill set for stability and the long distance. Leadership is the competency required to move the organization through the current zone of disruption, change, challenge and opportunity.
  • The management personality emphasizes responsibility, control and rational thinking. Leadership thrives on creativity and innovation.
  • Managers can be developed through commitment to and immersion into specific and well-documented processes and procedures. Leadership requires a personality that rejects these components in favor of the excitement, indeed passion, of the discovery and the achievement.
  • Managers respond to goals in a tactical and routine fashion, interpreting them as mountains that must be climbed for the sake of the objective. Leaders see goals as a mountain that they get to climb for the joy of the strategic view, the new perspective and the opportunity.
  • Managers see absolute compliance as the key to survival and recognition. The self-esteem of leaders is based upon the fact that they were able to see the challenge differently and wrap themselves around its unique demands and expectations

Today, the North American real estate industry finds itself at the brink of a new operational history, a vastly different working era, a greater investment expectation and an enlightened consumer experience. In order to realize the full potential of each of these factors, the industry will have to field both management and leadership resources that can jointly rise to the occasion and capture the brass ring. The first step of this journey must be to understand how these two competencies are different and how they can collaborate in support of this amazing opportunity.

How Can You Even The Score? Digitize Your Brokerage’s Message and Style.

One of the real joys of being engaged with the real estate industry, at this particular moment in its history, is the opportunity to understand the course of the industry’s current migration while, at the same time, being able to identify the behaviors and adaptations that will allow certain of its present brokers and practitioners to utilize the energies generated by the current transitions to move their businesses and careers to the next levels. Frequently this effort involves discovering other industries that have previously encountered, or are currently encountering, similar challenges and then studying how their stars and best players topped their challenge.

Dr. Steven Rothstein is one of those interesting people that life allows you to meet from time to time. Steven’s life is all about music composition. He holds a Ph.D. in music composition from UCLA, an academic and teaching relationship he continues to this day even as his career expands into the world of video music composition, recording and production. During a recent series of interviews and interactions (including my first visit to a vegetarian restaurant) in New York City, Steven introduced me to the digital recording world and helped me understand the mechanics of both its transition and its new reality.

The parallels of many, if not most, industries today are noteworthy. The process begins when either or both global investors and digital technology vendors discover industries and professions that have (1) traditionally relied heavily upon analog or manual (A.K.A. human) processes, like medicine, music and real estate, and (2) where experts deem an excessive amount of revenues and opportunities generated by those industries accrue to the sole benefit of the industry’s practitioners rather than being shared on an equitable basis with that industry’s owners or investors.

Screen Shot 2013-04-02 at 8.52.51 AMThe invasive procedures utilized by these players are quite predictable. Automation through technology is generally the first step. Research into the traditional internal practices of such an industry frequently discloses significant levels of inefficiency and waste. Which is to say that, in all too many cases, revenues that might well drive appropriate returns on investment are actually being expended to no one’s benefit because organized practitioners refuse to modify traditional practices.

In the case of the music recording industry, this process traces its origins to the period of 2002 – 2005. Since that time thisScreen Shot 2013-04-02 at 8.36.17 AM industry has been radically transformed by the introduction of composing software such as Sibelius, which claims to be “the leading music composition and notation software”. Such transformation also leans heavily upon the existence of previous resources; in the music industry’s case MP3 based technologies and the overall enhancement of the Internet itself. Sibelius software allows composers to both input their composition and perfectly play back the specific notes using the sound of selected instruments without human performance. This has had, and continues to have, a profound impact upon that industry’s products and profits.

Screen Shot 2013-04-02 at 8.38.04 AMWhile the availability of digital composition technologies have had a major impact upon the levels of creativity and innovation that are being seen in the music industry, an even greater impact has been experienced with respect to long standing music recording studios. In fact, over the past year several long-standing and even famous recording studios have announced that they are shutting down, leaving literally thousands of musicians, directors and associated professionals out of work with little or no hope for the future of their performing professions.

A secondary impact of this process has been what contemporary economists refer to as vertical disintegration. In plain English this means that the introduction of enhanced technologies into the music recording industry has paved the way for a shift of power into the hands of third party investors. Many experts argue that this shift has been to the disadvantage of both the industry and the consumer.

At the same time other experts argue that these same technologies also contribute to the democratization of the industries and professions that they touch. In the case of music, the Sibelius software is widely available and is very affordable, thus allowing composers like Steven Rothstein to expand their capabilities, competencies and potential for professional and economic success. Perhaps poetically this opportunity is not available for those practitioners who argue that they have some manner of constitutional right to engage in traditional practices.

The relevance of these factors to the real estate industry is absolute. There is more than adequate evidence to establish the fact that both the global investor and the technology have discovered the real estate industry and are moving quickly to create a power base. There is also evidence to support the fact that a significant segment of current practitioners, especially those from the boomer generation, are refusing to transition to processes, technologies and procedures that might effect a more equitable distribution of revenues. These factors would suggest to some that the die has been cast.

But, wait! The music recording industry is prepared to offer yet another superb example of what talented, creative and innovative individuals can do to meet the challenges of the investor/technology impact.

Enter the Piano Guys. First of all, find their youtube.com channel at http://www.youtube.com/user/ThePianoGuys. Spend a few moments validating the effectiveness of their music and their solution (it is, after all, remarkable). You can click the lower left play arrow to see how this group approaches music.

Here is a group of five musicians and technicians that have been together less than three years, had little or no personal or investor funding, have completely avoided traditional entanglements, yet have used the very processes that threatened to frustrate and even defeat their professional dreams in a manner that has rocketed them to the heights of success and, seemingly, financial security.

When all is said and done, what the Piano Guys have done is ridiculously simple. They merely identified what made them vulnerable (in this case digital composition) and turned it to their benefit by (1) adding a video component and (2) surrounding the entire package with an amazing level of creativity, high definition, innovation and, perhaps most important of all, joy.

The lessons presented by the Piano Guy’s story have an absolute reference to the real estate industry. There is no reason for today’s brokerages and/or agents to be defeated by global investors, technology vendors or even “Big Data.” Individual and team creativity and innovation have always outperformed third party packaging and power. That is one of the things that make capitalism great.

Learn how and why you are vulnerable. Discover what makes you or your business special. Take that unique quality to the next level. Play it out on a mountaintop, a beach or on the rim of a canyon. Find your rhythm, capture your pace and play out your destiny. This is the greatest time to be in the real estate market in the past thirty years. You can do this.

Will You Get Bumped In The Tight Race For Real Estate Dominance?

Screen Shot 2013-04-12 at 1.19.37 PMIt was really a great session. While the fog swept across the harbor in San Diego 35 industry executives from across the country spent the afternoon sharing and assessing the current realities of their markets. Area after area reported healthy increases in sales volumes and prices. Inventory figures sounded like science fiction stories and the art of the hopeful seemed to create a positive rhythm that could be felt even as many expressed concerns that unit prices were rising too quickly.

But even with the good news and positive reports one could sense an overriding anxiety in the room. Yes, after several long and sometimes fatal years, something called a solid market was back. But, it is becoming increasingly clear across the country that that which is back is not that which had departed.

For so many in the industry the mantra “when the market comes back” has indicated something that we all longed for and maintained in our hearts and imaginations, even when the going was at its worse. So, it is now a bit of a downer that, as the reports which so many have for so long awaited begin to arrive, we discover yet another sobering truth.

The market that is now rising before our very eyes is not that which we thought it would be. It is not going to look like 1995 or 2005; it is going to look like 2014. For many this reality is going to be destabilizing. There are expectations that are not going to materialize. Most of all there will be disappointment and from this disappointment will come stress, conflict and no small level of disruption.

A starting point for this discussion might be found in the history of the market itself. There are many in the industry for which the past several years represented the formidable years of their career. Still others were at full altitude and speed when the horrors of late 2005 came into play. But even fewer are in a position to appreciate the fact that the history may not view the past seven or eight years as a period onto itself but rather the tail of the much longer boom market that began in 1992.

For a period of thirteen years, before the dynamic forces of the great real estate boom finally ran out of steam, the market experienced the longest sustained period of growth and market activity in the history of the American real estate industry. During this period all was well for everyone whose life, career, business, community and neighborhood included the real estate dream. There was really no need to fix anything. Everyone who counted was happy.

So, now, for the first time in over twenty years, the North American real estate market is essentially starting all over again. Oh, sure, many will argue that the great mass of matters will be as they have always been, but it is not these old practices or traditions that will impact or influence the great weight of the market moving forward. They will merely serve as the playing field upon which the real action will take place.

Waiting to play a role in sculpturing the new market’s form, process and substance is the cast of millions which, for the first time, not only includes real estate professionals who long for stability and prosperity, real estate business persons who are focusing on market level returns of investment, but now also millions of consumers (both old ones and young ones) who want to return to the dream of homeownership, investors who wish to profit, politicians who wish to tax, regulators who seek to interfere, technologists who wish to automate, vendors that which to control, and yes, a few dozen writers and consultants who want to impact. Each has an idea regarding what this new market should look like, and how it should go about developing its new shape and adapting to its new surroundings.

A very powerful group that is waiting to play out its influence will be those who believe that the industry should return to what it might have been during the “good old days.” These folks will urge a return to the world in which brokers and agents held the biggest sway. Another group of substance will be comprised of those who believe that the market should become consumer centric. Yet anther powerful voice will be heard coming from those who would point out that reconstruction cannot occur without capital and thus it will be those with capital who should be calling the shots.

For the purposes of this discussion it matters not which of these groups will ultimately prevail, because in the final analysis all will influence the process and all will complain about the end product.

Our focus at this point in the market’s history might better be placed on the upcoming battle itself. Even as we speak, all of the notable players are choosing their gladiators and lining up along the line of skirmish. Each is assembling weapons, resources and loud voices through which to state their case. Each of the groups identified above are powerful and will be well represented at all levels of the conflict.

The real question at this point is whether or not there is some way that we can avoid the expense, pain, and embarrassment of a long series of protracted negative interactions. Can the industry somehow set about the process of fielding a leadership cadre that is capable of at least attempting reasonable negotiation and meaningful settlement? Is it really necessary that we delay the real “return of the market” for several more years while history sorts out who is the biggest and who is really bad? Is it possible that we could foster a conversation that rises, not out of threat, but rather creativity and innovation? Are there any such leaders of this persuasion left or have they all gone to parts unknown?Screen Shot 2013-04-12 at 1.28.49 PM

The issues around which these battles will be fought are plentiful. By way of example one can already see wisps of smoke rising around the “pocket listing,” MLS core services, agent rating, the mortgage interest deduction and agent compensation alternatives. There are a dozen more just waiting for their turn in the spotlight. Even a cursory review of the industry’s communications channels discloses that some in the industry can hardly wait to put on the gloves and let the fighting begin.

Screen Shot 2013-04-12 at 1.24.54 PMOne recalls the interaction caught so well in the movie Days of Thunder in which, while responding to a complaint about the practice of bumping competitors so that they will lose control, one of the veterans played by Robert Duval smiles and says, “Bumping is just racing.” If so, real estate body shops are about to have a great few years and the aspirations of some are about to, once again, be delayed.

How Are We Doing? Dare You Ask?

It happened towards the end of a business lunch at a popular lunch spot. There it sat, hidden from view between a glass of Diet Pepsi and a bowl ofScreen Shot 2013-03-08 at 12.25.26 PM
salsa, a small printed note on a card in a plastic stand. A simple question; “How are we doing?” Every one at the table immediately assumed that it read “How Did We do?”, but that was not the case. The card asked, “How are we doing?” and went on to provide instruction regarding texting the restaurant’s manager. We immediately transmitted a text stating; “all is fine except the manager didn’t stop by and say hello.” Within 60 seconds the manager made an appearance and received an enthusiastic round of applause from those at the table who immediately began to consider the ramifications of this development for the real estate industry.

Two days later the local newspaper carried an interesting front-page story about a major community event that included a midway with various rides and amusements. The story reported that local teenagers had created and populated a rating system that covered various midway activities. The rides had been rated on the basis of ride time, intensity, “nausea” scale and fun. The “take your chance” amusements had been rated on the basis of required skill, integrity, honesty and hustle.

These two events clearly demonstrate a major dynamic that is impacting today’s business world and consumer experience. Boomer generation adults, focused on their day-to-day lives, are not assimilating the vast level of transition that is occurring around them. When they do, they see it as an annoyance rather than a social adaptation.

Screen Shot 2013-03-08 at 12.29.50 PMThe majority of individuals currently engaged as sales, service and professional providers are put off by consumers who want to create a more inclusive and transparent experience, especially when high dollar expenditures are involved. The above referenced restaurant that has been in business since 1973 has developed a level of consumer centricity that extends to providing a consumer the ability to summon a manager in the event of unhappiness involving the purchase of a six-dollar margarita, more importantly, during the purchase! (Oh, by the way, both the card and the holder were provided by the Pepsi Corporation that has apparently discovered that assisting its customers to become more competitive is more valuable than making an extra five cents on a soft drink) This quick response option is rapidly becoming a consumer demand, especially when a fifty thousand-dollar automobile and/or a several hundred thousand dollar home is involved. Customer service experts tell us that, unless difficulties in the consumer experience are solved immediately, they will ultimately grow to encompass the entire experience. Behavioral psychologists tell us that the vast majority of service providers will choose to ignore these moments rather than to deal with them.

Accordingly, in 2013 many industries are still battling the contemporary consumer’s growing demand for transparency through rating. Their objection tends to arise out of their sense that it is beneath their “business dignity” to be judged like a “common cow at a livestock show.” The Canadian real estate industry provides an interesting example. This group recently adopted, virtually without review, debate or discussion, a program of contemporary reforms that would have caused a revolution in the United States. But, interestingly enough, despite enacting literally dozens of radical changes, this group specifically rejected the concept of consumer rating.

This position demonstrates classic denial on the part of professionals who refuse to recognize that today’s consumer considers the opinion of their peers to be the most dependable form of information available for consumers who are trying to choose with which professional or business to work. It is a refusal to accept the fact that creating and participating in rating activities has become second nature to todays Generation “X” and “Y” consumers, hence the teenagers enjoying the midway.

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All of these factors tie into a larger picture that Trendwatching.com called the “Virgin Consumer” experience in its February report. Trendwatching points out that as the speed of innovation and creativity within the consumer space increases, more and more individuals find themselves adapting a new set of rules, protocols and procedures as they work their way through a totally new consumer experience. Today’s consumer is being directly impacted by an environment that includes the dazzling levels of choice offered by the 19,000 new apps that Apple says are added to their store every month, the 18,000 projects on Kickstarter that were successfully “crowdfunded” in 2012, the 1.2 million patents for innovations granted in China alone, or the 480,000 companies registered in the UK in 2012. The shear volume of these events guarantees that every consumer experience will be touched or impacted.

The growing phenomenon of “substitution” also plays into this scenario. Think about how many times each month every consumer discovers that a favorite product or experience has been compromised and/or sacrificed in favor of corporate profitability. Containers are smaller, ingredients are compromised, automobiles have less and less steel, more (expensive to replace) digital components, clothing has less cotton and wool and more and more man made fibers, airlines become rude and callous commodity transport systems and the twenty year refrigerator has evolved into a five year maintenance nightmare.

The real estate service system also engaged in substitution. With no service standards in place, agents routinely substitute service quality on the basis of market volume, attitude and revenue. Just a few months into the current seller’s market the market is already awash with stories of agents who will not return calls or negotiate terms.

Assaulted by these realities each month consumers become more and more savvy, resistant and combative. The Anheuser Busch Company currently finds itself in the middle of a class action lawsuit suggesting that its product isn’t as “Stout” as represented.

The bottom line of all of this is that every consumer, no matter how powerful, affluent or experienced, is finding themselves a “virgin” in the new marketplace. Unlike consumers of old, today’s consumer isn’t given to taking whatever happens as the “way it is.” Today’s consumer is quickly learning to separate the chaff from the wheat. Today’s consumer is learning to play a whole new game of response and intimidation. Vendors and businesses who elect to take advantage of today’s consumer will find that social media and the Internet has given them a whole new way to be powerful and influential.

Brokerages that elect to ignore this growing risk-inflicted market environment do so at their own peril. The early warnings, provided by that classic legal letter of old, will no longer materialize. Consumers will no longer stew about their situation for months with a majority ultimately electing to stand down and stay dumb. Every brokerage must monitor social media and the Internet and be prepared to respond immediately to threats as they emerge. This is not our parents’ consumer, it is us. The mantra is a simple one; “How are we doing?”

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What Has the Industry Learned From Keller Williams?

They call it Family Reunion and for 2013 it was Dallas, Texas that played host to over 11,000 raving Keller Williams Real Estate participants from all over North America and nine overseas markets who gathered to celebrate the company’s 30th birthday party. For those who made an appearance at CEO Mark Willis’s State of the Company presentation (and that would be all 11,000 of them since both “respect” and “being there” are intrinsic elements of KW’s now famous culture) there was even a birthday present. At long last Willis was able to make the announcement that KW had become, by agent count, the largest brokerage organization in the industry. Interestingly enough, this achievement was confirmed with KW auditing its competitor’s websites for reported office agent populations.

This auspicious event and accomplishment make this a good time to review the many contributions that KW has made to the North American real estate industry over the past thirty years. This article is not intended as a tribute to KW, although many might argue that one is due. Neither is it to suggest that there are not several entities within this industry that have made significant contributions to the industry over the past two decades because there certainly are. It is to say that in the annals of entrepreneurialism, the KW achievement deserves special notice for what it has done, how it did it and when it did it.

Over the past 30 years KW has created and perfected a business model and corporate culture that long ago declared a wide range of traditional business practices irrelevant and impractical. By doing so it brought upon itself a level of attention and comment that frequently went beyond that reserved for mere competitors, approached ridicule and occasionally reached levels of unhappiness that one might have thought were associated with heretics.

It developed and promoted concepts that often seemed almost revolutionary and but which were always progressive during a rich period in the history of the North American real estate marketplace. Much of this period happened to parallel the great real estate boom of 1992 through 2005, when many in the industry were proving all one had to do to succeed was to toss a net into the market waters. At every step of the way KW convinced its growing community to go the extra mile and follow an approach that has become a prerequisite to “careers worth having” and “businesses worth owning”.

During the past seven years KW polished its business model in a national market environment that, in and of itself, threatened what was left of the traditional business model as it raced through successive disasters including the market crash of 2005, the mortgage crisis of 2006, the recession of 2007 and the foreclosure nightmares of that entire era. During this same time literally tens of thousands of brokerages disappeared from the marketplace.

Never once during the past 30 years has the KW community ever looked back on its decision to take a different road nor has it ever backed down from its objectives and commitment to follow a central vision that is the backbone of its current success. Without a doubt history will view this as one of KW’s first contributions to the industry.

Real estate has always been about accepting the risk, perseverance and courage. In following its belief that one should “never back down” KW has sustained the traditional industry value that long ago established courage and gumption as critically important attributes.

The KW business model is unique in many ways and one can bet that as investors, who are even now beginning to once again see the industry infrastructure as a positive investment opportunity, move closer they will be closely examining what features and functionalities have allowed KW to succeed over the past decade.

At the same time brokers throughout North America are also examining their traditional brokerage business models with many asking themselves what matter of business model will best serve their interests moving forward. The following KW innovations clearly deserve the attention and respect of both of these groups.

  • Creating a culture in which excellence in all things is an absolute necessity.

KW market centers and principals live in the same reality as traditional brokers when it comes to agent relationships. KW agents aren’t driven to success rather they are drawn by a culture of recognition and reward to participate and perform at very high levels. KW has created a massive culture in which personal excellence and financial success simply outweigh whatever ego satisfaction might come from an “I don’t need no stinking boss” attitude.

  • Building a community of inclusion that will drive that excellence.

Within the KW culture the words care and caring are not brochure fodder but rather are real and powerful beliefs.n Members of the KW family who encounter crisis and financial nightmares find that each year literally millions of dollars are made available to assist with their crisis through the KW Cares program. It’s not insurance that will guarantee a solution but rather community assurance that reaches out in a time of need and builds loyalty.

  • It takes metrics to define a business.

Within KW, business metrics reflecting virtually every aspect of the business have been raised to a level of the Holy Grail. KW maintains an exhaustive database that can either validate or invalidate every possible decision making process.

  • In order to be effective systems must recognize the interdependency of all involved.

It’s that old Jim Collins thing. Success requires having the right people, with the right attitudes and the right tools on the bus. At KW the term “right” is not about guesswork, it’s about homework.

  • Profitability must be a universal value.

If one is not part of the profitability solution then one is part of the problem. Within KW everyone, at every level, benefits from profitability but most especially those who contribute to it. The KW profit sharing program has distributed almost one half billion dollars to participating agents. Many within the organization have created retirement programs funded by these efforts. Why wouldn’t everyone want to drive profitability?

  • Technology cannot be an agent option.

Everyday, KW agents and market center personnel enter the market environment supported by technologies that create an entirely new level of competitiveness. KW’s e-Edge transaction management program is redefining the transaction experience. This participation is not optional, its what makes it all work.

  • Understanding the rule and role of knowledge.

Today’s Internet empowered consumer has a very low tolerance for agents who try to get by on their personality. KW knowledge management programs, designed and delivered to create a competitive advantage, are not required by statute but by self-respect. Again, it’s the culture.

  • Discipline, structure and accountability are the cornerstones of success.

 KW takes the position that laxity and undisciplined behavior are the root cause of low performance, wavering self-esteem and consumer dissatisfaction. No one forces perfection within the KW culture; it is just the most popular choice.

  • Systems do not distract from one’s humanity rather they contribute to it. 

Systems are the foundation for all manner of success within the KW culture. One very seldom hears the term “independent contractor” in a KW environment. It may take a village to raise a child but it takes a system to create customer satisfaction.

  • Respect is a commodity that adds great value.

In an industry that often lives by the rule of “what have you sold today.” KW has managed to introduce respect into virtually everything that it does. Yes, it is a respect that can be lost for the undeserving but at the same time it is a respect that is presumed and can be depended upon.

Keller Williams has earned the status and respect that now comes with its new status. KW has contributed to the positive image of our industry. It has reinforced traditional industry values, it has made profitability a science, its has raised the level of respect for REALTORS® in the communities in which it operates and it has helped lay the foundations for an industry moving forward that can once again been seen as a great investment and business opportunity.

It is success well earned and an achievement to be recognized. We are an industry facing many challenges over the next few years. Let’s be thankful for having another powerful and competent player to help us move the ball forward.

Now That Things Are Looking Up, What Will You Do Next?

Our firm is in the process of completing a survey of 35 leading brokerages across the country and as of the twenty fifth interview one could not help but be concerned about the results to date.

Some thoughts by way of laying a foundation. The issue of recovery is a ticklish one in economic circles. Its not like the military when a wounded soldier is deemed recovered when he or she can meet certain mental or physical requirements like reciting a procedure, running a mile in 5 minutes, doing 50 pushups or 40 sit ups. In economic circles, politics keep economists from declaring a recovery until every last I is dotted and T is crossed. One might imagine that by the time an official recovery is declared, most of the opportunities inherent in any economic shift have long since disappeared.

The North American real estate industry finds itself in just such a situation. It is feeling good out there, it is in many ways looking good out there, and some statistics seem to suggest that good may be the word of the day for the real estate marketplace. Most importantly the results of the survey process leave a strong impression that many brokerages believe it is good and getting better. Herein lies the rub.

The idea behind this column is not to declare the condition of the economy or the real estate market. In fact, it is quite the opposite. Just for the purposes of this discussion, let’s declare that the industry and the market are back to good.

The issue here is about what brokers who believe that the market is “back” are planning to do about it. By way of specific example, I was shocked to discover that one of my favorite brokers in the country, a franchisee operator with a strong number two market position in his state, multiple offices and a terrific 2012, is intending to sink over one million dollars into his headquarters building. Upon gentle probing with respect to why he was taking this step he replied, “Because I want my marketplace to know that we survived.” At least 6 other brokers surveyed expressed similar responses.

 

Rather than to render a judgment, for which there is no robe, or enter into psychological analysis which is outside the scope of licensure, the fall back position here will be to share a few basic thoughts.

The recommendation for brokers who truly believe that they have reached the other side of the economic desert and are dying to celebrate is as follows:

First, sit back for a moment and catch your breath. You, your body and your mind have been working overtime for the past several years guiding your ship through the worse storm in its history. Ignoring the fact that you may just have aged ten years in the last six, you are not the same person you were in 2007. Take that trip you canceled five times over the past five years. Spend some time with the family that you have driven crazy or ignored during the bad times. Get back to work on that antique car that so deserves your attentions. Do what you want to do but, for heaven’s sake, chill for 90 days.

Secondly, give the following some thought and dare to write down your answers. As all of us perpetual dieters can tell you, refusing to create an historical record is the classic sign of denial.

  • As a person how are you different than you were in 2007?
  • As a broker how are you different than you were in 2007?
  • List out the five worse moments of your business life since 2007
  • List out the five best moments of your business since 2007 (Don’t worry if you can’t remember five.)
  • Draw up a list of those individuals who have performed to your expectations during the past six years.
  • Draw up a list of those who failed or abandoned you during the past seven years. (Don’t dwell on their excuses, everyone who abandons has an excuse, some more compelling than others, but still just an excuse.)
  • Finally, list out the five most important lessons you have learned over the past six years.

Work with your answers. If you think that the past six years haven’t changed you as a person or a businessperson you ought to write a book about survival in the face of remarkable adversity. Of course you are different. It is patently absurd to suggest to yourself or anyone else that the experience of going through the worse business cycle in your career hasn’t had an impact on you.

Some experts suggest that the best way to recover from bad times is to forget them. This article is not to suggest that you should wallow in the bad times, but surely most will agree that one should learn from them. Remembering those moments of fear and terror will also help you recall that you also promised someone, even if it was yourself, never to be in that situation again.

Recalling the good moments helps you also recall how competent you were when it really counted. Self-esteem and self-confidence are going to be very important resources moving forward. If you and your firm survived the past six years you are good. Believe it!

Life has just given you the luxury of the ultimate test. You have stared adversity in the eye and conquered it. One of the most important lessons of this experience will be coming to grips with who served well with you and who didn’t. There are people in your life and in your business who have been failing you or exploiting you for years. This is the time to create the list.

By the same token there are those who hung in there and provided great service and inspiration. Take a moment to remember and perhaps even thank them.

The final list is the most important. Consciously or unconsciously you cannot possibly have failed to learn something new over the past six years. If you believe you have learned nothing then professional analysis may be in order.

Take all the time you need to complete this thought process. When you are done, turn your thoughts to your future and the future of your business. Understand that the business environment that we are now entering has very little or nothing to do with that which you experienced between 1992 and 2007. Everything is different, including the opportunities and the threats. It is time to make a post recovery plan.

If, after all of this effort, you believe that the best thing you can do is to invest in bricks and mortar then have at it. After all, this is American where anything is possible.

Sure You Can Aggregate It, But Can You Distribute It?

One of the joys of my world is to encounter the similarities of opportunity and challenge facing clients within the three industries in which we are currently engaged.

Our thoughts trace back to a recent meeting in the Wexford County Road Commission garage in central Michigan. In attendance were twenty some county road superintendents each of whom is responsible for the treatment of snow and ice on the roadways within their county. We are there working with Western Star, a Division of Daimler North American and the manufacturer of what is undoubtedly the most technically sophisticated vehicle in North America. The challenge before the group is how to use technology to automate one of the longest standing tasks in the transportation industry, maintaining commercially passable roadways during the winter months. More specifically, how to motivate maintenance vehicle operators to use new technologies to both improve service delivery and, more importantly, to reduce the costs of highway maintenance. Ever present on the agenda is what to do about those who refuse to play.

By way of background the transportation sector has spent millions researching the challenge of improving highway maintenance while reducing costs for the cash strapped governmental units responsible for the task. The results have been most impressive. Manufactures like Daimler North American, Monroe and Rexroth have collaborated with end users like our road superintendents to design and manufacture equipment that approaches amazing in its ability to solve the challenges. New deicing materials, new snow removal techniques, new abilities to measure road conditions and technologies that allow the perfect mix on materials to land perfectly on just the right road surface. All of these advances have transitioned the task from an art to a science. All that remains is to create a labor culture that is willing to coordinate its skills with these technologies without feeling competitive or challenged. In some ways it takes us back to the tale of John Henry who used his physical power and a sledgehammer to unsuccessfully compete with a steam powered drilling machine in 1871.

In other words the transportation sector is committed to using technology to not just aggregate data but also to redistribute it in ways that will substantially improve its ability to generate profits, promote safe travel and improve the lives of all of its beneficiaries including consumers.

How close is the tale of the traditional snowplow driver to the current status of so many real estate agents? Our industry is in the midst of a love affair with big data. We covet it, we scheme over it, we spend millions of dollars trying to mine it, we spend huge amounts of energy attempting to create coalitions to share it and we lose sleep over controlling it. Believe it or not there are substantial elements within our industry that are still trying to deny consumers access to it. Almost unanimously we gaze into the heavens as we gather to declare that data is our great hope for the future.

But what we are not doing is addressing the challenge of how to distribute it. Little if any effort is being expended in the area of developing requirements, techniques or standards relative to the distribution of information within the real estate transaction. As an industry we continue to expound the idea that the agent should be the center of the transaction through various information control techniques and tactics. Yet little or no effort has been invested in identifying just what information should be distributed through these techniques.

The industry is appropriately anxious about the current agent value proposition. Many suggest that the centerpiece of value should come from the agent’s mastery of all information regarding both transactional practices and information at both the general market and specific target property levels. Yet, here again, our research has developed no recommended practices or standards regarding what information buyers and sellers should have at each stage of their transaction.

Other elements within the industry seem to have succumbed to the notion that the information battle has been lost because today’s consumer can use online resources to learn all that there is to learn about their transaction. This concept apparently suggests that students, having purchased the textbook at the onset of the course, need not attend classes or lectures because there is no need to know how to use the information within the text to either pursue excellence or to survive even the most basic of encounters. Lost in this misinterpretation is a giant sector of the potential agent value proposition, the ability to assist the consumer to make sense of the information to improve their personal real estate experience.

Lastly we suspect that lurking beneath this suspicious decision-making process is the influence of legal counsel. Powerful contingents within this group have long advocated that standards regarding any aspect of agent practice are dangerous and ill advised. Like traditional opponents of universal suffrage and public education there are those who feel that risk management is best practiced through minimalism and plausible denial. This approach completes the agent value proposition circle and takes us back to where we are today with more and more consumers questioning, “why use an agent?”

Issues of information distribution and analysis will have broad ramifications for broker profitability and influence. At the risk of oversimplifying what some will certainly want to qualify as an amazingly complicated industry challenge the following recommendations are hereby submitted:

  • As an industry we should quite focusing on controlling information and instead direct our attentions to distributing it.
  • Identify a number of key waypoints along the transaction path and establish standards and/or guidelines relative to what information an informed consumer should have at each point and how they should use it to further their interests in the transaction.
  • Differentiate between possessing the information and being able to evaluate or analyze it thus providing agents with a valuable addition to their value proposition and consumers with a safer real estate experience.
  • Adjust the knowledge management system to assist agents, in a risk management appropriate fashion, in their efforts to be both information providers and/or information analysts. In the final analysis it may well matters not where consumers get the information but rather how they use it.
  • With these matters implemented the industry can finally focus its attentions on sourcing issues. Who is wholesaling accurate, relevant and useful information and who is peddling junk that no one will ever need or us?

Our industry is fast approaching that intersection where the brokerage value proposition will take its appropriate place within the transactional matrix. Over the next eighteen months we will experience the combined influences (In some cases conflicts) of transformational investors and enlightened consumers. Out of this crucible will come a brokerage business model that will address and compliment the expectations, demands and needs of all involved. Information distribution will play a critical role in this new formula for success. We can do this.

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