• Someone else already failed at it. Why will you succeed?
  • Real estate is a collaborative business.
  • Look to profitable precedents for true tech investment opportunities.

Luxury Connect
Meet the Luxury Leaders | October 19-20 | Beverly Hills

Picture the scene: “Tech bros” with money to burn surround the table. The disruptor-in-chief is rallying the troops to the tune of nine figures. The pitch is some variation of a model that has failed repeatedly and without exception for decades. “Today,” he states, “we will finally change real estate because we have — technology!”

SoloPro’s enticement of a $1.6 million investment from Lowe’s is just another data point in a long line of over-funded, soon-to-be-failed commission-busters.

That’s not broker-centric hubris speaking. It’s history.

The company’s “nod to the traditional real estate model” by bundling services this week wasn’t just a slide toward traditional commissions. It was the first step in admitting its model doesn’t work. The bluster of “blowing up” agent commissions is a tiresome, thin smokescreen to the seasoned observer.

Tech money is pouring into real estate, but some techpreneurs seem more interested in spending than doing their homework. Many of them need a Real Estate 101 course, with a significant portion dedicated to the history of failed ventures.

Don’t be offended, tech bros — I used to be one of you

I was a techie know-it-all who was appalled by the broker-agent model that dominates the industry. Agents were overpaid and commissions were overblown. We knew tech disruption would rid us of real estate’s high costs and inefficient labor. Then I spent 10 years in the trenches with real brokers and agents, and I saw how wrong we were.

If you’ve ever been lucky enough to hear Sean Carpenter speak, you’ve heard that in real estate, “Everything you need to know, you learned in kindergarten.” Having taught a significant number of kindergarten classes myself, I’d like to deliver a few of those lessons.

Let’s sit on the reading rug, clear our minds and start with the basics:

1. Read — read a lot

Find out if your business plan is just a carbon copy of something that’s already been done. Don’t let your ego get in the way. Many smart people have probably already tried it.

You’re saving consumers money by cutting commission costs? See Help-U-Sell since 1976. See the litany of competitors already entrenched in the marketplace and the graveyard of imitators in their wake.

You’re adding technology to increase the commission discount value proposition? See Redfin. Is $200 million in funding enough to reach 3 percent coverage in your primary market? That’s what it took them, along with continually shrinking the discount model.

The vast majority of that money came after the company changed its tone from adversarial to cooperative. So….

2. Play nice in our sandbox

Real estate is a relationship business. Abrasive characters usually find themselves a new attitude or find themselves out of the industry.

You’re not Steve Jobs. You don’t get to be a sociopath in this industry and get away with it. Real estate’s leaders are intelligent, savvy and financially motivated. They also make a lot of decisions based on long-term relationships. That’s not just the old boys’ club. It’s an acknowledgement that being amicable is profitable.

Many of our leaders were once real estate agents and brokers themselves — the smiling, anything-for-my-clients kind of folks. You’re going to have to shake a lot of hands, listen to a lot of different viewpoints and make a lot of friends to survive long term.

3. Build things. Don’t break things.

Disruption conjures images of broken models. Changing the way real estate works doesn’t have to mean tearing things down, though. It’s usually not the best path to profitability.

Our disruptive friends who are hell-bent on breaking everything in sight are often the fastest ones to the exit when it comes to earnings time. We love innovation in our industry, but don’t walk in, kick down the sand castle and tell us how smart you are.

Rather, build innovative tools that help us do business. Look at who’s actually generating revenue in this industry — listing advertising portals, productivity app developers, transaction management platforms, e-signature providers and so on.

Although some of these companies are still operating in the red, they’re at least hanging around with revenue long enough to establish themselves.

Brokers and agents have money, and they’ll spend it. Innovate and bring us a product we want to buy.

4. Follow the rules (as much as possible)

You’re entrepreneurs, so you’re naturally inclined to break the rules. Feel free to bend the rules of formality, tradition and stagnant thought. Just don’t ask to join the group and then pretend that you didn’t read the rules.

You can be a unique snowflake, but if you stand on your desk and throw rocks, you’re probably going to fail.

You could prove me wrong.

One of you will break all of the rules and be successful. I’ll let you buy me a drink and tell me all about it when you get there. But for most of you, building cooperatively is an easier path to profits in this industry. It has lower hurdles and more successful precedents to follow.

Innovate, but research first. Ask a broker why it won’t work. Take the advice seriously.

Then get busy building something that will loosen up our pocketbooks. History, and your investors, will look favorably upon you.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth and President-Elect of Seattle King County Realtors. You can find his team at SeattleHomes.com and BellevueHomes.com.

Email Sam DeBord.