It is About the Transaction, Not the Maginot Line

Screen Shot 2014-04-11 at 3.37.01 PMOver the past few years the industry has been fully engaged in a battle over the ownership and control of listing data. Each month the conflict has grown more combative and intense. At the present time both lives and fortunes are being invested by industry players who are incorrectly being advised that listing data flow control and ownership will be the single most important factor in determining business success or failure moving forward. It is this author’s opinion that such efforts are short sighted and fail to take into consideration the precious opportunities being lost and time being wasted. In the alternative the obvious priority would involve searching for solutions to the more likely challenges to the traditional orders of industry control and ownership.

Upon close examination both the leadership and the misguided direction of these efforts bring to mind the ill conceived efforts that gave rise to France’s Maginot line in the 1930’s.

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In terms of both lives lost and property destroyed, France suffered mightily at the hands of German forces during World War II. Fired by national pride, personal ego and a monumental lack of vision and military intelligence, French leaders became obsessed about a concept known as the Maginot Line; the theory involving the construction of a vast fortification system that ran along the French/German common border. The project was magnificent but unfortunately incorporated engineering and military knowledge about such matters gained, not from a study of the future, but rather from a review of the effects and impact of WWI military strategy and tactics that had been developed during the late 19th century.

The events surrounding the decision to build the Maginot Line offer an even more compelling and relevant lesson. Three specific leaders were influential at that point in time. Charles de Gaulle recommended that France adopt offensive rather than defensive military strategies. Marshall Petain, who had come to fame as a WWI general, argued that France should build a long line of fortifications along the whole French/German border, which would be both long and deep into France. Andre Maginot, the Minister of War, supported Petain. The results of this debate are self-evident.

The Maginot Line’s place in history was sealed not by the fact that it protected France from a German invasion at the onset of World War II but by the fact that the French leaders had totally missed the technological development and tactical advances required to create a new tactic called a “blitzkrieg.” In committing this colossal error and investing its human and financial resources through the Maginot strategy the French leadership actually lent assistance to the enemy’s cause.

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The real estate industry today appears to be caught in a similar quandary except it has no Charles de Gaulle. The traditional leadership element is advocating the creation of defense systems that use outdated strategies to protect the status quo. There is no evidence that the decisions being made by this group have had the benefit of any study regarding the trends and forces that, even now, are creating the Industry’s tomorrow. In other words, it appears as though they are being guided by pride and ego rather than reasoned sense and research.

The listing data wars are nothing more than a red herring, something that distracts attention from the real issue. At best it will ultimately, at a ridiculous cost, resolve the ownership issues and even then without the clarity necessary to exert complete control. At such point those who own or control will end up selling the data to those who require it. It is just the nature of business. With a bit of luck such an arrangement will last long enough to repay a portion of the cost of defense.

If those in control of the present dynamic are looking for a more relevant historic reference they might consider “follow the money.” The event at which both the money and all of the pieces come together is the transaction itself.

It is the transaction that creates consumer satisfaction. It is the transaction that determines brokerage, lender and title profitability. It is the transaction that offers regulators the perfect spot to launch a devastating ambush.

The current transaction is an unsatisfying piece for all involved. Consumers emerge sensing that they have just played a role in a really bad movie. Lenders can only hope that their interests have been protected through a last minute flurry of changes and modifications. Brokers and their representative agents have once again been unable to enhance their value proposition. The closing team walks away from yet another “close miss.”

Your author recently received the honor of becoming a member of a team dedicated to reforming and re-engineering the transactional process. To date this multidisciplinary group has come to the conclusion that the best starting point for this work will be to focus on the consumer experience in the closing transaction. Starting at the end of the process is sometimes the best way to go. This approach was made almost automatic upon learning that the probable sources of regulatory engagement will come from the consumer perspective.

The objective of this new project is to create a more positive, convenient, predictable and transparent experience for the consumer in the real estate transaction process. The more specific objectives will be to create both an improved consumer experience and a more efficient transitional process that seeks to incorporate both appropriate technologies and obvious connectivity to benefit lenders, brokerages and those responsible for the final closing.

Only through this process can the industry ultimately exercise a meaningful participation that both promotes consumer satisfaction, advocates brokerage profitability and provides some ability to impact and influence regulatory interdiction. These must be the objectives that we work together to achieve.

The industry’s current path of destruction and disruption may well create a few heroes and in all likelihood an even greater number of fools. It will however be nothing more than a delay on the road to the inevitable. Let’s focus on what counts, not what annoys. We can do this!

It Was a T3 Kind of Morning

Screen Shot 2014-04-11 at 2.11.50 PMIt was one of those mornings that just felt different. For those among the two hundred and thirty five industry thought leaders who would be participating in the 2014 T3 conference and who were lucky enough to already be at the J.W. Marriott Resort in Las Vegas one could feel the excitement. The sun seemed to come up earlier, the golfers rushed to conquer their morning round and throughout the property there was a tension in the air. Tonight was the night. It would be one of those rare occasions where what went on in Las Vegas would not stay in Las Vegas but rather would be heard around the world of residential real estate. It was a T3 kind of morning.

For those within the readership who have not heard about T3 a bit of explanation is in order. T3 is theScreen Shot 2012-03-06 at 5.11.34 PM brainchild and personal achievement of Stefan Swanepoel, the noted industry visionary, New York Times Best Selling author, publisher of the annual Swanepoel Industry Trends Report and, most recently, creator of the already influential Swanepoel Power200 publication that chronicles, by position, the 200 most powerful individuals in the residential real estate industry. Those who have read Stefan’s writings and publications understand that he doesn’t mass-produce them, each is custom built by hand in his studio overlooking the unique environs of Southern California. T3 is not a conference, a meeting or even a seminar. T3 is a work of communications art that is created to deliver a unique, stimulating, enlightening and, yes, learning experience.

Over its three-day performance T3 will address, indeed intimately explore, through a fully integrated and interactive program, the issues that are powering the residential real estate industry. Perfectly orchestrated by Swanepoel’s compelling and intense leadership style, over 40 highly ranked industry executives and leaders will share their perspectives, reactions and plans for the future of this vital industry. Some will provide that touch of history that makes today’s events relevant. Others will share their company’s current course and yet others will contribute to the event’s ultimate objective, a collective vision of the industry’s immediate tomorrow.

The centerpiece of the T3 experience is Swanepoel’s keynote address. It is this glimpse into the convergence of current trends that sets the relevance and tone for the overall event. This author was honored to receive an advanced briefing regarding this year’s amazing keynote. There is no doubt that this year’s attendees will once again be required to revise and reimagine the reality of their journey forward.

Screen Shot 2014-04-11 at 2.21.09 PMThe keynote will examine the growing avalanche of life and business related data that has already changed the very landscape of the real estate marketplace and transaction. It will examine the convergence between the availability of this data and the ubiquitous device known as the “smart phone.” In today’s world over eighty percent of cell phones (AKA connected devices) are smart phones and in 2014 it is estimated that over one billion newer and even more sophisticated units will be sold to individuals across the globe. In civic generation terms this means that several billion people across the world currently have a fully functional high-speed desktop computer in their pockets, on their belts or in their purses and packs.

The keynote will consider the emerging challenge of “intelligent consumption.” How does one decide how to dip their consciousness into the torrent of information in a manner that will make it useful rather than intimidating, profitable rather than overwhelming?

The industry’s current love affair with “Big Data” will be dispelled by the fact that the significant compromise necessarily required by its adoption is not only unnecessary, but actually leads to the misconception that data attacks the remaining shreds of privacy as it is understood by much of our current culture. The reality is that we have the technology to incorporate “small data” which is a far more respectful and responsive solution. Through small data our environment will be able to be more creative and innovative as it advocates and supports efforts to promote individualism. Welcome to the world of a category for everyone.

From this perspective the presentation suggests that our world will move to the benefits of “crowd shaping,” the ability and desire to provide a meaningful life experience for individuals within their own unique and individual space.

The presentation visits the potential downsides of society’s current rush to universal data. It will point out that, in reality, we are not victims of this new order but rather willing participants who have grown increasingly addicted to its benefits and highs. It is at this point that the keynote will examine the downsides of current trends. In our culture’s rush to experience the potentials and increased functionality of information infused existence, society has neglected to install gatekeepers and guardians, a flaw that will ultimately be catastrophic but survivable. Most vulnerable of these oversights will be social media.

But the focus of this presentation is on the positives and the potentials of these movements. It will suggest that moving forward both business and personal success will depend on an entities’ ability to integrate, incorporate and mitigate the impacts and benefits of the new data, connectivity and collective realities, while at the same time working to mitigate their shortcomings.

The keynote will conclude with a discussion regarding the nature of the individuals who will be required to innovate and manage within the constantly changing personal and business environment created by these trends and convergences. This, after all, seems to be Swanepoel’s promise. His readers, his subjects and his attendees always emerge from their experience more connected, more sensitive and more prepared to realize that which can be harvested from this amazing new world.

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It is a T3 morning here in Las Vegas and for those who were lucky enough to be at the T3 Summit it will have been a life-changing experience. We are most fortunate that our industry and its leaders have the foresight and courage to embrace and explore this journey to tomorrow.

Leadership During Turmoil: It’s a Whole New Skill Set

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Volumes are being written and recited about the amazing dynamics of today’s North American residential real estate industry. While only historians will have the ultimate privilege of defining and designating the nature of the current industry environment it is highly likely that their choice of words will exceed turmoil.

Leadership, vulnerability and survival are ideas that were on everyone’s mind when they woke up this morning. In some industry segments we are watching in amazement at what can only be described as a dearth of leadership. In others we observing what appears to be leadership even though we instinctively know that it is exerted in the wrong direction. In still other segments we see moments of brilliance that give us hope for the future.

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But for many the leadership sector that is of most concern is that which reflects one’s own efforts and energies, those sectors that they have been assigned, have accepted or for which they feel a burden or responsibility.

Today’s industry leaders are often mesmerized as they watch the daily story of the industry unfold. In the face of this spectacular rate of change few do feel no need, or at least no inclination to adjust leadership courses, approaches, strategies and tactics. Even those whose constitutions and commitments require and, indeed demand, that they “stay the course” feel the gravitational pull of change and transition.

So, without appearing to be whimsical, unstable, downright flighty and, God forbid, weak, in the execution of leadership responsibilities, what is it that leaders can do to ensure that their personal leadership is adjusting and responding in a manner that is appropriate to these extraordinary circumstances?

Screen Shot 2014-04-01 at 2.21.53 PMA solid first step is to accept that these are extraordinary times for our nation, its economy and our industry. Understand that these roads have been traveled before. Read No Ordinary Time by Doris Kearns Goodwin. It chronicles America’s leadership challenges during the early years of WWII when suddenly everything was the same and everything was different. Learn how men and women in virtually all walks and stations of life met challenges that might seem quite similar in intensity to those facing our industry.

Accept the fact that regardless of life’s experiences, wealth, power and/or influence, few have led in this environment before. Understand that the refusal to accept this reality places a crippling handicap upon the industry’s leadership potential. Appreciate the fact that every aspect of the marketplace and transaction has changed, is changing or will change over the next few years. Realize that your cumulative leadership portfolio, regardless of how magnificent it may be, will probably not serve you well without some adjustment.

Consider the fact that almost all of the factors that surround industry leaders including shareholders executives, managers, agents, customers, financing methodologies, technologies and even competitors are in change mode. Business cultures as well as associated practices, ethics, rules and regulations are all transitioning. Together these forces are creating what, in essence, is a new world, one that requires that everyone adjust and perhaps even overhaul their leadership style, strategies and tactics.

Leading in the midst of turmoil, even for the most accomplished of leaders, requires a significantly different approach. Whether turmoil is viewed as an opportunity or (in its most common scenario) as a threat, it requires competencies that are markedly different than those utilized in a normalized environment. Leading in turmoil that is viewed as a threat constitutes a “struggle.” Leading in turmoil that is perceived as an “opportunity” constitutes a campaign. How leaders handle their leadership struggles or campaigns over the next two years will, more than any other factor, determine the real estate market’s new configuration.

It is a cause for concern how many leaders are attempting to fool themselves as well as those around them, both allies and competitors, by sending out false bravado signals. Leadership modification is mandatory, so the question is not whether one is changing one’s leadership style. There are struggle related leadership strategies and tactics and there are campaign related strategies and tactics. Far too many industry leaders are declaring their experiences to be fully relevant with no change required.

In 2013 Harvard Business School Professor Joseph Badaracco evaluated the concept of “struggle” in aScreen Shot 2014-04-01 at 2.24.02 PM business context. He presented the results of his research in a book entitled The Good Struggle: Responsible Leadership in an Unforgiving World, which provides an excellent incite into the unique challenges presented by the turmoil that is today’s emerging business economy.

One of Professor Badaracco’s most salient findings is that the primary characteristic of today’s business environment is turbulence. Badaracco suggests “What’s going on now is a return to an earlier more volatile form of capitalism, where there is lots of turbulence. The new invisible hand of markets is even more intense than the old one due to rapid global dissemination of information.” Badaracco’s work is extremely relevant to the leadership challenges being faced by the modern day industry executive and leader.

Another critical concept regarding contemporary business leadership is the idea of vulnerability or, perhaps more to the point, invulnerability. One of the most destabilizing psychological factors in today’s real estate world comes from the constant drumbeat of change. Industry and brokerage leaders start each day by visiting Inman News or one of the several respected blogs that currently serve the industry faithful. Over the past several months this task has become increasingly anxiety ridden because of an unending flood of stories, intense to the minutest detail, relative to how the real estate business has changed overnight. Of course half of what is announced will not, in the long run, make any difference at all. Yet the daunting task of evaluating each announcement and projecting its likely impact has taken on a life and a pressure of its own. These events lead to a growing sense of vulnerability.

The severity of this situation was recently brought to the forefront when one of the blogs undertook a post that announced the employment of a former Obama administration celebrity by an industry entity. The news ranged through the industry like a shot causing untold numbers of leaders to evaluate its possible ramifications. While the blogger must have thought that such an undertaking was cute, very few of his formally loyal readers agreed.

An excellent source of understanding relative to the impact of vulnerability or invulnerability on leaders can be found in the work of Dr. Brene Brown of the University of Houston. A recent TED talk by Dr. Brown can be found on YouTube.com at http://www.youtube.com/watch?v=_UoMXF73j0c.

These are no ordinary times. For real estate industry leaders and executives it is a time of constant challenge, opportunity, threat and vulnerability. No one in an environment of this intensity can take either their leadership talents or experience for granted. The leaders who will fail in their responsibilities are assuming legacy positions. The leaders who will make a difference are taking specific actions to improve leadership skill sets and competencies. It is a choice that all will have to make. We can do this.

 

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We Have Convergence: All Hands Rig for Collision

Convergence: When two or more forces come together and create a new, more powerful, force.

No real estate brokers or agents were injured in the production of this article.

(This comment does not however apply to what is apparently about to happen.)

 

Convergence factor #1: Shortly after the return of the real estate market in 2012 it quickly became obvious that the market that had returned was nothing like the market that had crashed in the late fall of 2005. Across the country sales figures dramatically increased while inventories remained extremely low and prices began to precipitously increase. This market was quickly classified as a “Hyper-Market.”

Convergence factor #2: Accompanying these symptoms, and appearing amazingly early on in the new market, were observations that suggested that real estate professionals at both the brokerage and agent levels were demonstrating behaviors totally inconsistent with their own, the consumer’s and the industry’s long-term interests.

The most alarming of these behaviors were the “Off MLS” marketing activities that, by early 2013, had rapidly spread and in some markets were impacting over 30% of transactions, a level that clearly threatened the stability and function of the Multiple Listing Service (MLS). Major markets began to experience brokerage commercials that promoted the availability of “coming soon” properties not yet on the market. It became obvious to many observers that some real estate professionals were so focused on making up for the lost time and income brought by the 2005 crash that they were willing to risk destabilizing critical institutions and lifelong relationships.

Even after the presence of off MLS marketing and its legal and marketplace dangers became known, few leaders spoke out against it. Brokers expressed fear that any interference would result in “breakage” as agents threatened to play out their eternal “I don’t need no stinking boss” routines. Participating agents created an entire litany of excuses and rationalizations including such soon-to-become classics as “my clients are requesting this,” “I am protecting my clients against the ravages of incompetent agents,” and “My clients are worried about their privacy.”

The agents whose ideas of professionalism included telling real estate consumers “You don’t need no stinking MLS” are not “those agents” (the ones everyone loves to accuse of being ill trained part timers without real passion for the job or love of their clients). The agents leading this new movement were the elite, the vaunted “top producers”, the agents that were seen as “role models” for the rest of the industry.

By mid summer of 2013 concern for the negative market, legal, regulatory and relationship ramifications of these behaviors (and the resulting lawsuits) had reached a point were some of the top entities in the real estate industry had began to speak out about the dangers of these practices. The California Association of REALTORS® demonstrated great courage and caring with a fully funded multi-media program that warned California consumers against the evils of off MLS marketing practices.

The brokerage response was taken up by no less a firm than Long & Foster, a national icon in the American real estate industry. Untold amounts of its resources were invested in a program to caution consumers in the several states in which Long & Foster operates, that off MLS marketing opportunities were not in their best interest. These materials were published in several publications including the prestigious Wall Street Journal.

Convergence Factor #3: While the real estate industry was working its way through these issues, other movements were gaining speed, influence and power. Welcome to the world of the community or “neighborhood” website.

A neighborhood website connects people that share common interests in a given neighborhood. These common areas of interest enable neighbors to meet new friends and connect with each other. These connections are initially made on a publically accessible website, but at some point many shift to a limited access subscriber based connection on a social media network such as Facebook. Over the past several years these “community websites” have gained both popularity and sophistication and, dah, are now are widely being used to market real estate outside the MLS (and agents.) It comes as no surprise that consumers who use these neighborhood networks have learned to use them as private networks to make sure than only the right people buy into the neighborhood. Unfortunately, after being told by top real estate agents “you don’t need the MLS, I have buyers,” some consumers have come to the conclusion: if I don’t need the MLS then perhaps I don’t need a real estate agent. I also know buyers, they are coming to our community website everyday.

Convergence factor #4: Insecure proponents of Off MLS marketing are fond of pointing out that these practices will only work in a hypermarket and it will not last forever. While the logic of this agreement may be correct, its metrics are not. This market will, in all likelihood, last for two more years. During that period of time hundreds of thousands of consumers will (1) have been told that they don’t need the MLS and (3) will have followed the advice of friends and neighbors relative to how to respond to that announcement.

Convergence factor #5: Last week the Convergence theory took on new power. An impressive number of marketing areas across the country reported impacts and fall out from last fall’s large broker/MLS skirmish that burst into flames during NAR’s Washington Meetings. These matters came to light when representatives from several marketing areas reported unusual contacts from their brokerage community demanding that they take certain steps regarding their MLS operations.

Convergence factor #6: Last week information provided by no less a source than CoreLogic reported that in 2013 some 43% of real estate transaction didn’t pass through MLS.

Convergence factor #7: Additional information emerged last week that portal traffic had continued to grow and that the top five portals were capturing almost 40% of consumer Internet traffic with Zillow alone capturing almost 17%.

Convergence factor #8: Zillow was actually a question on Jeopardy last Thursday night. Don’t you hate it when those Zillow folks make fun of us? Aren’t you sorry you suggested that the Obama interview was a flash in the pan?

Convergence factor #9. Last week Errol Samuelson, one of the brightest and most respected persons in the industry summarily departed REALTOR®.com for Zillow.

Convergence factor #10: Last week it was reported that REALTORS® associated with one of Houston’s largest brokerages had created an entity known as PocketListingInfo.com In a one page manifesto that some might describe as a declaration of war against the MLS, and shooting themselves in the foot, these scholars essentially announced to the 4th largest marketplace in the country that, relative to off MLS marketing, “all the cool people are doing it so why not pay us $14.95 a month and join in.”

While all of this is happening officials of the Consumer Financial Protection Bureau, one of the most powerful and savvy regulatory programs every created in the United States, just happen to be working in broker offices across the country monitoring compliance with their several hundred new mortgage related regulations. While we certainly hope they don’t have time to figure out what all the noise is about it does seem doubtful. Perhaps they will believe declarations that it was all a joke.

So, that’s it. Nothing much is happening here in Deadrock. After dinner awards and prizes will be given out to those who can list all of the ways in which contract provisions, licensure laws, fiduciary duties, fair housing regulations and consumer best interests are being fouled by the behaviors discussed above. Then, just before the strike of midnight, we will call for the scribes and summon the brilliant minds that brought us this impending disaster to tell us what in heck they were possibly thinking. Upon completing this task we will gaze up at the moon and wonder how much Spencer Rascoff paid Zorro to put that Z on the man in the moon’s shirt pocket.

We desperately need some leadership here.

Houston: We Have Convergence, Man Your Battle Stations and Stand by for Collision

It is hard to imagine that just last month this column asked a simple question about Off MLS Screen Shot 2014-03-11 at 6.48.27 PMmarketing practices: “convergence or Unintended Consequences.” Looking back, one wonders whether it was possible to be so naïve as to doubt whether or not respected participants in the American real estate industry would actually undertake to disrupt the most powerful real estate marketing tool and system of cooperation and compensation ever created, the Multiple Listing Service.

At the time it seemed inconceivable that in the midst of a wonderful market with unbelievable promise and potential that the very people who stood to benefit the most would feel the need to destabilize it. Every night we watch similar acts in communities and countries across the globe, always taking a moment to thank the lord that we don’t live in those types of communities.

Over the past month news media have provided ample opportunities to witness passion, demonstrating both courage and creativity, delivered in the name of democracy, freedom and constitutional rights. As news of each act was delivered on the Internet or television screen all of us took a moment to wonder what matter of human travesty or horrible injustice would bring about the decision to disrupt what had taken so long to build.

Well, with respect to “off MLS” marketing practices we could not have been more wrong. We now understand and fully appreciate that some real estate professionals at both the brokerage and agent levels stand ready to disrupt lifelong professional relationships, critical consumer perceptions, the industry’s reputation, functionality and institutions, not over issues of personal safety, religious freedoms, constitutional rights or self-determination but rather over issues of competitive advantage. Imagine trading personal security and family stability for market share points.

Screen Shot 2014-03-11 at 6.57.54 PMIt is even more disturbing to think that these actions may be part of a national movement to consciously or unconsciously destabilize the Multiple Listing Service yet over the last month we have learned that this may be the case. We have recently learned that similar campaigns, many using similar strategies but different tactics, have appeared in markets across the country.

To be more specific it now appears as though brokers in different markets across the country are deploying tactics that are either intended or will have the unintended consequences of destabilizing the Multiple Listing Service and the invaluable services it provides to both REALTORS® and consumers. Moreover, as last month’s article disclosed, there are agents affecting the same objective through their use of “off MLS” marketing practices. Now, based on information provided by CoreLogic, a leading real estate information and system vendor, during a meeting last week in Phoenix call the Clareity Conference, we have been informed that slightly over 43% of transactions closed in 2013 didn’t pass through a Multiple Listing Service. While it is true this number includes an undisclosed number of new home sales, distressed sales, for sale by owner and non-arms length transactions, the number still represents a serious matter, raises serious issues and reflects the fact that this market segment is growing year over year.

An interesting example of this movement can be found in the recently created website PocketListingInfo.com introduced into the Houston marketplace. The text on the site starts out with a seemingly proud announcement that pocket listings have been around forever (sort of like riptides and poisonous snakes). It then goes on to suggest that we all know the cool kids (top producers) are doing it, thus so should we. My sense is that using this rationale certainly impacted the document’s credibility.

The creators of this program, like others creating off MLS sites around the country, are willing to trade decades of cooperation and compensation amongst millions of REALTORS® for $14.95 per month. Imagine that.

One can only puzzle about what the business model for this might be. Will a critical mass even consider participation, especially with an enterprise that is based on such an unproven concept? What do you suppose agents who participate in off MLS marketing practices will do if the MLS and HAR.com are destabilized as a result of these practices? If efforts like this have the effect of destabilizing the MLS and public websites, like HAR.com, yet lack the funding and technical sophistication to be a replacement for the MLS/public website, where will it leave the thousands of agents in the marketplace?

Since common sense tells us that this concept is unlikely to prevail, then who are the victims Screen Shot 2014-03-11 at 7.06.23 PMand who are the incidental beneficiaries of this undertaking.

The obvious victims here are the community, the consumer and the real estate professionals, all who stand to lose the benefits of a stable real estate marketplace and a system that provides structure, cooperation and compensation to those who participate. With respect to area agents just how many pocket listing networks will an agent have to join? Interesting since this is one of the reasons why the MLS is a market wide system open to all real estate professionals.

There are two obvious beneficiaries, however unintended. The first is some combination of the listing portals that, even now, are attempting to dominate the Houston real estate market and challenging the position of the Houston REALTOR®. Zillow and Trulia would like nothing better than to be the beneficiary of a struggle that sees REALTOR® pitted against REALTOR®. It is the ultimate application of the Blue Water Strategy made famous in the 2005 book of the same name.

The second potential beneficiary of this outrageous plan would be the Consumer Financial Protection Bureau, DOJ, and the Fair Housing enforcement system. While all of this has been happening, officials of the Consumer Financial Protection Bureau, one of the most powerful and savvy regulatory programs ever created in the United States, just happen to be working in broker offices across the country monitoring compliance with their several hundred new mortgage related regulations. While we certainly hope they don’t have time to figure out what all the noise is about, it does seem doubtful. Perhaps they will all believe it was all a joke.

Screen Shot 2014-03-11 at 7.05.08 PMThe REALTORS® of the greater Houston area have spent nearly a century creating a real estate marketing system that thrives on trust, ethics and mutual respect. It’s not perfect, but just last year alone the MLS and HAR.com facilitated over 88,000 transactions worth nearly $21 billion. Both have contributed mightily to create stability, competitiveness and trust amongst both real estate professionals and consumers.

Perhaps the response to the off MLS marketing situation that is most telling is the fact that many of the largest and most respected brokerages (e.g. Long & Foster and John Daugherty, REALTORS) and REALTOR® associations (e.g. California Association of REALTORS and HAR) in the country are spending huge dollars to inform consumers regarding the undisputed advantages provided by the MLS and the disadvantages of off MLS listing practices.

The Quintessential Visionary

Screen Shot 2014-02-20 at 7.52.20 AMI recently had the opportunity to attend the Keller Williams Family Reunion event in Phoenix. Those who have attended this event in the past will best understanding its unique and amazing dynamics, though such is not the focus of this piece.

Traditionally one of the first programs at the Family Reunion event is the annual vision presentation produced by Screen Shot 2014-02-20 at 7.53.54 AMKeller Williams Chairman of the Board Gary Keller and his team of writers and researchers. Sitting in the venue watching over 10,000 people attempting to capture the meaning and relevance of every word, one cannot help but wonder whether or not there is one word that fully defines this presentation. It is part lecture, part newscast, part comedy routine, part coaching, part motivation, part sermon and all with a giant dose of admonition. The word Gary Keller chooses to apply to this lightening bolt of consciousness is vision, and it is certainly all of that.

Defining, refining and communicating a clear and powerful vision is one of the fundamental and essential duties on which a business leader must deliver. Yet, as one experiences the various personalities, images and words of our industry’s leaders, it isn’t clear that all brands, franchises or entities are being guided by a vision rather than status quo or automatic pilot. Even if these fine organizations have evolved such a vision it is definitely not clear that it is being communicated to either its internal or external constituencies. Very few managers, franchisees and/or agents can even begin to articulate their brand’s vision and direction.

What is clear is that in the current market atmosphere of “tipping point” level change and historic transition all of our industry’s business leaders and executives should be focusing on the basic elements of visioning, vision implementation and vision communication.

Creating and communicating a clear and powerful vision delivers many benefits. A clear, shared vision helps to define company philosophies, direction and values for the benefit of everyone involved, perhaps most importantly to agents that the company is seeking to recruit. In today’s marketplace agent recruiting and retention atmosphere more and more agents are becoming aware of the fact that their career choices must go beyond commission splits, office expenses, brands and marketing plans.

More and more agents from all generations and experience levels are coming to understand that (1) choosing the right company in which to invest one’s career and future success is becoming more critical than ever before, (2) that there are less and less options with respect to companies that a top agent, or would be top agent, might want to have a long term career relationship with and (3) that this may be their last recruiting decision and as such it better be based, to a great extent, on understanding, respecting and assuming ownership of that company’s vision.

While a strong vision can contribute to productivity and efficiency it can do even more to contribute to the formation of the committed long term relationship between companies and their agents that will be the basis of sustained success moving forward.

So, how should real estate industry business leaders go about creating and communicating clear visions for their troops to follow? Here again the Keller example might serve as a model for what it takes to produce a relevant, unique and effective vision for any entity in today’s real estate marketplace.

First of all, the answer lies in understanding and identifying the business’s core values, understanding the core purpose or envisioned future of the business, and clearly articulating and communicating the vision to the organization. The best visions are developed by individuals who are truly in “awe”, “love” and “in respect” for the functions and legacy of the residential real estate business. This might or might not be in direct contradiction with the industry’s current expanding relationship with Wall Street. The industry will soon learn whether classic shareholder value based priorities can successfully contribute to an overall company vision that can be owned by all involved.

Exploring the creation process further, it might be said that would be visionaries ought not be in the midst of their wealth collection phase for dollars and cents directed decision making, as that often runs counter to what it takes to be a great visionary. Stability and continuity are also critical elements. It is difficult for someone who is worried about his or her own future to create a great vision.

Finally, great visionaries tend to have a strong sense regarding the common or community attributes of their industry. Competitiveness is certainly a powerful, respected and even worshiped virtue among successful business leaders in both the real estate and other industries. Yet upon closer examination one would discover that over and above competitiveness, visionaries understand that “to the victor belong the spoils.” Being the winning competitor in a race to be the best in a failed industry is of little value to its participants, its executives and its shareholders.

While the obvious audience for Gary Keller’s vision presentation was the 10,000 or so Family Reunion attendees from both North America and the several countries around the world in which Keller Williams franchisees are currently active, they were by no means the only group that could benefit from the information and insight provided. Interestingly enough much of the presentation is also directed at an audience that was not in the huge venue. For executives, brokers and agents across the American residential real estate industry, Keller’s comments offer a level of guidance and wisdom that can only be produced by sustained study and continuous analysis.

Beyond his status as the founder of the Keller Williams organization and his current employment as its Chairman of the Board, Keller holds yet another designation. Gary Keller is Keller William’s resident scholar and senior researcher and it is this status that takes him beyond being a KW treasure and makes him an industry icon. Keller is a prolific writer who has written and/or coauthored several best selling books on real estate business operations, marketing and personal achievement dynamics. Keller spends much of his time studying the residential real estate industry and the changing environment in which it must exist from the command center like spaces in the basement of the Keller Williams International headquarters outside of Austin, Texas.

Beyond his engagement with Keller Williams, Keller has also demonstrated an ongoing commitment to the overall intellectual and business health of the real estate industry as a whole. In 2007 Keller personally contributed the funds necessary for Baylor University to create a new research center for residential real estate. Operating under Baylor’s Hankamer School of Business, the center is among the first of its type in the country. The center will benefit the entire industry, as well as the real estate consumer by studying issues such as real estate consumer behaviors, factors that influence real estate-buying decisions, and real estate marketing and management strategies aimed at assisting agents and brokers reach more effective business practices and customer relationships.

Is Keller’s example an exclusive insight into the qualities of a visionary? Obviously not. However, it does offer a number of clear and valuable indications of what matter of intellect, emotional stability and commitment are necessary to field and communicate a great vision.

So, you ask, what vision did Gary Keller deliver in his presentation? It really doesn’t matter. Experience tells us how effective his visions have been in the past and history will reflect how intuitive they will be in the future. Besides, you really had to be been there when his eyes narrowed and he announced; “if you are not going to stay in real estate don’t screw it up for the rest of us.” Enough said.

Convergence or Unintended Consequences: The Growing Legacy of Off MLS Marketing

Screen Shot 2014-02-12 at 10.52.15 AMIt arrived in the spring 2012, to the collective relief of an entire industry. After five years of unstable and conflicted market conditions the market seemed to finally have “returned”, and with it came the promise of new opportunity and prosperity for all within the industry. A palatable sense of relief flooded across markets as hundreds of thousands of Boomer generation real estate agents realized that they would have one more opportunity to make the big time.

It quickly became obvious that the market that had returned was nothing like the market that had crashed in the late fall of 2005. Across the country, sales figures dramatically increased while inventories remained extremely low and prices began to precipitously increase. We now know that this activity was being driven by pent up consumer demand, the reticence of homeowners to enter the market, artificially low mortgage rates, and ridiculously low prices.

Accompanying these symptoms, and appearing amazingly early on in the new market, were observations that suggested that real estate professionals at both the brokerage and agent levels were demonstrating behaviors that were inconsistent with both their own and the industry’s long-term interests.

The most alarming of these behaviors were the “Off MLS” marketing activities that, by early 2013, had rapidly Screen Shot 2014-02-12 at 10.36.57 AMspread, in some markets impacting over 30% of transactions, a level that threatened the stability and function of the Multiple Listing Service (MLS). Major markets began to experience brokerage commercials that promoted the availability of “coming soon” properties not yet on the market. There was a growing sense that a rapidly increasing number of real estate professionals were so focused on making up for the lost time and income created by the events of 2005 through 2011 that they are willing to risk destabilizing critical institutions and relationships to meet their objectives.

Even after the presence of off MLS marketing and its legal and marketplace dangers became known few leaders spoke out against it. Brokers expressed fear that any interference would result in “breakage” as agents threatened to play out their eternal “I don’t need no stinking boss” routines. Participating agents created an entire litany of excuses and rationalizations including such soon to become classics as “my clients are requesting this,” “I am protecting my clients against the ravages of incompetent agents,” and “My clients are worried about their privacy.”

The real story behind this refusal to take action to stop off MLS marketing practices was actually more personal than professional. The agents who were leading the way by telling real estate consumers across the country “You don’t need no stinking MLS” weren’t “those agents” (the ones everyone loves to accuse of being ill trained part timers without real passion for the job or love of their clients). The agents leading this new movement were the elite, the vaulted “top producers” the agents that were seen as “role models” for the rest of the industry.

By mid summer of 2013, concern for the negative market, legal, regulatory and relationship ramifications of these Screen Shot 2014-02-12 at 10.54.47 AMbehaviors (and the resulting lawsuits) had reached a point were some of the top entities in the real estate industry had began to speak out about the dangers of these practices. The California Association of REALTORS® demonstrated great courage and caring with a fully funded multi-media program that warned California consumers against the evils of off MLS marketing practices.

Screen Shot 2014-02-12 at 10.53.12 AMThe brokerage response was taken up by no less a firm than Long & Foster, a national icon in the American real estate industry. Untold amounts of resources were invested in its program to caution consumers in the several states in which it operates that off MLS marketing opportunities were not in their best interest.

Both of these organizations and their efforts deserve credit and recognition for demonstrating leadership, “doing the right thing” and creating leading edge multi media campaigns designed to reach the right people with the right message.

Now back to that convergence thing. While the real estate industry was working its way through the various traumas of the past several years another movement was gaining speed, influence and power. Welcome to the world of the community website.

A social network community represents and connects people that share common interests in certain areas. These areas can be social, cultural, religious, geographic academic, lifestyle or special interests in nature. The members of a social network community select individuals from within their network to manage their profiles using the functionality provided by the social network website they use. The common area of interests enables users of the community website to meet new friends and identify like-minded people. Users connect with each other, rate peers and objects, buy and sell things, ask questions, get answers and discuss relevant topics. These connections can be made on a publically accessible website or a subscriber based connection on some a social media network like Facebook. Screen Shot 2014-02-12 at 10.56.44 AM

Over the past several years these “community websites” have gained both popularity and sophistication. The research leading up to this piece disclosed that:

  • Many if not most neighborhoods now have a website
  • Many neighborhoods use a public facing website for certain levels of interactivity and the subscriber based functionality (generally requiring subscribers to have at least two sponsors) to deal with more personal and intimate subjects
  • Participation in many of these sites has grown to include thousands of households
  • These websites tend to be managed and focused on issues from a woman’s perspective
  • These websites have become significant trading and merchandising centers

Here is the convergence. Over the past year the consumers who use these social networks have come to an interesting conclusion about their real estate marketing needs. After being told by numerous real estate agents through a whisper in the ear, “you don’t need the MLS, I have buyers,” consumers have come to the following conclusion; if I don’t need the MLS then I really don’t need a real estate agent. I also know buyers and they are coming to our community website everyday.

Agents who are caught with their hand in this cookie jar are fond of pointing out that this situation will only work in a hypermarket and it will not last forever. While the logic of this agreement may be correct, its metrics are not. This market will, in all likelihood, last for two more years. During that period of time hundreds of thousands of consumer families will have created a real estate marketing experience that many will find preferable to that offered by these same agents. There is plenty of time for the word to get around and the culture to change.

During this same period of time industry, public and lender perceptions of the value of the MLS will also have changed. To protect their positions and businesses these entities will have adjusted to new ways to perform old functions and they will not elect to return to vulnerability.

Finally, keep in mind that sophisticated off MLS marketing practices (not the pocket listing) have only been around for about 16 months and they have already had an immense impact. This is without consideration for expanding broker liability, new lawsuits, fair housing assaults and the impact of additional regulation. Two years is forever.

Bottom line, brokers must take charge of their firms and their marketing practices while there are still time to turn these trends around. Situations like these call for command and control. Increased regulation is just around the corner and it will use off MLS marketing as its rational. It may be from government agencies, financial realities or just plain old customer demands. It matters not; the destination is all the same.

Shareholder Value and the High Performance Agent

The long ‘off and on’ courtship between Wall Street and the American residential real estate industry reached record levels of passion and engagement in 2013. It is a trend that appears to be a clear indicator of the real estate industry to come. With this trend comes a number of quandaries either ignored, overlooked or perhaps not adequately addressed by an industry held privately in the past.

Certainly among the most important of these issues will be the subject of profitability. Paramount with respect to this Screen Shot 2014-01-24 at 10.06.58 AMissue will be the question of shareholder value versus agent compensation. There appears to be no doubt that most (although apparently not all) of the new equity based players understand the disastrous impact that agent compensation has had on profitability over the past quarter century. It remains to be seen whether or not yet another iteration of industry ownership will fall victim to agent centricity or whether this time around investors will be given an opportunity to earn a market level return on their investment.

This discussion is taking place in real estate entity boardrooms across the country. One can only be impressed with the importance of the decisions to be made. Given the almost total lack of individuals willing to plunge their private fortunes into “this is how we have always done it” follies in any industry today, the idea of this new breed following the same course seems unbelievable. Yet, it has apparently happened in at least one significant case, so who knows?

Screen Shot 2014-01-24 at 10.08.27 AMGiven the presence of so many executives and managers who were raised in the agent centric world, there is no doubt that an endless number of points are being made in support of “staying the course” and honoring the system that got us where we are today. We have all heard that argument. It is just a matter of doing what we have always done in the past, only doing it better. We will get there this time.

At the same time we are all aware of those who are advocating a complete abandonment of investment in the brokerage world in favor of using technology and the force of the new consumer to create and implement new life forms. They are called portals.

The more interesting question then is whether there are effective individuals advocating a brokerage business model that celebrates profitability and incorporates the new technology and interactive systems that create it. What might such a presentation look like?

A simple shareholder value argument might be the place to start. This position might seem radical in the face of the long-standing argument that only happy agents create broker profitability. Where should the priorities lie?

During the 1960’s corporate America saw a rise in a concept that became known as corporate responsibility. This Screen Shot 2014-01-24 at 10.13.43 AMtheory suggested that corporations had responsibilities to, not just its shareholders, but also to its community and the environment. Such became the test and many corporations worked hard to become good citizens and stewards of the environment. Some even survived. Those familiar with the history of the American real estate industry might suspect that such an agreement of the minds also occurred with the agent being substituted for the community and the environment

Then, in the 1980’s, the mood in American business changed and the concept of shareholder value began to move to the forefront. The essence of the shareholder value movement was that, while some peripheral issues had to be considered, the overwhelming priority of publicly held corporations was the creation and growth of shareholder value. Other players and entities could be responsible for the community and the environment.

Over the past thirty years the debate outside of real estate has continued with shareholder value holding a decisive lead in the debate and in corporate operations. Successful corporations have used increasingly more effective public relations and media resources to spin their “citizenship” and “green” qualities, but behind the scenes it was all about shareholder value. In the real estate industry “not so much.”

Argument one: Lets go with the current winner.

Another way to evaluate the “agent centricity” decision is to consider how successful it has been. At this point in the discussion some well-meaning soul will probably say; “wait, perhaps agent centricity wasn’t done that well, perhaps we could do it even better. Lets give it another chance.” When this argument is presented it should immediately be ruled out of order. Since the beginning of American business no group has even come close to demonstrating a level of loyalty and selflessness equal to that of the American real estate broker towards its agents. It has been a complete and total commitment and sacrifice by some of the most competent and committed businesspersons on earth. No one could have done it better.

So how did this investment in agent centricity work out?

  • It turned out that there was never a rich enough commission split to satisfy. Imagine that during the heyday of the great boom some brokers were actually paying out 125% commission splits. Despite this, and with few exceptions, brokerages became a revolving door.
  • Again, with precious few exceptions (Every broker can name ten out of a thousand) there was little (and in some cases no) reciprocity with respect to either loyalty or the idea of building financially and culturally strong brokerage organizations capable of meeting everyone’s needs, including the owner.
  • When, in the late 1970’s the industry was attacked by the Boomer generation lawyers, there was little or no cooperation with the brokerage’s efforts to implement risk management practices.
  • When the potentials of technology became evident in the 1990’s there was little or no effort to cooperate with brokerages, even those who were investing millions of would-be-profit dollars in trying to help the entire organization be more competitive.
  • The arrival of the Internet in the early days of the twenty first century was met by a similar refusal to play.
  • At the same time the growing importance of data and information was deemed not appropriate for this group who favored their own sense of matters. “I don’t need no stinking boss” was the favorite bumper sticker.
  • The same resistance and refusal met the emergence of social media a few years later.
  • The rise of the engaged consumer over the past five years has been largely ignored. The impact of these decisions is being reflected in both surveys and the consumer’s current migration to the portals, a factor that will cost investor owned brokerages millions of dollars to counter.
  • To top off the list, many of these same individuals are currently engaged in highly destructive “off MLS marketing” practices. Some experts are now predicting that these practices will cause immense legal liability and lost opportunities for both agents and brokerages in the near term future.

Argument two: It hasn’t worked!

In short, a strong argument can be made to support the conclusion that despite an investment of gargantuan proportions the American real estate brokerage’s efforts with respect in its agent community have not produced even a psychic return let alone a market level financial return. Even more to the point is the fact that literally thousands of brokers are about to discover the ultimate truth of this effort as they struggle to sell their businesses and collect a well deserved retirement.

We now return to our regularly scheduled and hopefully enlightened board meeting.

Understanding Your New League, This Is Not Fantasy Football

Screen Shot 2014-01-24 at 9.35.04 AMGive this article a bit of patience; its relevance to your day-to-day lives will become clear shortly. Wall Street was abuzz this morning about yet another genius strategy employed by the iconic Berkshire Hathaway organization. It seems as though Berkshire Hathaway is purchasing a division of Phillips 66 using Phillips shares it already owns to finance the deal. The shares in question were acquired when Berkshire made an investment in energy giant Conoco in 2008, an investment that was widely viewed by Wall Street insiders as one of the worst in the long and phenomenally successful history of the Berkshire organization. In fact in Berkshire’s 2008 annual report to its shareholders it reported the transaction as a “major mistake.”

What occurred during the five years after the “mistake” serves as a lesson for everyone in the residential real estate Screen Shot 2014-01-24 at 9.37.31 AMbusiness. In an attempt to make lemonade out of lemons Berkshire sold off much of its Conoco shares during the years following the transaction. Even with these efforts it was reported that losses from the investment exceeded one billion dollars. However, unnoticed by many was the Phillips stock that Berkshire got from the spinoff. During the same period Berkshire carefully acquired additional Phillips stock that, by the beginning of 2014, left it in a very good position to make this latest deal.

Now, for some of those shares (Both original and subsequently acquired), Berkshire is getting a very profitable chemical division of Phillips. It is interesting to note that this is not the first time Berkshire has executed on this strategy. Another of its over 80 owed units, Lubrizol, also benefited from similar tactics. By following these strategies Berkshire has been highly successful in eliminating its competition. These are strategies that the real estate industry should expect to see.

Now lets work on that relevance. It is certainly common knowledge among our readers that in 2013 Berkshire Hathaway extended its long-time HomeServices of America investment in the residential read estate industry through a deal with Brookfield, a Canadian organization. This complex transaction created the purchase of the Prudential franchise unit and a subsequent division of its assets between Brookfield and Berkshire.

Screen Shot 2014-01-24 at 9.43.24 AMHomeServices of America (the previous Berkshire real estate industry investment) created the Berkshire Hathaway Home Services brand when it assumed a majority stake in the Prudential Real Estate and Real Living brands from Brookfield Asset Management leaving the relocation assets to Brookfield. This was necessary for a number of business related reasons including the need to replace the iconic Prudential Real Estate brand, which will self destruct over the next ten years pursuant to the terms of Prudential’s sale of its real estate franchising arm to Brookfield.

Over the past several months an impressive number of large brokerages have switched from the Prudential brand to the new Berkshire Hathaway Home Services banner. It is believed that significant resources are being expended to encourage non-Prudential brokerages to similarly align themselves with the new effort.

The lesson here is that there is a new force within the residential real estate industry. Moreover it is a force that has an Olympic class record of changing industries and fortunes. As indicated above it is not a perfect force or even an omnibus one. It is however a force to be reckoned with and a force to learn from. Every individual associated with the American real estate industry should be recalculating their immediate and mid-term futures with this new force in mind.

As is always the case, there is the classic decision to make. Is the new Berkshire Hathaway real estate play an opportunity or a threat? The answer is obvious, it will be whatever the current players want it to be. For those who take advantage of the new industry environment there will be benefits. For those who ignore it there will be diversions and excuses. For those who are new to the industry, let this stand as an example of the amazing opportunities that are coming their way. In the meantime there are certain guidelines that might be helpful.

  • We need to recognize that the Berkshire Hathaway organization works at levels most of us can’t even imagine. There are way too many conversations going on about the wisdom of their acquisitions and the colors of their logo. If the industry wants to learn and profit from this experience, leaders at all levels must raise their level of observation, knowledge and analysis.
  • The fact is that experience in the industry has nothing to do with understanding how Berkshire Hathaway will impact this industry. Most of us will never really know what is in store for us until the ball drops on a new era.
  • Understand that many of the industry’s sacred cows are not going to survive the Berkshire Hathaway experience. How long will an organization whose profit expectations exceed twenty percent tolerate an entity that dreams about eight? Consider the current relationship between the industry and the traditional agent. Is it possible that Berkshire Hathaway will follow the traditional path and see the agent as their ultimate customer? Is it likely that executives and managers who refuse to engage the new environment will be seen as part of the solution?
  • Appreciate that in all likelihood the winner of this contest will be the team with the highest level of innovation and the most concentrated level of creativity. For all of those who have had creative and innovative thoughts this is the time to put them into effect and make that difference.

In other words the arrival of Berkshire Hathaway into our industry should be greeted with cautious inspiration and a Screen Shot 2014-01-24 at 9.40.18 AMwhole new focus on potential. There will undoubtedly be some pain, but when it is all over we will be better and stronger for the experience. Both you and Berkshire are going to make mistakes on the road forward but your ultimate success will depend upon how you recover from them.

Start thinking about how you and your firm will benefit. Now is the time to join the tide. We can do this.

When Is A List Not A List?

Screen Shot 2014-01-24 at 8.59.40 AMAn amazing event happened yesterday and as is the nature of all amazing events our world will be forever changed. The event was the release of the first Swanepoel Power 200, a comprehensive rating of the thought leaders and senior executives of the residential real estate industry designed, produced and written by Stefan Swanepoel, industry chronologist and author of the annual Swanepoel TRENDS Report and Swanepoel TECHNOLOGY Report and co-edited by consultant Rob Hahn.

If the release of the document was an amazing event, its creation was an even greater achievement. Swanepoel and Hahn spent hundreds of hours using algorithms and engaging the level of immense detail and analysis that both have become famous for. The result is a document that dares to evaluate and compare both the power and the potential of the industry’s top thinkers. Previous efforts of this nature have merely identified individuals on a bus headed for destiny. This product allows us to view the market from a whole new perspective.

Because of Swanepoel and Hahn’s efforts the industry can now engage in a discussion about direction, potentials and probable outcomes. With this work in hand industry players can now begin to more accurately envision where the industry is going and where they need to position themselves to be part of its success. As a result of this work our industry will never be the same. Hopefully the discussion that will surely emerge from this event will benefit everyone and help raise residential real estate to the next level.

In considering this emerging dialogue several ideas come to mind. The first has to do with the role of the status quo and of history. The Swanepoel Power 200 doesn’t address what is going to happen nor does it applaud past behaviors. It merely identifies who, at this point in time, is positioned for greatness and supremacy. As the business journals reflect every day, what happened in the past is no longer a determinant of what is going to happen moving forward. To quote Marissa Mayer, President and CEO of Yahoo from her recent presentation at DreamForce 13, “One of the few things we know about the future is that it will look nothing like today.” It could be argued that there are a number of individuals named in the document whose presence may be more indicative of their performance in the past than in the future. But even with that adjustment the remaining names will, in all probability, reflect those who will make a difference moving forward.

Reviewing the Swanepoel 200 is much like watching the first lap of a NASCAR race. It is an amazing display of determination, design, horsepower, color and yes, noise. We are, at the same time, impressed with both the similarities of greatness and the differentiations of style. We can only be humbled by the challenges that lie ahead for these esteemed individuals as they navigate what, for most of them, will be the race of a lifetime.

There are many lessons to be learned by those whose names didn’t appear on this special document. The first lesson to be learned is that there is a race going on and that it is without question the most challenging and defining race that this industry has every faced. It is not a race for market share or productivity but, as Keller Williams CEO Mark Willis has often said, it is a race for dominance.

The second lesson is that if you are on the track you are part of the race as no spectators or tourists are allowed. Those on the track and not engaged in the race are likely to be hurt.

The third lesson is that there are many different makes and models of business models in this race and no one knows which model is going to win the race or which is going to show at the finish line. Absolutely no one is guaranteed a position on the final lap. Not all vehicles were designed or even created to be in a race and even fewer have even a chance for victory.

For some on the list the race started years ago, for some the race started this week and for others the race has ended. As it proceeds, the racing process will settle out these differences. Unfortunately for both themselves and the remaining competitors there are some Sunday drivers out there.

If you see yourself in the race there are a number of proven concepts and rules that you will have to comply with in order to be successful. First and foremost, racing is not an individual sport, it is a team activity. None of the individuals on the list will win without massive and competent support. This is a time for these leaders to review their teams and determine who on their team can make a contribution to victory and who is just along for the ride. The ultimate loyalty here is to the team not to individuals regardless of history.

There is a significant difference between being a placeholder, promoting the status quo and being a competitive organization. The fact that an organization has held a top market position for many years is not an indicator that they will hold that position moving forward.

One of the wild cards in this race will be the role that agents play. For many entities the agent will be a handicap and/or a restrictor plate. Although agents might well play and could play an important role, this race will not, in the end, revolve around the agent. That is not the way of capitalism or free enterprise. Equal to the role of the agent will be the influence of Wall Street. If the traditional objective of a brokerage is a happy agent, the absolute objective of a publically held entity is building shareholder value. Shareholder value is currently playing a major (even if yet disclosed) role in our industry.

REALTOR® Associations at all levels must take special notice of the race. First of all, they are not on the track and therefore they can’t win. However, they can prevail and make a difference it they are associated with the right team and/or the right program, product or service. With the winning prize will come the right to determine what role, if any, will be played by the entities that comprise what is commonly known as “organized real estate”. Interestingly enough this will include both NAR and the Realty Alliance.

The key to being an effective competitor in this race will be the incorporation of strategies and tactics that reflect today’s field, not the 1985 Grand Prix.

Screen Shot 2014-01-24 at 9.06.07 AMThe Swanepoel Power 200 provides us with an excellent sense of who is holding both the “pole” and the best “grid” positions. However, as American Business has proved over and over again over the years, being the “polesitter” is a very temporary position if it is not supported by the right team, resources, strategies and tactics. Being the polesitter is cool during the prerace process but remember, “Leaders can only go backwards.”

Screen Shot 2014-01-24 at 9.02.17 AMThis race has already produced a high level of “bumping” and it will get even more combative as it proceeds. If your team is “bumping adverse” best to get it off the track now. Slower cars will not be invited to leave the track they will be bumped off of it.

Screen Shot 2014-01-24 at 9.03.27 AMEvery team must have a “pit” strategy. Most industry entities reflected on the Swanepoel Power 200 will not be able to either win or finish the race in their current configurations. Some part of their competitive resources will have to be committed to this reconfiguration process and timing that process will be critical.

Keep in mind that there are few rules in this race and, at this time, even less regulation. However, an increasing number of experts are warning the field that at any time the Consumer Financial Protection Bureau (CFPB) may introduce a yellow flag. As the mortgage industry is even now learning that when that flag appears the race will be halted while compliance is achieved. This will require another strategy.

The introduction of the Swanepoel Power 200 marks the entry of the industry into a new era that has been forming over the past few years. It serves as a wakeup call for everyone, especially those who would suggest that all we have to do is to return to the basics. There are no simple competitive solutions here, only old lessons updated to new realities, only commitments and competencies, only courage, creativity and ingenuity.

If your organization is in a status quo posture then the Swanepoel Power 200 is merely a beauty pageant. If your organization is in racing form then recognize that this is an open class race with few rules and that bumping will be required.

For those who will be neither on the track or in the pits, use the Swanepoel Power 200 as a invaluable guide to follow the excitement, the anxiety and the challenge that is currently the American residential real estate marketplace. Don’t focus on who is in what position, it doesn’t matter. From this point forward performance, creativity and, perseverance will determine the field.

Thank you Stefan and Robert. You have done us a great service. We look forward to sharing both the race and next year’s Power 200.

An amazing event happened yesterday and as is the nature of all amazing events our world will be forever changed. The event was the release of the first Swanepoel Power 200, a comprehensive rating of the thought leaders and senior executives of the residential real estate industry designed, produced and written by Stefan Swanepoel, industry chronologist and author of the annual Swanepoel TRENDS Report and Swanepoel TECHNOLOGY Report and co-edited by consultant Rob Hahn.

If the release of the document was an amazing event, its creation was an even greater achievement. Swanepoel and Hahn spent hundreds of hours using algorithms and engaging the level of immense detail and analysis that both have become famous for. The result is a document that dares to evaluate and compare both the power and the potential of the industry’s top thinkers. Previous efforts of this nature have merely identified individuals on a bus headed for destiny. This product allows us to view the market from a whole new perspective.

Because of Swanepoel and Hahn’s efforts the industry can now engage in a discussion about direction, potentials and probable outcomes. With this work in hand industry players can now begin to more accurately envision where the industry is going and where they need to position themselves to be part of its success. As a result of this work our industry will never be the same. Hopefully the discussion that will surely emerge from this event will benefit everyone and help raise residential real estate to the next level.

In considering this emerging dialogue several ideas come to mind. The first has to do with the role of the status quo and of history. The Swanepoel Power 200 doesn’t address what is going to happen nor does it applaud past behaviors. It merely identifies who, at this point in time, is positioned for greatness and supremacy. As the business journals reflect every day, what happened in the past is no longer a determinant of what is going to happen moving forward. To quote Marissa Mayer, President and CEO of Yahoo from her recent presentation at DreamForce 13, “One of the few things we know about the future is that it will look nothing like today.” It could be argued that there are a number of individuals named in the document whose presence may be more indicative of their performance in the past than in the future. But even with that adjustment the remaining names will, in all probability, reflect those who will make a difference moving forward.

Reviewing the Swanepoel 200 is much like watching the first lap of a NASCAR race. It is an amazing display of determination, design, horsepower, color and yes, noise. We are, at the same time, impressed with both the similarities of greatness and the differentiations of style. We can only be humbled by the challenges that lie ahead for these esteemed individuals as they navigate what, for most of them, will be the race of a lifetime.

There are many lessons to be learned by those whose names didn’t appear on this special document. The first lesson to be learned is that there is a race going on and that it is without question the most challenging and defining race that this industry has every faced. It is not a race for market share or productivity but, as Keller Williams CEO Mark Willis has often said, it is a race for dominance.

The second lesson is that if you are on the track you are part of the race as no spectators or tourists are allowed. Those on the track and not engaged in the race are likely to be hurt.

The third lesson is that there are many different makes and models of business models in this race and no one knows which model is going to win the race or which is going to show at the finish line. Absolutely no one is guaranteed a position on the final lap. Not all vehicles were designed or even created to be in a race and even fewer have even a chance for victory.

For some on the list the race started years ago, for some the race started this week and for others the race has ended. As it proceeds, the racing process will settle out these differences. Unfortunately for both themselves and the remaining competitors there are some Sunday drivers out there.

If you see yourself in the race there are a number of proven concepts and rules that you will have to comply with in order to be successful. First and foremost, racing is not an individual sport, it is a team activity. None of the individuals on the list will win without massive and competent support. This is a time for these leaders to review their teams and determine who on their team can make a contribution to victory and who is just along for the ride. The ultimate loyalty here is to the team not to individuals regardless of history.

There is a significant difference between being a placeholder, promoting the status quo and being a competitive organization. The fact that an organization has held a top market position for many years is not an indicator that they will hold that position moving forward.

One of the wild cards in this race will be the role that agents play. For many entities the agent will be a handicap and/or a restrictor plate. Although agents might well play and could play an important role, this race will not, in the end, revolve around the agent. That is not the way of capitalism or free enterprise. Equal to the role of the agent will be the influence of Wall Street. If the traditional objective of a brokerage is a happy agent, the absolute objective of a publically held entity is building shareholder value. Shareholder value is currently playing a major (even if yet disclosed) role in our industry.

REALTOR® Associations at all levels must take special notice of the race. First of all, they are not on the track and therefore they can’t win. However, they can prevail and make a difference it they are associated with the right team and/or the right program, product or service. With the winning prize will come the right to determine what role, if any, will be played by the entities that comprise what is commonly known as “organized real estate”. Interestingly enough this will include both NAR and the Realty Alliance.

The key to being an effective competitor in this race will be the incorporation of strategies and tactics that reflect today’s field, not the 1985 Grand Prix.

The Swanepoel Power 200 provides us with an excellent sense of who is holding both the “pole” and the best “grid” positions. However, as American Business has proved over and over again over the years, being the “polesitter” is a very temporary position if it is not supported by the right team, resources, strategies and tactics. Being the polesitter is cool during the prerace process but remember, “Leaders can only go backwards.”

This race has already produced a high level of “bumping” and it will get even more combative as it proceeds. If your team is “bumping adverse” best to get it off the track now. Slower cars will not be invited to leave the track they will be bumped off of it.

Every team must have a “pit” strategy. Most industry entities reflected on the Swanepoel Power 200 will not be able to either win or finish the race in their current configurations. Some part of their competitive resources will have to be committed to this reconfiguration process and timing that process will be critical.

Keep in mind that there are few rules in this race and, at this time, even less regulation. However, an increasing number of experts are warning the field that at any time the Consumer Financial Protection Bureau (CFPB) may introduce a yellow flag. As the mortgage industry is even now learning that when that flag appears the race will be halted while compliance is achieved. This will require another strategy.

The introduction of the Swanepoel Power 200 marks the entry of the industry into a new era that has been forming over the past few years. It serves as a wakeup call for everyone, especially those who would suggest that all we have to do is to return to the basics. There are no simple competitive solutions here, only old lessons updated to new realities, only commitments and competencies, only courage, creativity and ingenuity.

If your organization is in a status quo posture then the Swanepoel Power 200 is merely a beauty pageant. If your organization is in racing form then recognize that this is an open class race with few rules and that bumping will be required.

For those who will be neither on the track or in the pits, use the Swanepoel Power 200 as a invaluable guide to follow the excitement, the anxiety and the challenge that is currently the American residential real estate marketplace. Don’t focus on who is in what position, it doesn’t matter. From this point forward performance, creativity and, perseverance will determine the field.

Thank you Stefan and Robert. You have done us a great service. We look forward to sharing both the race and next year’s Power 200.

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