Today, I read an interesting article in the Globe and Mail… have a look.
In the past, I’ve commented on some of the Competition Bureau issues and alternative business models here and here, and I am fully supportive of a competitive industry with many options for the consumer.
There are some very interesting thoughts sprouting from this issue…
1) Whose information is the actual home listing? Does it belong to the Realtor, or the seller?
2) The big issue with letting everyone in on the party at Realtor.ca and giving everybody the ability to post a listing is that we pay a big fee every year as Realtors to maintain the site. We built it, so we should have some level of control over it, including the information it contains. But from the seller’s perspective, without their data, the site wouldn’t exist. It’s a little chicken/egg, isn’t it?
3) Also, the real estate industry is extremely protective of the Realtor brand. By having a bunch of companies who do a half-assed job for a lower fee, the concern from the industry is that it will serve as a self-fulfilling prophecy – “All Realtors suck, and they don’t deserve to be paid much…” and then more discount companies pop up that are even less helpful, and they charge practically nothing… and so on. It’s a value-suck system that can really lead to some interesting outcomes.
For example, I could see it mirroring this social-economic effect:
Just like the decline in mid-wage jobs in the chart above, the average Realtor is feeling the squeeze. On one hand, you have the high-wage, extraordinary Realtors who provide value in multiples to what they’re paid – giving great advice, aggressively searching for buyers and putting their clients’ interests first. The average Realtor just isn’t that skilled, and never truly buy into the concept of giving more than they receive. And again, much like what we see above, the average Realtor feels pressure from the bottom-end, because some of these companies have trimmed some elements of their service (often resembling the average Realtor in almost every way), and work more on a volume model of a few corners shaved here and there, with a corresponding lower fee.
4) I think people need to remember that some of our fee accounts for the risk involved. Unlike a lawyer, who works on a retainer, we work on a contingency basis. In other words, instead of you paying us upfront for our time and energy, we get paid only after the title changes hands. Before that, we’re investing money in ads, putting time, energy, fuel and lots more into it, without any guarantee of return. Personally, I would consider charging less if I had guaranteed funding up front. It’s an interesting way to think about it.
5) Is the general public’s opinion of how lawyers are paid any different? How about financial planners? Doctors?
6) If Google wanted to take over the entire real estate industry, they could do it in a matter of weeks. Proof? Click here.
Realtors used to be the gatekeepers of information. Twenty years ago, you needed to speak to a local Realtor, and they would pull out a binder with all the current listing information, which was updated every two weeks. All the homes came out in the Wednesday newspaper. There were no fax machines or email, and you had to drive to your clients’ house, even if they were 3 hours away. Times have changed, and that’s not why the consumer needs us anymore.
What they do need is context, sorting out large amounts of information, help with strategy, negotiating, and experience.
I believe the real estate industry is not going anywhere. Or rather, the good agents have nothing to worry about. There is always demand for a good consultant, a good negotiator, and someone who can handle all the details. What all of us don’t need any more of are lazy, sleazy, overpaid sharks who value their commission cheque more than their clients’ best interests. And this will only come with stricter standards and a higher commitment to education. There are wayyyy too many part-time real estate agents out there.
One thing is for sure… the true value of a good Realtor appears when the market slows down. When there are no multiple offers, and homes take six months to sell… that’s when the cream really rises to the top, and there’s a noticeable difference in a discount brokerage compared to a traditional full-service Realtor with loads of experience and the tools to get it done the right way.