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Dear NAR: Whatever You’re Doing Ain’t Working

January 31, 2008

Over at TechCrunch, a hugely influential web technology site, there’s a profile of Redfin up. The profile itself is pretty bland and content-free. But the comments to that post has some… ah… action in there.

For example, here’s a “Kerry R“:

I’m not paying an F-ing real estate agent any fees, they don’t do anything! I don’t care how much they rebate. If I’m going to sell my house I’m going to use Craigslist or Backpage or ChoiceA but definately not paying realtor commissions. And before I sell I’ll use Cyberhomes or Zillow to validate my pricing strategy. This whole “you need a realtor” BS that is all over my TV is tired. C’mon, $30,000 in commissions to sit down and post a house on the MLS and just wait for a buyer to call you. National Association of Realtors will be in the deadpool by 2012.

And then, a couple of comments later, here’s a “Marzipan“:

Second, to #3 Kerry R….Realtors charging the typical 6% do get paid too much. But paying 1-2% is quite fair. The reason is that sombody else handles the BS, but more importantly…you are buying an entity and/or individual to sue in the event the $hit hits the fan somewhre in the transaction.

May I suggest to whomever the powers be at National Association of Realtors that whatever they’re doing ain’t working?

Particularly interesting is Marzipan’s perspective: that using a broker is essentially taking out an insurance policy on the home sale transaction. Is that what real estate brokerage has been reduced to in the Internet age?

Marzipan’s comment reminds me of a conversation I had a couple of years ago at Realcomm. A top residential broker from the Houston area had just presented to a room full of commercial real estate people how she uses the Internet and virtual teams to get her tasks done. As she was going through it, I realized that her team (spread throughout the world, including India) was doing everything from marketing to website maintenance (her own site) to contracts and paperwork to setting up closings to followups. Now, she was a Re/Max agent, but used absolutely nothing that Re/Max presumably offered her except perhaps for the business card.

So I asked her, “What exactly does Re/Max do for you, since you’re a totally self-contained operation?”

She said, “They provide liability insurance.” That was it. That was the entire value of being part of Re/Max for this top real estate agent whose team did north of $15M in GCI.

So apparently is the entire value of working with a real estate agent for at least that Marzipan guy.

This goes to the heart of a debate I’m having in the comments of the Halstead Brand Suicide post. If the core value proposition of a real estate agent is brokering, then the industry is doomed. The Web does brokering — the matching of buyer and seller — better than just about any human being. We’ve seen this in finance, we’ve seen it in travel, we’ve seen it in dating, we’ve seen it in job search, we’ve seen the phenomenon in every industry where the essential value is matching a buyer with a product/service.

Why do so many real estate people think it won’t happen here?

NAR’s advertising campaigns have been incredibly bad.

Apparently, NAR doesn’t realize that the image of the real estate agent is so bad that anything they say is simply treated as a lie.  It’s probably true that right now is a great time to buy (assuming you’ve got the cash, the credit, and can get a mortgage) for all the reasons the ad mentions.

Too bad the consumer just thinks Realtors are full of crap.  Just check out the comments on YouTube on that video.

“I keep finding realtors/former realtors that were topless dancers (pole dancers) or that are going back to that business (or prostitution).

Is it the lure of easy money combines with the lack of morals? ”

“Realtors are parasites.”

“It is always a good time to buy. You know why? Because if you don’t buy homes, realtors starve. They can’t pay their mortgages or put gas in the Escalade.

So go ahead and buy, even though your house will be worth less in a few years and you will have no equity.

NAR would be better off spending their ad dollars to give to people as down payments. It’s the only way half the people will even be able to afford a house.”

I don’t know if I agree that NAR is better off spending ad dollars to give people down payments.  But I do think NAR should fire whoever its ad agency is, maybe fire whoever is heading up the PR/Marketing efforts for NAR, and spend some real time and money understanding consumers and why they think Realtors are such scumbags.

If marketing is a conversation, then NAR has simply been plugging its ears going “Nyah nyah nyah, I can’t hear you!” for years.

And given the Texas agent’s comments, that problem is up and down the entire real estate value chain.

How to fix this problem?  I don’t know.  If I knew for certain, I think I’d be a rich man on a tropical island somewhere.  But I do have some thoughts.

First, get rid of the bad apples.  It may be that most Realtors are hardworking, conscientious professionals who take their responsibility very seriously.  If so, the industry needs to purge those whose behavior reminds consumers of prostitutes and pole dancers.  If the 1.3 million Realtors goes to 500,000 Realtors, but every single person who carries that tag represents the best practices, best intelligence, best knowledge, and highest ethics, I think that’s an improvement.

Second, go back to the grassroots.  Have conversations.  Instead of spending $40M on TV ads that make consumers think you’re a slimy douchebag, why not spend it training every single Realtor and every local Realtor Association to get out to the community, in person, to hold seminars, teach consumers the ins and outs of the market, evaluation, housing laws, zoning regulations, and share whatever knowledge and expertise Realtors have?  People generally find it harder to call you a scumbag to your face, especially if you’re telling them something they didn’t know that could help them, without sales pressure and sleazy tactics.

Third, really understand and proselytize among the brokerage community what the value proposition is.  If it’s brokering, then prepare for a bloodbath.  If it’s something else, then work to make that happen.  My personal belief is that the value proposition of brokers in the Internet age is wisdom and judgment.  Websites can give me valuations; they can help me find homes; I can get neighborhood info from them.  What I can’t get is an expert’s wisdom and judgment.

This is more or less how it works in finance.  In law.  In accounting.

Why would real estate brokerage be any different?

-rsh

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2 Comments leave one →
  1. S Bennet permalink
    March 11, 2008 12:15 pm

    I hate, hate, HATE RE agents!
    I would like to know how much more time and money they spend marketing a house that costs $500k over a house that costs $225K. I already know the answer.

    They need to lower the commission overall to 4% on lower priced property and 2-3% on higher priced or set a fixed price on a sliding scale. They should definitely have a lower priced commission on properties which the largest segment of the population can afford and which tend to move quickly.

    I’m selling a $500K home right now.
    I’ve offered a 3% commission to 2 buyer’s agents to bring me a buyer. THey won’t even have to spend one dime on marketing. I’ve even promised one agent my additional business in finding a new home for me when my current one sells. They would rather walk away from all that $$$ if they cannot get exactly what they want.

    Real estate sells itself. Folks don’t go out buying houses until they are needing a house. It isn’t like the door-to-door Avon sales lady!

  2. March 11, 2008 1:56 pm

    Interesting.

    If you think real estate sells itself, why bother with agents? What is the value that an agent (either a seller’s rep or a buyer’s rep) brings to the table that you’re willing to pay even 3% to him/her?

    And a variant on that — would you be willing to pay for services like you would any other professional? Say, for example, $75/hr for home staging; $1,500 for a home marketing brochure; $100/hr for open house, etc.?

    I wonder if this a la carte approach isn’t something that the RE industry should think about.

    -rsh

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