Recently in Paradigm shift Category

A new Inman report that just came out: A New Decade in Real Estate. The report is based on a survey of Inman readers that got over 500 responses.

The report is fascinating: especially Part 1: The Future of Real Estate Fees. When asked what will change the most about real estate compensation, the largest share of respondents - 40.4 percent - said that fees will increasingly be based on the consumer's selection of services by the year 2020. Additionally, 17.4 percent of respondents said that brokers will increasingly charge a flat fee for real estate services. So, more than half of respondents (57.8 percent) believe that real estate services will increasingly be fee-based in the next 10 years!

This post arises from a letter I wrote to the facilitator of an excellent seminar I attended in December. On reflection, I thought parts of it might be useful to ACRE® colleagues (or others interested in Consulting) in helping to refine their articulation of the consulting mindset and value proposition.

ACRE® Jennifer Allen, author of "Sell with Soul" and (just out) "If You're Not Having Fun Selling Real Estate, You're Not Doing it Right!" recently sent out a fantastic email to her mailing list. I asked her if I could share it because:

1. It makes one think.
   
   
2. Jennifer's thoughts are at the heart of consulting where the fundamental question when dealing with clients should be "Is this in my client's interest or in mine?"

Hope you find it as thought provoking as I (and other ACRE®s) did:

...whether they are dealing with Health Care or Real Estate Services.

I was chatting with a friend of mine last week when he admitted that he had been without health insurance since he got out of college. Given that he's a real estate agent, that's not so surprising: as an independent contractor he's on his own regarding health insurance and many in our industry have simply taken their chances, especially when they are young and healthy like my friend Jack.

But as part of the approximately 15% of Americans who are uninsured, Jack has a window on a phenomenon that few of the rest of us ever see: what health services actually cost. You see, Jack was playing softball one Saturday a couple of weeks ago and sprained his ankle. As luck would have it, a member of the team was a physician and offered to take a look at the ankle at his office. After his ankle was wrapped up, Jack offered to pay him.

I'm not in the book review business but I have to tell you that I just got through reading World Wide Rave by David Meerman Scott and it is an amazing book!

As I posted on Facebook last night:

I've been struggling with how to get my book and company more noticed without much in the way of funds, and after reading this book, I feel like I have a new lease on life and work. If you know me at all, you know I don't swoon over much but this book is incredible.

Like many of us ACRE®s, David challenges the conventional wisdom on how to bring online eyeballs to whatever you do. I found myself nodding my head and saying YES! out loud.

AND...if you want to get a taste of what I'm "raving" about, you can go to his site and download his free e-book that started it all: The New Rules of Viral Marketing: How Word of Mouse Spreads Your Ideas for Free.

But, it gets better...

There has been a lot of discussion of late on real estate blogs regarding buyer agency and the plusses and minuses of working in a buyer agency-only firm (Exclusive Buyer Agency) versus practicing buyer agency in a brokerage that also includes seller agency.

The main theme around these threads is how to get the consumer to trust, and thus demand, their own representation. The proponents of Exclusive Buyer Agency argue that the problem of trust would be eliminated if the public could understand the advantages of having an entire office that just practices buyer agency. Practitioners of buyer agency in traditional brokerages (those that have both buyer and seller agents in the same firm) argue that with the advent of designated agency, practicing buyer agency in a traditional firm no longer presents a conflict of interest.

The news out there for real estate continues to be bleak. Falling home prices, long market times, falling sales, credit issues for buyers, the list goes on. If you've been in the business awhile, seeing the ups and downs, you might be trying to hang in there while the "newbies" who jumped into the market in the last five years are steadily abandoning real estate for greener pastures.

But sometimes, even for us veterans, it's hard to keep up our confidence. Our industry is going through tremendous challenges with changes that aren't going to disappear once the current market recovers. That's because the changes we are seeing are systemic in nature, challenging our most basic real estate assumptions and practices.

This past week, a real estate agent opined in her blog that when agents make a practice of asking a buyer for a pre-approval, or even request that they sign a buyer agency agreement to show a commitment on their part, that this is a sign of "disrespect" to the consumer.

She further went on to say that she herself has used the services of real estate agents in the past and if any of them had asked upfront for evidence of her financial qualifications or willingness to make a commitment, she'd have found someone else who showed her the respect she believed she deserved as a consumer. I read her post and was frankly, speechless. And when I found at least two dozen comments from other agents on her blog exclaiming what a great post she made and how they agreed with her a hundred percent, I was even more so.

Recently on the ACRE® Coaching Exchange, our coaching platform for ACRE® graduates, we had a very interesting discussion about where our value today lies as agents. It seems that in the tough market that we are working in, many agents are competing for listings by charging less than the competition and requiring less commitment in the way of an exclusive agency contracts with buyers.

This is so sad because you can never compete on price and stay in business. No matter how low you go, there will always be some desperate soul who will charge less. And when you don't require a commitment from those you work with, you only underscore that your time, experience, and expertise has no value.

If you are out in the market trying to make a living in real estate, I don't need to tell you that our industry continues to go through tremendous changes that are challenging our most basic of real estate practices and assumptions:

• Revolutionary growth in technology which continues to transform our industry.

• A huge consumer backlash that, contrary to conventional wisdom, is not just challenging our commissions but challenging our very value as professionals.

• A growing bewilderment by both the consumer and ourselves over what exactly our role as real estate professionals today is supposed to be.

Yet, in the midst of all of this, when we clearly need some new direction, it seems like all we're getting is the same old advice from the same pundits that have been around forever saying the same things like:

The Republican primary in the state of Michigan was held this past January and the way that the two leading candidates approached this primary provides a fascinating primer on how real estate will fare in the next few years, depending on our reaction to the systemic changes that confront us.

Below is a response from one of the ACRE graduates and coach, Judi Bryan, to a post on a list-serv regarding programs that teach fee-for-service type models.

There is a program available which gives the "availability" of fee for services, but goes, I believe, a whole lot further. It's the ACRE® program for Accredited Consultant in Real Estate. Since the program is designed around a "consulting" model where the seller has options with what services they want and how they want to pay for them, and the agent has the opportunity to get compensated for time and expertise, whether a transaction ensues or not, it offers a real win/win. And there is no need to sell a prospect on anything. All it is meant to be is an option...an option that gives us "transparency" in how we are being paid and does not require that the seller take an "all or nothing" package.

In real estate today, large numbers of agents are competing for a shrinking market. With unlimited real estate information available online and multitudes of sites competing with, and seeking to replace the agent, the public increasingly looks at the agent (and brokerage), who only offers the traditional full-service package payable only by commission, as a commodity to be shopped by price. Limiting themselves to the traditional commission model, agents and brokerages are indeed swimming in a bloody red ocean of cutthroat competition.

By contrast, real estate consulting, which provides the consumer responsible choices in the services they can obtain and how they can pay for them, while paying the professional fairly for their time, experience, and expertise, creates an "uncontested market space, ripe for growth that makes the competition irrelevant."

If the only thing we change about our business is implementing a different way to charge clients for real estate and real estate related services we have missed the point. You just become another real estate agent with a different business model. So, lets take a look at what "consulting" and "consultant" really means:

Note: Republished from the Northern Virginia Real Estate Guide

October 17, 2006

The traditional commission model has no relationship to effort and expense across a wide spectrum of property types, markets and price ranges. We (Pam and I) began using consumer Choice models when I established our relationship with RE/MAX on August 1, 2004. We have accumulated significant experience with different approaches and what works and what doesn't; the pitfalls, potholes, roadblocks and agent/broker scourge as well as documented successes. This stuff works! I believe it IS the future for the real professionals in this business.