Your clients are finding the house on Zillow, doing their own school research, securing their own mortgage, and even figuring out the comps — so why do they need you, exactly? And why should they pay you 3 percent?
Jed Carlson opened up his lecture at ICNY with this (probably familiar) argument many agents have heard, and from there spun it into a lesson about the music industry, consumer behavior and why the agents-as-sherpas philosophy makes a lot of sense in real estate.
Please see the entire transcript of Jed’s talk below:
Why do I need you? Let’s welcome Jed Carlson from Adwerx to explain.
Listen, I found the house on Zillow. We did the SKU research. We secured the mortgage ourselves. We even figured out the comps. We did it all from our phone. So no disrespect but why do I need you again? And why on earth would I pay you 3%?
This was a conversation a real estate agent relayed to me that they’d had with a prospective client. And although I’d heard this before this time it really hit home. That this is the fundamental challenge facing the real estate industry, redefining the why. Why do we exist? Why are we needed? And every agent in this room has either had one of these conversations or at least felt it in the body language of a prospective client.
Am I right? Technology, data, what do I need you for? And that conversation reminded me of another one. But in this case it was a gathering of industry executives. And they had come together to talk about the looming threat of a disruptive technology. And the fear in that room was palatable.
We’ve lost control of the content. There’s got to be a way to lock it down. Who are these guys? We should sue them into oblivion. Maybe the government can help. What about more laws or regulations to protect us? This could destroy our business model. And the genie is not going back in the bottle. If that sounds familiar to you, it should, except that the industry I’m talking about, oops, is the music industry and the destructive technology was Napster. This conversation happened 15 years ago. I was there.
So imagine my sense of déjà vu when I got into the real estate industry a couple years back and heard things like, “We’re losing control of the data. Should we sue them or join them? If estimates are free how will we survive?” So on and so forth.
So, the question is will the real estate industry go the way that the music industry went? I don’t think so but a lot of it depends on you. And before I get into that let me unpack real briefly why the music industry actually failed.
So a lot of people think that it was because of music piracy, the actual stealing, the theft that caused the demise of the music industry. But it seems pretty clear looking back at the data now that that’s not exactly the case. It wasn’t piracy that had a direct impact on the demise of the music industry. In other words if you add back in all of the lost sales that came from piracy it doesn’t tell the whole story. But it’s what piracy trained us as consumer to do that changed everything.
You see sites like Napster they allowed us to expect that on the internet we could acquire music as singles not as albums. Singles not albums. And as soon as the consumers were trained that way the genie really was out of the bottle. Two years after Napster peaked in 2003 a little store called iTunes was born. And now I could go to iTunes and for 99₵ I would get my favorite single, the one song off the album I actually wanted and not be forced to pay $15 for the other ten songs I didn’t. Right? And iTunes was legal. Not only was it legal, it was a better user experience than stealing music. So it was great.
So let’s see how the music industry has performed since then. So take a look at this chart. Singles are the red line. Selling like hotcakes. Right? Crazy good. Everybody wants singles. It’s awesome. Albums are the blue line. Industry up over $1 billion on singles, down $7 billion on the lost revenue from albums. Overnight the industry was decimated. So will this happen to the real estate industry? Will technology fundamentally disrupt the business model that’s been with us for as long as we can remember?
So I was reading an article from an industry expert who was asked if you could boil down the essence of what a service provider provides to the client what would it be? And this guy thought about it and he wrote a little article. He said, “I think it’s three things. The first one is they help reduce the risk. They reduce the risk of the transaction. The second one is they help carry the load, grunt work, leg work, all that stuff. And the third one is they comfort the client along the way.” Does that sound like the essence of that relationship? It did to me too, except that this guy was an expert in mountain climbing. And he was talking about the Sherpa as the service professional, the Sherpa mountain guy.
Now for those of you who don’t know what a Sherpa, what they are. They’re a culture of about 50,000 people that live in eastern Nepal. And they’re famous for their hard work ethic and being acclimated to high altitude. And a lot of them make their living taking climbers up Mt. Everest and K2, the most dangerous mountains in the world.
So the Sherpa I think make a great analogy to the real estate agent in a lot of ways because they share an eerily similar set of core value propositions. Right? Reduce risk, carry the load, comfort the client. So maybe we should take a look at what’s happened to the Sherpa in the age of technology. Maybe they would be a good analog. Right? After all Mr. Sherpa I have Gore-Tex. I have a SAT phone. I have NORAD. I have Google Earth. I have my own oxygen tank. I even have a drone. So what do I need you for? Well has demand for Sherpas gone down since the advent of technology? Absolutely not. It has not because what they’re selling are those three core values that add up to confidence. The music industry was selling content, easily disruptible. The Sherpa sells confidence. You sell confidence, not easily disruptible.
So if the Sherpa sells confidence and it’s not easily disruptible how do they think about technology? They’re not afraid. They think it’s awesome. Have your own gear? Fantastic. I don’t have to go to the outfitter and get it for you. You’ve got a satellite phone? That’s amazing. I don’t need to let you share mine and I don’t need to bring any extra batteries. Oh you’ve got a weather app on your phone? Amazing. I don’t have to explain to you why we’re not going climbing today. You can look at the weather and know why we’re not.
So the Sherpas have found a way to embrace technology. In fact can you even imagine a day when the Sherpa mountain guy is replaced by some sort of climbing robot that people would actually trust to take them up that journey? I can’t. Although my imagination is admittedly limited. I don’t think it’s a coincidence that then either that in this age of technology booming in real estate. Did you know that for sale by owner is at its lowest percentage in over a decade? In fact the number of people choosing to climb the real estate transaction by themselves is at its lowest point since 1981? And this is with the free flow of information and technology. So maybe there’s nothing to be too afraid of. Right?
So let’s take it all the way back to my friend at the beginning of the conversation who had that awkward conversation with a perspective client. And maybe the issue is really about how she positions herself and her ability to answer those questions about why you. So let’s try those questions on one more time.
We found the house on Zillow. Awesome. We don’t have to waste any time driving around. We can focus on getting you the house you want. Well we secured the mortgage. Wonderful. This is going to put us in an incredible negotiating position right out of the gate. Well, but we figured out the comps. Be careful here. You should work with me on that. Comps can be tricky and it takes experience to really know what to do with them. Sharing the core value of what you do. So remind me again why do I need you?
Listen, I am going to take you through the most difficult and treacherous and biggest transaction of your life. I cannot guarantee it will be painless or easy. But it is my job to protect you during the process and make you as comfortable as I can. My experience will prevent errors. And when something unexpected comes up we’re going to benefit from my experience.
Listen, I’ve got your back all the way through the process, even beyond the close, until you are satisfied. I am your Sherpa.
So, just to quickly review the points.
- People didn’t need what the music industry was selling. I didn’t want those ten extra songs and yet that was what a lot of the value was trumped up on.
- Your product is confidence not content. Confidence is something that in incredibly difficult to disrupt.
- Go forward, be awesome and embrace technology like the Sherpa have.