[I haven’t been doing this long enough to do an entire expose on the industry of real estate, but I have been doing this long enough to see several iterations already arrive & come to pass. I believe this one is going to be different. I believe this one is going to leave its indelible mark, But, I also believe that when most people are thinking and talking and using this current iteration in its nascency, they’re getting it wrong, again. Here’s a quick note to make sure that my tribe, that’s you, is among the minority who gets it right.]
It seems the older I get, the more I’m amused by the fact that: while very little ever seems to change on the marco-level, a ton of things are constantly changing on the micro. Add to that, we always seem to repeat these cycles of history and yet allow ourselves to be completely taken away by them, when they do. Its like watching the movie Momento from 2000, except then, Momento’ing ourselves to the storyline every morning when we wake up and feel compelled to go watch the movie, again ;).
Here’s where history seems to be repeating itself in the current RE game, and why you need to recognize this pattern to protect your own booties .. But also why this one is going to be different.
THE QUICK AND DIRTY
So heres the q&d: Over the better half of the last 2 decades, most every seller I have ever worked with wants the same sum version of these 3 things:
1) sell their home for the most amount of money (or at least just more than their shitty neighbor 😉
2) control time (which usually means, sell it in the least amount of time..but can also mean stay in the home while they buy another one)
3) have the experience unfold as enjoyably as it could (which is all loaded up in certainty, surprises, fairness, etc).
Here’s the challenge: #1 is easy to manage in a hot market. You can even affect elements to do so before you sell your home. Like, with negotiating the RE commission – which is a huge chunk and the prettiest penny on the closing statement. Just like the chants in the last election for Hillary were “Lock her up! Lock her up!” The similar chants in the living room’s across the country begin to arouse, “Cut that shit! Cut that shit!”
Insert (again): The discount brokerage. But this time, it’s tricky and clever iteration, well call: Model v.18.1
Now, the allure is even deadlier, however, becuase this new version 18.1 is sexier than ever before. Why? Its got this fanciful tech piece attached to it. We love our tech. Tech companies love that we love our tech. So, tech companies are taking over the space and banking millions upon millions of dollars on the fact that everyone is so myopically focused on using tech to “win” in #1 from above, they don’t realize that what they really want is the most NET. Not necessarily the least COST. We are conditioned to shop on cost. But rarely do we find ourselves as consumers, trained in settings like the mall, to worry ourselves with the net. Study after study shows, that when home sellers deviate from the traditional model to sell their home, they sell it for less, they complain about the experience .. and thats if they finish selling it at all. Now, the rational side of the brain says, “That’s ok. Becuase I’m paying ‘x’ less in commissions, so, it’ll soak up the losses and because of that I will probably come out ahead by going discount.”
Thats fair. And even reasonable considering the chuck of change that a typical RE commission tallies up to considering the home prices they’re attached to.
And that fair and reasonability quotient is what the model relies on to be successful and continue to subsist.
But, the challenge is this: [cue Big Top Circus 3-Ring Voice] “Introducing!! .. “The Invisible!”
The invisible is literally everything else that does not have to do with the things you can see.
And mind you, the invisible is like the ol’ iceberg theory – 10x’d – when it comes to the invisible in a typical RE transaction.
Let’s break this down. And in order to do so, let’s start by defining the visible.
The visibles are:
*Brokerage names *Branding, including website *Commission Rates *Fees *Sign in yard *Agent’s presentation & materials *Review sites *Performance analytics sites
While just a snippet of the invisibles are:
*The net profit to the seller *Pricing techniques *Management of transactional details game-plan *Ability to see several moves down the chess board *Negotiation style & competence *Back office systems *Competence of people on team *Professionalism (absent the presentation) *Reputation within the industry *Marketing reach and effectiveness *Strategy of execution *Vision to sell home, with who, how, when *Competence of 3rd party professionals whom the agent will be choosing to represent you *Who’s interest in the deal to they truly ally with when it comes time to close *How do they react, respond & lead in difficult situations *How much money is being spent on marketing & advertising *What results are those efforts yielding *Oversight of the transactional details *Prepping of home, which includes: repairs, fixes, elimination, moving, storage, paint, landscaping, debris removal, concrete repair, foundation assessment, roof maintenance, major functioning system test, minimum code and law requirement standards, settling, cracks, functional obsolescence, resolving neighbor disputes in advance, exterior paint, minor/major remodel project oversight, access to cadres of tradesman w/ pre-negotiated rates, green features spotlight, flooring, tips/tricks/expertise on what to spend on vs what not to, ROI, design council, staging, social media production schedule, online promulgation using a chunk-down theory of distribution, guerrilla physical marketing techniques to enlist the neighbors germane to the area already, online as well to enlist the Dunbar tribe within their own tribes *This could go on all night …
But whether the list is comprehensive while exhaustive, or not, isnt the point here. The point is:
ITS NEARLY IMPOSSIBLE TO QUANTIFY THE VALUE OF THE INVISIBLE AT ANY TIME DURING THE PROCESS OF SELLING YOUR HOME. BUT, ITS THE MOST IMPOSSIBLE ON DAY ONE.
So lets make this even more manageably and put it super-simply. Lets just make the invisible everything other than the real estate commission.
And lets make the subtitle: its everything that matters that you can’t point to as a line item on day one when meeting someone to predict an outcome. Until homeowners are educated on this principle, they will continue to lose when it comes time to sell their home when they use a discount broker.
That is why I am writing this to you, now. Because despite the bias that is drenched in this op-ed .. despite the obvious horse I have in this race .. at least I know that my own tribe can be dutifully equipped on this Zeitgeist of conversational hype’ery and hope to spread this quip of education to anyone in your tribe, respectively.
BUT BEFORE COMPLETELY BURYING THE LEAD, HERE’S WHATS DIFFERENT ABOUT THIS ROUND
I believe that this round of disruption will end up sticking. I believe that technology will eventually digitize everything in the real estate transaction, with one exception: The last 100 yards.
THE LAST 100 YARDS
What I mean by the last 100 yards is this: Real estate will never be completely digitized in our lifetime’s. Becuase at its core, its still a piece of property, that is being negotiated by two completely irrational people, each of whom believe the thing is worth more and/or less than the other does, respectively, at a singular point in time where there is only one price/value of the home which has never occurred before and never will again. And as long as that is the case, you need an expert consultant on your side, who is a master negotiator, and who him/herself is flanked by a team to make sure all of the management and oversight of the transactional details are handled for you banked by hundreds and thousands of cumulative transactions between them amounting to impossible-to-digitize experiential capital. Because of that, my skill sets are more valuable today than ever before. And because of that, my skill sets will become more and more valuable as technology continues to digitize the other 80% of the transaction which, quite frankly, has never been my unique ability, anyway.
While most agents in my industry are scared shitless about their impeding doom as a result of search apps and are flying to reduce their commission rates to respond to their lack of value being exposed, I can’t wait for the disruption to take hold. I think its going to create a better client experience as technology digitizes its way to cover every part of the traditional real estate model it can do better, more consistently, more reliably, than humans can. And at the same time, reveal the glaring need for only the best consultants, negotiators and adept managers of difficult transactions to shine & thrive. I also believe theres going to be a thinning of our real estate agent group, which I can’t help but think will be a good thing. And I think the overall client experience will improve as a result of all.
WHAT’S THE MODEL v.18 BIG TAKEAWAY?
Theres so much to be excited for in this brand new digital economy as it continues to grow up and redefine whats possible in reaching scale.
In the real estate industry, we’re going to see that ironic truism where, “the more things change the more things stay the same.” The thinning of the licensee herd (finally!), the adoption of more and more useful digital tools to help us become better homeowners, more informed buyers and sellers, while our roles as your agents will reduce in scope, crystallize and become more effective in the roles which will become more and more important, too.
And as we move in those inevitable directions, don’t be fooled by the low-lying fruit of the imitation game. A wise man once told me: “You negotiate your pants off for any product you want to buy. Becuase if successful, you get the same product. But don’t EVER negotiate on services. Because you get what you pay for in the service industry.” The presence of discount brokerages is not a new concept. Its been around for decades. It attracts the lowest level of help available, offering the promise which is sexy, alluring and very hard to refuse: Pay less, get more. But what experience shows is that what the consumer receives is: Pay less, get less.
And while we will continue to embrace technology to affect the best case scenario outcome for the net of your next home sale, we will remain vigilant to not be fooled by the lure of the .. “Running down the dime only to let the dollar go flyin’ by.”