Recently in Opinions Category

Imagine that you had won the following prize in a contest:

Each morning your bank will deposit $86,400.00 in your private account
for your use. However, this prize comes with rules just like any game has certain rules.

I just wanted write to say I am proud to be a an ACRE and I feel like there is light at the end of a dark tuneel! I've already got my frst real estate consulting job next week and I am so happy to not only sell real estate but I can add this to my business to generate a steadier income and provide a viable service. Great to be here! 

I think you all will find this post very interesting and I hope our voices will be heard loud and clear in support of the retainer. Please comment.

With the death of Steve Jobs, much has been written about the incredible contributions he made to the computer industry. Much less noted was the fact that he also revolutionized five other industries: animated movies, music, phones, table computing, and digital publishing.

There are so many lessons to be learned from the genius of Mr. Jobs but for now, let’s focus on just ONE of the industries he transformed by climbing into the old time machine to remember the music industry prior to iTunes.

As a general  principle, Jewish holidays are divided between days on which you must starve and days on which you must overeat.  Many Jews observe no fewer than 16 fasts  throughout the Jewish year, based on the time-honored principle that even if you are sure that you are ritually purified, you definitely aren't.
 

 

Though there are many feasts and fasts, there are no holidays requiring light snacking.   Note: Unlike Christians, who simply attend church on special days (e.g. Ash Wednesday), on Jewish holidays most Jews  take the whole day off.  This is because Jews, for historical and personal reasons, are more stressed out.

 

 

WIth the passing of Steve Jobs, there will be many tributes but in my humble opinion, there will be none as encompassing, nor one as important to the challenges we face in our industry as the simple recitation of his 1998 ad "Think Different":

Here's to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They're not fond of rules, and they have no respect for the status quo.

Late last year a man named Mack Hanan past away. I mention this because his book Consultative Selling was instrumental in how I structured my real estate firm upon becoming a Broker in 2005. I understand when he pasted he had been working on the eight edition of the book. I have the current edition published in 2004 and kept earlier editions as references until recently.

We love to talk about the Realtor® of tomorrow but we ought to be talking about the Realtor® of today as we've lost a lot of ground in two crucial areas:

1. Not recognizing how the role of the real estate agent has changed over the last 30 years and
2. Not adapting to the tremendous growth of technology

First, the change in our role: I'm going to state a premise that is controversial but I believe to be true: real estate can and should no longer be defined as a sales profession. The sales model made total sense when our sole responsibility was to move the inventory. But starting in the 90's with the advent of agency, our role fundamentally changed. With the advent of agency, our state and national boards and associations began to tell practitioners that primary role was that of a fiduciary without re-examining how we were compensated, putting practitioners in a bind.

Is fair market value fair market value, regardless of who is listing the house? 

Should a home buyer that is looking at a FSBO discount the amount of the offer by the average commission that is added to all other homes for sale that are not FIZZZZBO’S?

Should a buyer ask for a discount on fair market value if the seller isn't using a Realtor? Commissions are built into the listing price or selling price negotiated by a Realtor, which inflates market values. But, the FSBO seller can't be expected to adjust pricing based on this model, can he? "If I'm going to do my own work, why shouldn't I reap the benefits of the Realtor-commission-adjusted "market value"?

"But I am a FULL TIME REALTOR"!  I work real estate 29 hours a day and 9 days a week.  Only a Realtor(R) can be so bold as to add days and hours to our lunar calendar because there are just not enough hours in the day or days in the week for Realtors(R) to accomplish all they need to do!

There's been a lot of talk of late regarding commission rebates. The consumer, squeezed by the market, is increasingly asking for them and many in our industry are increasingly providing them.

But...we sure don't like it!

From our vantage point, it feels like hands in our pockets, grabbing at our shrinking paycheck. It feels like...DARE I SAY IT?...the way we have felt for years when relocation companies offer us a coveted buyer or seller in a nice price bracket but attached at the hip to a pile of extra paperwork AND a 30-35% cut out of our check for the privilege!

From our vantage point, it feels like we're being robbed. And we are.

By: Glenn Freezman
Nucazza, LLP

I'm not sure if you've noticed or not, but during the past decade how consumers behave has changed dramatically.

The rise of the Internet has meant that consumers no longer play a passive role in acquiring information to help them make decisions but instead are on the front lines and fully active when it comes to finding better deals on everything from buying a bar of soap all the way up to a new car.

By: Glenn Freezman
Nucazza, LLP

As you may already be aware, a number of new 'rebate' models have crept into the real estate market during the past few years. Driven partly by a weak market, the vast majority of these programs are aimed at enticing buyers to work with brokerages by offering heavily discounted closing costs. In some ways the rebates are little more than marketing tools that are being used to bring in new business by floating out a strong unique selling proposition (USP) to help those brokerage stand out from the crowd.

In the 1995 movie, The American President, there is a scene where President Andrew Shepherd, is in a heated discussion with his domestic policy advisor, Lewis Rothschild, about the President's falling poll numbers.

In this scene Rothschild pleads: "People want leadership, Mr. President, and in the absence of genuine leadership, they'll listen to anyone who steps up to the microphone. They want leadership. They're so thirsty for it they'll crawl through the desert toward a mirage, and when they discover there's no water, they'll drink the sand."

To which President Shepherd responds: "People don't drink the sand because they're thirsty, Lewis. They drink the sand because they don't know the difference."

Let me rephrase this exchange as it applies to today's real estate consumer:

A few years back in an article in RIS Magazine, Brian Buffini, founder and chairman of Buffini & Company, made a very interesting observation: although 80-90% of real estate buyers start their home search online, almost none would actually go to the next step and click “Add to Shopping Cart.”

Online technology gives the consumer a running start. But to cross the finish line, they need a flesh-and-blood Realtor® who knows the local market and the ins and outs of bringing the transaction to close.

The problem is that traditional real estate companies and associations are still telling the public that if they want the hands-on personal care that Buffini advocates, the full-service commission-only model is the only option. Those who want to take advantage of the do-it-yourself opportunities (and cost savings) OR who do want full service, but just don’t like paying by commission—are turned away.

A couple of months ago, Kirby, our family dog, started scratching himself like crazy. So, like any good mommy owner, I took him to the vet. Unfortunately, his regular doctor (who has 30 years experience) was away on vacation so he saw a new doctor just out of veterinarian school. He checked Kirby over and gave me a prescription. Alas, he misdiagnosed Kirby's problem, necessitating two MORE visits. It wasn't until the third visit when his regular doctor was back, that Kirby was diagnosed properly.

But what really fried me was the bills for the visits. I was charged the same thing for an office visit with Dr-Wet-Behind-The-Ears as I was with our 30-Years-Of-Expertise Doctor. I understand that new veterinarians need to learn their profession but it shouldn't be at my expense. Fortunately, Kirby didn't have a life-threatening ailment. But what if he did? What price would I pay to have the best vet out there taking care of him?

My husband and I pay top dollar to our CPA because his expertise pays for itself year in and year out. When I need a root canal, you bet I go to a senior endodontist, not some rookie out of dental school even if it costs me more. And if I'm ever in legal trouble, you bet I'll want to hire the best attorney to handle my case, not some newbie out of law school.

So, how must a real estate consumer feel when hiring a REALTOR® to handle their largest financial asset?...

This past month we had a post on our ACRE® Coaching Exchange about using the consulting model for assisting clients involved with short sales and foreclosures.The post resulted in a very spirited discussion given how many consumers are under water with their homes.

However, it seems to me that many professionals are doing short sales and foreclosures right now because that's "all there is out there". And if it's an area that's paying you for your work, more times than not, all the power to you.

But, from my vantage point, I see hordes of practitioners, armed with the same limited offering, all chasing the same business. The problem is that without unique tools, your value proposition is the same as everyone else's.

Real estate professionals have lots of forums for support. Have a tough experience in real estate? Just post about it and you have tons of supporters who can feel your pain. But there's something very passive about many of the travails we complain about in our industry. It's as though things happen TO us rather than us initiating the changes needed to make things better.

For instance, a subject that comes up over and over again in one shape or another is that we're tired of providing free CMA's. Yet, overwhelmingly we accept it as a given because "everyone else does it". Charge a for a service that draws on our expertise and experience? Why would someone pay for something they can get for free?

Years ago, prior to my real estate career, I was a Tupperware Lady. Like many women with small children, trying to find a way to earn money using my education (an MBA no less!) while being able to stay at home with small children, I ventured forth to sell Tupperware. Turned out, I was pretty darned good at it - I rose to management of a unit (with the van and everything!), and my unit was tops in sales for the three years I was in it.

I left Tupperware because I was fired. Was I cooking the books? Stealing Jello Molds? Not burping my lids properly? No, alas I was caught doing the unthinkable - pretending to host parties while secretly passing out catalogs to my working friends to collect orders at their places of business.

My customers loved that I provided choices. Many didn't know that they could actually order Tupperware without having to attend a party until I told them. But once I explained how they could do a "book party", they loved it! I still held parties for those who wanted them, but I also provided other options so no matter how they bought the product, I got the sale.

Another View of Commission (as published in REM, February 2011)

The Guest Column (REM November 2010) did our industry a service by raising the subject of agent remuneration, but the assertion that sale-contingent commission is the best compensation method for ever and all time perhaps deserves some scrutiny.

Public response to on-line media articles around the recent Consent Agreement between CREA and Competition Bureau overwhelmingly cast real estate agents in a negative light, suggesting, among other things, that we are overpaid, under-qualified, self-serving, lazy etc. Little was said to suggest that we add much value to real estate transactions. A common thread connecting many of the negative comments was commission. Public opinion surveys repeatedly rank us embarrassingly low on the integrity scale. Our traditional compensation model only perpetuates this industry’s self-centric image in a day when consumers are demanding fairness and transparency...

I was doing errands over the weekend and on the radio was a call-in show on consumer issues. My ears perked up when I heard a consumer call in saying that they had bought a home recently and once they moved in, they found mold. So, the question is: why wasn't the presence of mold brought to their attention? The caller and host discussed several possibilities:

1. Their agent knew about it and didn't disclose it which the host was quick to say that if that was the case, the consumer could go after the agent and their broker.
2. The homeowner knew about it and didn't disclose it to the agent. If that was the case, the consumer could go after the former owner.
3. The home inspector saw it but didn't bring it to the buyer's attention since "everyone knows" that inspectors are under pressure to pass houses because it they don't, buyer agents won't recommend them to their clients.

An agent called in next to say that only buyer agents, who have the fiduciary obligation to work in the best interest of the buyer, can recommend home inspectors. The host replied that while that may be true, because the agent only gets paid if the transaction closes, it makes logical sense that even buyer agents are going to lean toward "easy inspectors" who won't flunk a house and make their work on the transaction for naught.

I hate to say it, but he has a point, if only in the mind of the consumer. As long as our compensation is tied up with "closing the deal", I fear this host's opinions will continue to be shared by the public. We can argue till the cows come home that we take our fiduciary responsibilities seriously and will always work in the best interest of the client (whether buyer or seller). But the truth is that under contingent compensation, how do we argue to the consumer that the amount of our paycheck (or whether we get paid at all) doesn't influence who we recommend or our advice in general? And even if we can argue that we personally would never let our compensation influence our advice (a difficult proposition to make since it defies logic), can we truly debunk this feeling about our industry as a whole?

I know, I know, if you're a real estate professional, the title of this post probably makes the hair stand up on the back of your neck. But, for just a moment, I'm going to ask you to take off your agent hat and put on your consumer hat. Leave your skepticism at the door for a moment and think through our present role(s) and how we are paid.

On one hand, real estate has always been considered a sales profession, paid by commission. As an independent contractor, a real estate agent needs to get homes sold as quickly as possible, and for as much money as possible, to make a living in this business. And thirty years ago, when an agent's sole responsibility was to "move the inventory", contingent commissions made total sense as they do for anyone else that is in a sales capacity.

The problem we have run into has come about with the advent of agency. Starting in the 90's, our national and state associations asked us to now to wear a second hat - that of a trusted adviser who's job is to provide fiduciary counsel that is in the best interest of our client, not ourselves, without taking a serious look at how we are compensated.

The Value, The experience and The knowledge that Realtors bring to the table shouldn't be discounted. During the past decade, more and more prospective home buyers have started taking advantage of the information and tools that are available to them on the Internet -and why not? The abundance of sites and information that allows home buyers to thoroughly do their homework before even stepping into a home on the market is tremendous For example, prospective buyers can now virtually tour dozens of homes by looking through photo slide shows, virtual walk-throughs and tools like Google maps, which allows buyers to virtually wander through the neighborhoods or view entire neighborhoods. Overall, it's a pretty easy way of getting the skinny on any house on the market before you decide to go and see it for yourself.

From a buyer's perspective, this access to all of this information and capability often questions the value of paying a Realtor for these services if you can do them yourself. After all, why should they end up paying a Realtor® a high commission when they can do most of the legwork themselves?

From the buyers standpoint this value equation seems to makes sense. However, from the standpoint of what buyer's agent actually does that leads up to the closing, it's a great deal more than being an on-demand tour guide for people looking for a home.

I'm currently writing a book due out in September. Unlike my previous book, where I had a traditional publisher who took care of everything (financially and otherwise) but left me a minuscule royalty on my books that sold, I went a different route this time. I hired a "Book Shepherd".

Follow me on this because I'm going to get to the tie in with real estate in just a moment. My "shepherd" acted as my editor and manager of the process. I paid him by the hour to edit my manuscript and then guide me as to what needed to be done. While I am publishing my book myself, I am certainly not doing this by myself. My shepherd has provided excellent recommendations for an interior designer and cover designer. He has advised me where to get my ISBN numbers. I have paid for each of these experts as they provide the service and am getting great results because I each of these experts (including my book shepherd) were compensated very well for their time and talents.

When the book is published, I will only pay for the costs to print them. The difference between the printing costs and the jacket price goes into my pocket.

A recent post in Active Rain asked very simply "When Do Realtors Stop Working for Free?" She mentioned that she: "got an email today from a colleague who is a real estate investor. He is very savvy and someone who "gets" it. His advice can be summed up in a couple of snippets. If we are as smart as we think we are and we give great advice, why are we giving it away?"

The comments were overwhelmingly from agents that agreed with her premise but questioned how they could get paid in any way other than by commission. But there were a few responses that blew me away - one actually said that she "hated this conversation" because she maintained that we are (I guess she thinks we always have to be) commissioned salespeople without ever letting her mind expand that practices change when businesses do.